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UPDATE: Council’s executive director speaks against stock exchange takeover

Neil addresses Queen's Park committee.

Neil addresses Queen’s Park committee.

Council of Canadians executive director Garry Neil spoke against the proposed takeover of the Toronto Stock Exchange by the London Stock Exchange at an all-party legislative committee hearing at Queen’s Park in Toronto this morning.

The Toronto Star reports this afternoon that, “(On) the second day of the Ontario government’s hearings…the nationalist citizens’ group The Council of Canadians issued its own warning that the deal is more of a takeover by the London exchange than a merger because the British side would control the combined entity. ‘Canada’s experience with foreigners taking over strategic assets is not good,’ executive director Garry Neil said, citing the layoffs after U.S. Steel took over Stelco and a major strike after Brazilian mining giant bought Inco. Neil also said a merger would lead to increased pressure to harmonize market regulations to the lowest common denominator – a danger in Canada given that the country has been widely credited for tighter regulations that prevented damage seen elsewhere in the global financial meltdown.” More at http://www.thestar.com/business/article/948075–market-merger-puts-canadian-stocks-at-risk-mpps-told.

The Wall Street Journal adds 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.'” That’s at http://online.wsj.com/article/SB10001424052748703300904576178584292120612.html?mod=rss_markets_main.

In his presentation, Neil said, “The Council of Canadians urges you to oppose the proposed merger of the London Stock Exchange and TMX Group.  We first of all note that this is really a takeover of the Toronto Stock Exchange by the LSE, since the London group will control the Board and the Chairman’s position.  This transaction is of no benefit to Ontario, it will bring risks for Canada’s financial stability and it will erode our ability to regulate financial markets in the public interest.”

He also highlighted, “If the transaction is approved, the combined LSE/TSE would be regulated in both Canada and the UK.  In this environment, the pressure to harmonize regulations would be very powerful, and effectively this will mean that the most lenient set of rules will apply.  While Canada could theoretically maintain tougher rules, this would merely encourage the combined exchange to shift the regulated activities into the UK to avoid the tougher standards.  As the TSE loses business, the pressure on Ontario and Canada to allow risky activities, which are either banned outright or highly restricted in Canada, would be overwhelming and our regulatory authorities would be unable to maintain our standards.  Regulatory cooperation between different jurisdictions always results in the lowest common denominator winning the day. Why does this matter?  Surely if we have learned only one lesson from the global economic meltdown, it is that regulation and supervision of financial markets is essential.  Our politicians all proudly point out that Canada’s banks and financial system were far more resilient than those of the U.S., Europe and elsewhere.  We weathered the recession far better than most.  This is the case because we resisted the worldwide push to deregulate the sector.  Instead, we have maintained smart regulations on our banks and their financial products and services, and the corporate structure of the banks and insurance companies.”

And in reference to the ongoing Canada-European Union trade talks, Neil said, “A further risk to our regulatory capacity comes from the proposed Comprehensive Economic and Trade Agreement (CETA) being negotiated between Canada and the European Union.  Even with the secrecy surrounding the talks, it is clear that the EU objectives include to deregulate substantially Canada’s financial sector; to allow more foreign ownership of banks, insurance companies and other strategic assets; and to remove corporate structuring rules which prohibit some companies from offering certain financial products. What’s more worrisome to the Council of Canadians is that our governments, including Ontario’s, appear willing to agree to these EU demands.”

To read Garry Neil’s statement in full, please click here.

For past campaign blogs on this issue, please go to http://canadians.org/campaignblog/?s=%22stock+exchange%22+%2B+%22toronto%22.