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NEWS: Queen’s Park committee reports on Toronto Stock Exchange takeover

Council of Canadians executive director Garry Neil addresses Queens Park committee

Council of Canadians executive director Garry Neil addresses Queen’s Park committee

The Globe and Mail reports, “An all-party committee of the Ontario legislature is calling on the architects of a transatlantic deal between the Toronto and London stock exchanges to give Canada a bigger voice on the new entity’s board of directors. The committee, which released its report on Wednesday, made nine recommendations aimed at addressing concerns that the transaction is not in Canada’s best interests because majority control of the combined entity would reside outside this country. …To better protect Canada’s interests…the board of the combined entity should consist of an equal number of board members from Canada, the United Kingdom and Italy. As well, the committee recommends that the development of new products and services take place in both Canada and the United Kingdom.”

Reuters notes, “The much-awaited report to the provincial legislature, however, made no recommendation on whether the deal to acquire TMX Group, owner of the Toronto Stock Exchange, should go ahead.”

The Globe and Mail article continues, “TMX Group and London Stock Exchange PLC issued a joint statement on Wednesday, saying they will review the report but remained non-committal about whether they would adopt the committee’s recommendations.”

“Gilles Bisson, the New Democrat member on the nine-person committee, wrote his own report on behalf of his party, opposing a deal that has sparked intense debate in the business community. Unlike the Liberal and Conservative members on the committee, Mr. Bisson wants to see the proposed multibillion-dollar transaction blocked.”

“The committee does not have the power to approve or reject it. But its recommendations will become part of a report the Ontario government submits to Industry Canada, which will ultimately rule on the deal.”

“(Ontario finance minister Dwight) Duncan has also expressed reservations about the merger, questioning whether it makes sense for Canada’s premier stock exchange to join forces with an overseas partner. In fact, he has emerged as the chief potential obstacle to a deal that would see TMX shareholders left with a 45-per-cent minority stake in the new exchange venture. …In recent weeks, Mr. Duncan has not publicly criticized the deal. He acknowledged to reporters on Wednesday that he does not know whether in fact the province has the unilateral power to block the deal.”

The Council of Canadians has been opposing the takeover of the Toronto Stock Exchange by the London Stock Exchange for several months now.

On March 3, the Wall Street Journal reported that, “A prominent citizen-advocacy group urged Ontario’s provincial government to withhold support for TMX Group Inc.’s proposed merger with the London Stock Exchange Group PLC, arguing the stock-market tie-up could hinder Canada’s ability to regulate its financial markets, and adding to growing criticism of the deal here. The Council of Canadians, a group that has opposed many free-trade proposals as well as closer trade and security integration with the U.S., stepped into the fray on the second day of public hearings by the Ontario provincial government. …Garry Neil, executive director for the Council of Canadians, said LSE’s majority ownership and board representation on the merged company could ultimately lead to the adoption of U.K. securities regulations here. Mr. Neil said that what he called tougher regulations now on the books in Canada ‘would merely encourage the combined exchange to shift the regulated activities into the U.K.’”

On February 9, the Toronto Star reported, “The head of a nationalist watchdog group fears allowing the two exchange companies to combine would mean a loss of jobs, both at the exchanges themselves, and among the broader financial sector, as more firms choose to list their stocks in London. ‘We’ve watched this happen so many times when Canadian companies get taken over. At first, they say ‘it will be good for you, and we’ll keep a Canadian headquarters,’ but inevitably those jobs shift to the home base,’ said Maude Barlow, national chairwoman for the Council of Canadians. If Canadian companies do shift their listings to London, England, they could be following financial rules set outside this country, Barlow fears.”