*Says CDS pricing could come under regulatory oversight
*Saus deal for Alpha, CDS to benefit all market players
*Says working with Competition Bureau
(Adds details about IIROC committee in para 13)
By Jennifer Kwan and Pav Jordan
TORONTO, Dec 1 The Canadian consortium seeking
to buy TMX Group (X.TO), operator of the Toronto Stock
Exchange, said on Thursday it could give regulators the right
to supervise clearing and settlement prices in order to gain
approval of the C$3.8 billion (C$3.76 billion) takeover deal.
Under its TMX takeover proposal, the Maple Group consortium
of Canadian financial services companies wants to also buy
Canadian Depository for Securities (CDS), which clears and
settles trades in Canada. This aspect of the deal has spurred
fears of an unfair monopoly, and Maple said it is ready to
compromise to get the deal done.
"We will be announcing a model and a structure and so forth
with regards to fees," Luc Bertrand, the public face of Maple
and vice chairman of National Bank Financial, told a public
hearing held by the Ontario Securities Commission (OSC).
"Our proposal would be that the model would be part of the
recognition order, which, in our view, would give the
commission the ... explicit responsibility on a go-forward
basis to ... reject or approve fees."
Bertrand said Maple remains committed to a one-tier system
that keeps fees accessible for all market participants.
Maple's offer to take over the TMX Group is contingent on
it also getting regulatory approval to buy CDS as well as Alpha
Group, TMX's top stock trading competitor.
"Our deal is based on getting regulatory approval for both.
If we don't have Alpha or we don't have CDS there is no Maple
transaction," Bertrand said in an oft-repeated pledge.
CDS handles all of the back-office processing of cash and
securities after a trade is made, acting as a central
counterparty for trades.
Opponents to the deal say that if Maple wants to integrate
CDS, it should be forced to keep CDS's current cost-recovery
model in place. CDS currently runs on a not-for-profit basis
but Maple wants to make it a for-profit operation.
Handing oversight to regulators may allay concerns about
Maple having monopoly control over pricing.
The concerns about fees were flagged earlier in the week by
federal Competition Bureau Commissioner Melanie Aitken.
"Our work with the Competition Bureau continues and we will
update the market on its progress at the appropriate time,"
In its submission to the OSC, a committee formed to advise
the Investment Industry Regulatory Organization of Canada said
CDS clearing and settlement costs, among the lowest globally,
would rise under a for-profit model.
"We're concerned the conflicts of interests they have can
be used to limit access to the non-Maple members and drive
prices higher," said Jeffrey Kennedy, spokesman for the IIROC
committee and chief financial officer at Cormark Securities.
"The three issues are access, pricing and governance. What
we're concerned about is the conflicts of interest from the
investor dealer affiliates of the Maple Group."
Maple, comprised of 13 of Canada's most powerful financial
institutions, stressed to the OSC that its proposal would
benefit all market players.
The hearing continues on Friday.
(Editing by Peter Galloway)