The Canadian Competition Bureau has approved Maple Group’s bid for TMX Group without conditions despite earlier concerns over potential favoritism in equities trading, clearing, and settlement and depository services.
Commissioner of Competition Melanie Aitken released a statement on July 4 saying conditions prescribed in the Ontario Securities Commission’s (OSC) approval changed the regulatory environment enough to substantially mitigate the bureau’s concerns.
The OSC prescribed extensive oversight intended to ensure investment banks, pension funds and other financial service companies in the Maple consortium do not abuse their status as owners or create market instability resulting from their own stakes in securities markets. The regulator acknowledged it would need more resources to achieve such oversight, but expected those to come from higher fees charged to Maple members and their affiliates.
In addition to the Toronto Stock Exchange, TMX includes the stocks and futures exchange Alpha and the Canadian Depository for Securities (CDS). The OSC’s approval specifically restricts CDS from adopting any agreements that would deter participants from choosing another clearinghouse to perform post-trade clearing, settlement or depository services.
Stikeman Elliot partner Susan Hutton said it was no coincidence the Bureau issued its no-action letter shortly after the OSC conditionally approved the merger with behavioral remedies.
“To the extent we see behavioral remedies, they are often more common where there are vertical issues between customers and suppliers (like investment companies and exchanges,)” said Hutton.
Maple seeks to purchase between 70% and 80% of TMX on July 31 as part of an integrated acquisition transaction that would see all of TMX sold to the consortium for $3.8 billion (£2.5 billion). Only a TMX shareholder vote remains before the parties can close – the Alberta Securities Commission and British Columbia Securities Commission approved the Maple bid yesterday.
The Competition Act allows the Bureau a one-year grace period to revisit its approval and bring the transaction before the Competition Tribunal, but that power is rarely exercised.
“It would really take a surprising turn of events,” Hutton said. “One would be surprised to see it after a review that lasted over a year.”