by Greg Klein | October 18, 2013
The move seemed not just surprising but counter-intuitive. Those were among the reactions when Dundee Corp TSX:DC.A president/CEO Ned Goodman joined CNSX Markets in September as a strategic investor and deputy chairperson. As exchange CEO Richard Carleton put it, “I think the question on everyone’s mind is, ‘What the hell is Ned doing?’” Speaking at an October 17 meeting of the Venture Capital Markets Association, Carleton offered some answers.
All of the alternative market operators are in favour of change and my colleagues at the TMX Group, who will lose money and improve the visibility of their competition, are not. So that’s going to be an interesting point of contention in the coming months.—CNSX Markets
CEO Richard Carleton
First of all, there’s the motivation. Goodman is “terrified,” Carleton said, that “we are destroying a unique ability” that Canadian capital markets have over those of other countries. “The cost of public capital is becoming prohibitive and Ned wants to do something about it.”
His near-term plans? There’s a new name, the Canadian Securities Exchange or CSE. It was supposed to have been a surprise but Goodman “blurted it out” in an October 16 TV interview. “So that bus has already left the station and you’ll see us scrambling to change the website almost immediately,” said Carleton.
Effective January 1 the Pure Trading and CNSX platforms will consolidate. That means “all the stocks are going to be listed on one board, one market data feed, one price, one access fee, the whole nine yards,” Carleton said. “In conjunction with this, we’re going to reduce our market data fees.”
The CSE plans “to eliminate make-or-take pricing across the board,” he added, noting that the TSX Venture hopes to do the same.
Stocks lacking liquidity might benefit from a potential “market-making program which will provide dealers with trading opportunities.”
Additionally “there is a tremendous amount of under-employed trading talent available in Canada put on the sidelines by the high-frequency trading revolution and we can apply that talent to the junior capital markets to the benefit of everybody. We’re going to substantially increase the investment we make in issuer recognition. So we’re going to help our issuers tell their stories better,” Carleton said. “We’ll also be increasing the number of boots on the ground in western Canada.”
In other New Year plans the CSE “will extend the free real time data program that we initiated with Google last year,” he said. Another search engine “that I’m probably not at liberty to announce, that used to be the biggest,” will join the program in Q1.
Carleton also expects Q1 “breakthroughs” on broker access to the exchange, “which is a big step for us.”
Looking further ahead, Carleton hopes to see other changes. “We’ve not done a good job in Canada on providing cost-effective market data that provides investors with information on what’s going on in all the marketplaces at reasonable cost,” he explained. But any improvement would require regulators undergo “a backbone transfusion,” he cautioned. “All of the alternative market operators are in favour of change and my colleagues at the TMX Group, who will lose money and improve the visibility of their competition, are not. So that’s going to be an interesting point of contention in the coming months.”
Earlier that day Carleton spoke in more general terms to the British Columbia Securities Commission’s Capital Ideas conference. He pointed out that during the tech boom the NASDAQ-listed success stories were open to all investors. Now American markets limit opportunities to “a few, favoured wealthy individuals [who] are entitled or enabled to participate in growth stories like Facebook, where the IPO is an exit, it’s not to raise new money to invest in the growth of the company. So I think we have to be very protective and very careful in preserving what we have built in Canada—and in fact enhancing the opportunities.”