Industry Minister Tony Clement says the federal government will review the proposed merger of the Toronto Stock Exchange and London Stock Exchange.

Clement said Monday that the proposed deal falls under the Investment Canada Act and will be approved if it is of net benefit to Canada.

Industry Minister Tony Clement says the proposed merger of the Toronto and London stock exchanges will be subject to a federal review. (CBC)

The TMX Group — operator of the Toronto Stock Exchange, the Toronto Venture Exchange and the Montreal Exchange — agreed to merge with the London Stock Exchange Group on Feb. 9.

The deal attracted concern because of fears that foreign investors would have control of the joint company.

Clement's comment before question period followed a statement by the Quebec government last week that it would review the deal.

Ontario went even further, with Finance Minister Dwight Duncan saying Friday that the exchange is a strategic asset.

"We have to take into account not just the shareholders of the TSX and the LSE, but we have to take into account the shareholders of Canada, the people of this country," Duncan said.

TMX Group also operates the Natural Gas Exchange, and owns Shorcan Brokers Ltd., a fixed income inter-dealer broker, Equicom, an investor relations subsidiary, and a majority stake in the Boston Options Exchange.

Four provinces — Ontario, British Columbia, Alberta and Quebec — have the right to review the transaction.

"They have their own regulatory requirements," Clement said, adding the federal government would consult the provinces.

The review could begin in a week and take 45 days or more, he said.

When the deal was announced, Xavier Rolet, CEO of the London exchange, said it was "great news for Canada and all its provinces."

Thomas Kloet, TMX chief executive, said he was confident the deal would provide a "strong net benefit."

But some finance executives said it would marginalize Canada in international finance.

TSX trading on the TSX over one month

The TMX Group is valued at $2.99 billion, while the London group's value is around $3.25 billion. The combined group would be jointly headquartered in London and Toronto.

The initial announcement drove up the stock price of TMX, but it fell back Monday, losing 86 cents or more than two per cent to close at $41.29.

Clement decided in November 2010 to block the $40-billion US takeover of Potash Corp. of Saskatchewan by BHP because it failed to meet the net benefit test.