Nasdaq eyes move into TSX's backyard
In talks with OSC
Peter Fitzpatrick
Financial Post
Wednesday, February 19, 2003
CREDIT: Peter Redman, National Post
Helen Kearns, president of Nasdaq Canada, said "we are working with the OSC to determine how best to come into Ontario through the front door with regulatory recognition."
Nasdaq Canada has begun talks with the Ontario Securities Commission about setting up its trading system in the province as early as this year.
Helen Kearns, president of Nasdaq Canada, said yesterday the arm of the giant U.S. electronic exchange is in discussions with the OSC about how it would be regulated and will soon seek public comments.
"We're working with the OSC to determine how best to come into Ontario through the front door with regulatory recognition," she said at the Securities Superconference in Toronto.
"We're working very hard to get their agreement on what the appropriate recognition model for Nasdaq Canada is."
Nasdaq began operating in Quebec in November 2000 and currently has 11 member firms who trade directly on the exchange using trading desk terminals.
Although its growth has been much slower than anticipated and its ambitions pared back, the exchange offers a potential rival to the TSX Group Inc., which owns Canada's two stock exchanges.
Eric Pelletier, a spokesman for the OSC, confirmed the regulator is in "early stage" talks with Nasdaq.
"You want to make sure you're fostering efficient markets on one hand but that you also have appropriate protections for investors," he said.
The main stumbling block is regulating the exchange. While members would be located in Canada and under local jurisdiction, the exchange itself is based in the U.S.
Although Nasdaq won recognition from the Quebec government to operate elsewhere in the country it would need the approval of both the various securities commissions and the Investment Dealers Association of Canada, which does not have jurisdiction in Quebec.
"If the commissions were to recognize them as a stock market, who would regulate them? That becomes the question for us and we would assume we would and they might propose the NASD regulate them," said Paul Bourque, vice-president of member regulation at the IDA.
Reaching an agreement with the OSC and the IDA would create a template for Nasdaq Canada to spread nationally and Ms. Kearns said the company has spoken to other provinces.
Noting that more than $10-billion in Nasdaq stock trading each month originates in Canada, Ms. Kearns said providing direct access to Nasdaq would benefit the Canadian securities industry and consumers. At present, firms outside Quebec must either set up U.S.-based affiliates or form alliances with U.S. dealers to trade stocks for them, she said.
"This creates higher costs, more delay and less client protection," she said.
Still, Nasdaq has not had overwhelming success expanding in either Canada or around the world.
Its much-hyped plan to create a global network with round-the-clock trading was dealt a setback when it closed Nasdaq Japan last year, a victim of the technology and economic meltdown.
Although it recently signed a five-year deal recommitting itself to the Quebec market, the company has made slow progress, growing only to 11 from the original 10 member firms. It recently returned $12-million in provincial grants because it did not meet targets and it has quietly dropped plans to begin trading in Canadian dollars to focus instead on recruiting new members.
Three people working in the Montreal securities business, including a broker, analyst and money manager seemed only dimly aware Nasdaq Canada was even running when contacted yesterday. However one user lauded the system.
"It's a big plus for us basically to have direct access to the market and it also allows us to be licensed in the U.S. and we've opened a couple branches in the U.S. side for our institutional trading," said Pierre-Louis Robichaud, vice-president of trading at Desjardins Securities Inc.
pfitzpatrick@nationalpost.com |
