TMX-LSE merger stalled by politics: Caldwell

Political posturing is getting in the way of the TMX-LSE merger, the former governor of the TSX says.
A general view looking down Bay Street in the heart of Toronto's financial district and the former location of the Toronto Stock Exchange. TMX Group, operator of the Toronto Stock Exchange and the Toronto Venture Exchange, has agreed to merge with the London Stock Exchange Group. ((Chris Young/Canadian Press))

There is a strong business case to be made in favour of the merger of TMX Group and the London Stock Exchange, but political posturing is getting in the way, according to the former governor of the TSX.

In an interview with CBC Radio's The House with host Kathleen Petty airing on Saturday, Thomas Caldwell said the "political chips are stacking up pretty heavily against this deal."

Caldwell, founder and chair of Caldwell Financial Ltd., primarily took issue with criticism expressed by Ontario Finance Minister Dwight Duncan, who was the first out of the gate with doubts about whether the merger would benefit Canada.

Duncan called the TSX a "strategic asset" to Canada's largest city, and said decisions about its future must be made in the public interest, not just for that of stakeholders.

The Ontario minister also went on to express his doubts about the Middle East "owning" the stock exchange.

Caldwell, whose company has holdings in both TMX Group and the LSE, called Duncan's comments "odd," and suggested the provincial finance minister "has never visited the Toronto Stock Exchange."

"I don't even think he knows their current address," Caldwell said.

Business case

Caldwell insisted there will be a net benefit to Canada in this deal.

Here are some of his arguments in favour of a TSX-LSE merger:

  • "The listings, the fundraising, the corporate finance will still be done in Toronto."  
  • If it gives "easier access to Canadian companies, easier access to European and Middle East funding via the London Stock Exchange, that would be a tremendous economic boom."     
  • "The LSE does not have a derivatives platform, that is options, and Montreal does. So they're going to be using the Montreal system and staff to build their products in Europe."    
  • "Quebec may actually get jobs out of this"
  • "We are going to have a greater selection of investments quite possibly, and greater access to capital."

Federal review

Federal Industry Minister Tony Clement spoke with Ontario Finance Minister Dwight Duncan about the proposed transaction on Thursday.

In a written statement Friday, Clement told The House it was a "very positive conversation."

"Policies of the affected provincial governments" will be among the factors that will weigh into the decision under the Investment Canada Act, added Clement, now in the process of reviewing the stock-exchange transaction to determine whether it is of "net benefit" to Canada.

Four provinces — British Columbia, Alberta, Ontario and Quebec — can review the transaction.

So far, Ontario has emerged as the most vocal opponent of the proposed deal.

CBC's The House can be heard every Saturday morning at 7 a.m. on Sirius Satellite Radio Channel 137, and at 9 a.m. on CBC Radio One, 9:30 a.m. NT.