Luring Nasdaq to Montreal was the trump card the Quebec government held all along when it approved the controversial reorganization of Canada's stock exchanges last fall, Quebec Finance Minister Bernard Landry said yesterday.
In fact, negotiations with the Nasdaq stock exchange started before the market reorganization proposal was unveiled last fall and the Nasdaq deal was completed shortly after Mr. Landry tabled his budget last month.
"I had this proposal in mind for a long time. I knew that our economy needed access to a huge reservoir of capital, one that was larger than the one being offered here in Canada," Mr. Landry said yesterday. "In fact, I knew this the day I became Minister of Finance."
On Wednesday afternoon, Mr. Landry and Premier Lucien Bouchard shocked Canada's business community by announcing they had signed a deal with Nasdaq to bring the powerful U.S. market into Montreal.
The Quebec-Nasdaq deal creates questions about last year's reorganization of Canada's stock exchanges by returning stock trading to the city of Montreal. The restructuring in 1999 saw the Toronto Stock Exchange transformed into Canada's market for major companies, while the Vancouver and Alberta exchanges merged to become home to listings for smaller companies and the Montreal Exchange took over futures and derivatives trading.
After he was named Finance Minister in January of 1996, Mr. Landry attempted to convince the ME to specialize in high-technology companies.
When the ME refused and last year accepted a proposal to abandon stock trading and concentrate on derivatives, the Quebec government approached Nasdaq -- which lists mainly technology stocks -- with its proposal to set up operations in Montreal.
"When the Montreal Exchange refused to budge, we provoked [talks with Nasdaq]" Mr. Landry said. "We approached Nasdaq and told them that we had a strong desire to connect our companies with the world's biggest stock exchange."
Last November, Mr. Bouchard bowed to pressures from the Montreal business community and approved the reorganization of Canada's stock exchanges while Mr. Landry was on an economic mission to the Middle East.
Mr. Bouchard opted against adopting legislation proposed by Mr. Landry that would have allowed trading in stocks with market capitalization as high as $500-million to be traded on the ME. According to business leaders, the legislation threatened to jeopardize the reorganization proposal.
Mr. Bouchard approved a compromise that allowed 125 companies with market capitalization below $4-million to continue to be listed on the revamped ME. Trading for these small Quebec companies would take place on a Vancouver computer belonging to the new Canadian Venture Exchange, created through the mergers of Vancouver and Alberta stock exchanges.
The deal with the Canadian exchanges came under attack by former Quebec premier Jacques Parizeau, who accused Mr. Bouchard's government of collapsing under the pressure of the Montreal business community. And others, such as former finance minister Jean Campeau, argued that Quebec was abandoning an important instrument of economic development.
The deal with Nasdaq helps to explain why the Quebec government ignored the criticism and approved the reorganization that ended stock trading on the ME.
The government had assurances that, by luring Nasdaq to Quebec, it could recapture the competitive edge it had lost to Toronto by enhancing Montreal as an international financial centre.
During the talks between Quebec and Nasdaq, the provincial government offered the U.S. exchange numerous tax breaks and promised to proceed rapidly with special legislation that allowed for the creation of a new exchange without a long public-hearings process through the Quebec Securities Commission.
Mr. Landry said Quebec had more to offer than Toronto in attracting Nasdaq. Tax breaks offered under the province's international financial centres program were expanded.
Mr. Landry argued that Quebec had not only the political will to proceed rapidly but also the certainty that Montreal firms, including government-owned companies, would choose to trade on the Nasdaq.
"We have programs that Ontario does not offer," Mr. Landry said. "It doesn't bother us that Toronto was also negotiating to set up an exchange in that city."
It was certain that Montreal was getting a head start and would remain aggressive in its promotion of high-tech industries, he said.
Rhéal Séguin