Canadian Nasdaq on hold
By BERTRAND MAROTTE
From Monday's Globe and Mail
Montreal — Plans for a Nasdaq Stock Market north of the 49th parallel have been put on indefinite hold almost two years into a frustratingly slow development phase.
The Quebec government lured Nasdaq to Montreal in early 2001 with an incentives package, including a 10-year tax holiday.
But now Helen Kearns, the former Bay Street executive who was appointed Nasdaq Canada president in May of 2001, concedes that events have conspired against the ambitious plan to create what wags have dubbed Nasdaq North, an electronic stock market that could give the Toronto Stock Exchange and nascent alternative trading systems a run for their money.
"You are correct in saying it's been slower to start than we would have hoped, but the market conditions have really dictated how quickly Nasdaq Canada could roll out and it's been a difficult market," said Ms. Kearns in an interview at the downtown Montreal head office.
As it stands, Nasdaq Canada for now consists of computer terminals set up on the trading desks of nine Quebec investment dealers, allowing them to offer clients direct trading on Nasdaq's main market in the United States, including the 101 Canadian firms that trade there.
The much-anticipated second phase calls for the creation of a standalone Canadian market on the Nasdaq trading platform that would include U.S. and Canadian companies listing exclusively on Nasdaq Canada, trading in Canadian or U.S. dollars.
Phase II was originally set for launch in the spring or summer of 2001 but has been put off indefinitely.
"The real advantage here is Phase II, which helps boost the capital formation process and also offers an alternative to the TSX," said Sylvain Perreault, president and chief executive officer of trading firm Jitney Group Inc. and a former vice-president of the Montreal Exchange.
The meltdown in technology stocks — Nasdaq is heavily weighted in tech equities — and the global economic slump obviously haven't helped Nasdaq in its bold expansion plans in Canada and elsewhere in the world.
Indeed, Nasdaq has pulled back on its project to create a seamless, 24-hour-a-day global electronic market. It just yanked the plug on Nasdaq Japan after two years of losses.
Those setbacks don't help advance the case for a Nasdaq Canada.
"Given the current market conditions, [Phase II] is likely to be delayed. Right now we're really focused on pulling our dealer network in," said Ms. Kearns, the former head of Kearns Capital Corp. in Toronto and a native Montrealer.
She said she could not indicate when Phase II may become reality.
Last week — after almost two years on the sidelines — heavyweight RBC Dominion Securities Inc. announced it's joining Nasdaq Canada, making it the ninth member. Four other investment dealers are in the process of signing up as well, Ms. Kearns said.
"Having RBC come on board is a tremendous vote of confidence for the facilities that Nasdaq has to offer, for the trading access that it offers," she said.
However, RBC and the other big bank-owned brokerages already have direct access to Nasdaq through their U.S. subsidiaries.
For example, CIBC World Markets joined Nasdaq Canada two years ago, but subsequently dropped out because it was wired for direct access to the Nasdaq market via its New York operations.
Some industry players in Montreal's financial community view the involvement of RBC Dominion and other firms in Nasdaq Canada with some skepticism.
They say their participation is little more than a public relations exercise to appease the $133-billion Caisse de dépôt et placement du Québec, an arm of the provincial government.
"It's clear that this is just PR," one well-connected industry player said about RBC Dominion's presence in Nasdaq Canada.
Top Caisse officials have in the past publicly warned investment dealers that they stood to lose Caisse business if they didn't sign on with Nasdaq Canada.
Nasdaq Canada also appears to be making little headway on another front — clinching approval from regulatory authorities in the rest of the country to allow for critical expansion beyond Quebec's borders.
More than two years ago, a senior Nasdaq executive — vice-president of Nasdaq International, Doreen Davis — said Quebec was only the "first step" in a national rollout and that approvals were being sought from regulators in other provinces.
Fast forward to October, 2002.
"We are still having discussions," Ms. Kearns said. "We've had discussions with all the major regulators outside Quebec. Progress is being made." |
