Proposed Acquisition of TMX Group Inc. - AMF intends to approve Maple application
Thursday, March 15, 2012
Montréal – The Autorité des marchés financiers (the “AMF”) today announced that it intends to approve, based on information available to date, the transaction proposed by Maple Group Acquisition Corporation (“Maple”) to acquire TMX Group Inc. (“TMX Group”). The AMF believes that the draft decisions recently submitted to Maple based on the initial application, recent discussions, proposals and undertakings to be finalized by Maple will maintain the integrity and efficiency of the financial markets as well as the continuity of derivatives operations in Québec.
“We’re satisfied with the results of discussions to date with Maple and with the scope of the undertakings that Maple will be required to provide. In addition, the conditions that Maple will be required to accept will ensure that we are able to fully assume our role and responsibilities as a regulator , while giving it the power to operate efficiently,” stated AMF President and CEO Mario Albert.
The AMF took into account the comments made as part of the public consultation and studied the various issues raised by the proposed transaction, notably with respect to corporate governance, market access, fees, the framework for Maple’s proposed operations and the continuity of derivatives operations in Québec. The conditions that the AMF intends to impose on Maple and its subsidiaries will adequately address these issues. These conditions, which are complementary to the current legislative and regulatory framework, will be incorporated into the decisions that the AMF expects to issue in the coming weeks.
Businesses and market participants in Québec will be assured of the continuation of a suitable offering of financial products and services and fair and equitable access to market infrastructures. As well, the AMF will exercise its authority with regard not only to Montréal Exchange Inc. (“Montréal Exchange”) and Canadian Derivatives Clearing Corporation (“CDCC”) but also Maple and TMX Group in so far as they operate exchanges or clearing services in Québec.
Positive undertakings for Montréal
Since the filing of Maple’s initial application on October 3, 2011, numerous discussions with Maple have helped address the concerns of the AMF and have enhanced the undertakings initially proposed that will be necessary for the AMF to issue a final decision to:
- ensure the maintenance and development of Maple’s derivatives trading and related products operations, including over-the-counter derivatives, in Montréal;
- set up a derivatives committee of the board of directors of Maple for advice on all policy issues and matters that are likely to have a significant impact on derivatives and related products of Maple and its subsidiaries;
- ensure that all enhancements to the SOLA® application software will be developed in Montréal.
“We believe that this undertaking in principle to maintain and continue to develop Montréal as a hub of attraction for Maple’s derivatives trading and related products operations, including over-the-counter derivatives, is vital for a robust derivatives industry in Québec,” noted Mr. Albert. “These enhanced undertakings will be added to those made in 2008 by TMX Group in connection with the merger with Montréal Exchange which were also part of the initial Maple proposal, in particular compliance with the restriction whereby no person or company may acquire more than 10% of the voting shares of Maple without the prior authorization of the AMF,” added Mr. Albert.
All undertakings that Maple will provide will become conditions to the decisions that the AMF will issue.
Alpha and CDS
The AMF also intends to give its approval so that Maple can pursue its acquisition of Alpha Trading Systems Limited Partnership and Alpha Trading Systems Inc. (“Alpha”) and The Canadian Depository for Securities Limited (“CDS”).
In light of its discussions with Maple concerning the proposed change in the CDS business model, the filing of a proposed fee structure related to the primary services provided by CDS Clearing and Depository Services Inc., the responses to questions and the solutions proposed to address the issues raised as part of the public consultation, the AMF intends to approve these transactions in principle subject in particular to compliance with conditions intended to:
- ensure that individuals and businesses in Québec have fair and equitable access to CDS services and products;
- address the issues with respect to the rate structure of CDS.
The AMF will therefore require that Maple meet stringent conditions pertaining to corporate governance, barriers to access, fee structure and the fairness of this structure for market participants, in the event that Maple concludes the acquisition of CDS.
Maple will also be required to provide all relevant information regarding the recognition of Maple and CDS as a clearing house and the recognition exemption of Maple and Alpha as an exchange so that the AMF is able to issue decisions for overseeing all components of these transactions.
Based on the information received and available to date, the AMF is announcing that it is prepared to approve the proposed transactions subject to incorporating the conditions and the enhanced undertakings of Maple in its decisions. The full text of these decisions is expected to be published in the coming weeks.
The Autorité des marchés financiers ("AMF") is the regulatory and oversight body for Québec’s financial industry.
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