Sunday 18th November 2018

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The Venture gets an earful

Anger, frustration ring out as the TSXV town hall hits Vancouver

by Greg Klein

Anger, frustration ring out as the TSXV town hall hits Vancouver

A sometimes raucous group of well over 300 people sounded off about the market malaise.


The interruptions began during John McCoach’s introduction and continued throughout his presentation. The president of the TSX Venture Exchange said he wanted dialogue and that’s what he got on January 28, when his travelling town hall meeting came to the world’s capital of struggling juniors. Facing him were well over 300 people representing the small cap “ecosystem” of management, brokers, investors, advisers, accountants, lawyers, regulators and others. It was the biggest, most boisterous event of the tour so far, McCoach said.

What it accomplished remains to be seen. McCoach tried to outline last December’s white paper, with its three-part plan to revitalize the Venture. That entails a program to cut issuers’ costs, build the Venture’s investor base and expand the exchange with non-resource stocks. Unimpressed audience members stuck to their grievances, sometimes shouting over each other. Fees and over-regulation were the sorest points, while short-selling, management compensation and high-frequency trading also came up.

Anger, frustration ring out as the TSXV town hall hits Vancouver

TSXV president John McCoach faced a tough
crowd at the Vancouver town hall meeting.

As McCoach went through his seven-step cost-cutting program, one audience member complained that “when things really became tougher was when the TSX became a for-profit organization.”

“Exactly!” piped up another voice.

Saying he used to serve on the board of a mutual, McCoach responded, “We are all far better off with an exchange operating as an efficient business.”

As a number of people vied for attention, one especially loud voice called out: “You tell us you are reducing costs yet you’re not reducing your fee schedule. So it appears to me that you’re trying to reduce external costs but you’re trying to maintain your bureaucracy and your job by not reducing the fees that go to the TMX.”

“We’re trying to reduce overall costs,” McCoach replied.

“If so, why not reduce your own fees?”

“… if we’re going to reduce our revenue by half, we have to look at other ways to get that same revenue…”

The tumult exploded again, drowning him out.

Not just fees, but procedures came under fire. “You’ve made it so difficult for the public to participate,” one audience member charged. “You can buy a $10-million house on two signatures and you can’t buy five grand worth of stock…”

Among other concerns was short-trading, but audience members disagreed on the issue. McCoach said only a minority of people interviewed during pre-white paper consultations complained about shorting.

Zombies were another audience-introduced topic. The Venture’s new plan would encourage NEX board lurkers to reactivate, while creating more stringent requirements for those that would remain on NEX. But over shouted denials, McCoach insisted the Venture enforces its existing continued listing requirements. “That’s a bald-face lie!” came one retort.

“One hundred and fourteen companies went from TSX Venture to NEX last year,” McCoach replied.

But, according to some critics, the number should have been 600. That’s the figure provided by Tony Simon of the Venture Capital Markets Association in his list of TSXV companies with negative working capital. McCoach countered that a NEX designation depends on additional factors.

Having deflected several criticisms by saying they’re matters for IIROC or the securities commissions, McCoach said, “The regulators are listening very carefully. Some of them are here today.” He added that the Venture has been lobbying them for additional prospectus exemptions and a revamped rights offering program.

It appears to me that you’re trying to reduce external costs but you’re trying to maintain your bureaucracy and your job by not reducing the fees that go to the TMX.

Not everyone saw the Venture as the root of all evil. “Your hands are tied in a lot of ways by securities law,” said one attendee. As for the regulators, “they should be up here too.”

“I don’t blame you for ISIS … I don’t blame you for the Montreal Canadiens power play,” commented a visitor from Val-d’Or. But he did hold the TSXV accountable for failing to curtail costs and listen to its issuers.

A white paper focus that got little attention, however, was the plan to aggressively attract more high-tech, clean energy and life sciences stocks. “It was a judgement call on the stage to interact with the crowd as opposed to continuing to discuss that topic,” McCoach told following the event.

The initiative comes as the TMX Group’s (TSX:X) own stock fairs poorly, especially when compared with that of the LSE, whose proposed merger with Toronto was defeated in 2011 by a group of Canadian banks and pension funds. There’s also speculation that Nasdaq might invade Canada after acquiring the Chi-X Canada alternative trading system, a deal that’s expected to close early this year. The CSE reported a record year for listings and trading volume while last year’s newcomer, Aequitas Neo, announced its first listing application the day of the Vancouver meeting.

But the Venture’s white paper was motivated “simply by what we’ve heard today, what we can do to help our clients,” insists McCoach.

Past changes in policies and procedures were “never packaged together and rolled out as something we’re doing all at once,” he explained. “It’s important that the market be aware that we’re doing this. So we’ve decided to pull all these initiatives together, even though they’ll have different timelines, and use that as an opportunity to gather this kind of feedback.”

“It didn’t surprise me that people were anxious to see change,” McCoach added. He plans to “digest” the day’s comments and compare them with feedback from the other meetings. Vancouver was the fourth stop on the tour, with several other cities planned into February.

Read more about plans to revitalize the TSX Venture.

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