13 days to go to planned merger of a winner with a loser
Vancouver Stock Exchange
VSE
Shares issued 0
1899-12-30 close $0
Monday Nov 8 1999
Also Alberta Stock Exchange (ASE) IF STOCK EXCHANGES WERE AIRLINES, shareholders of the
growing, profitable Alberta Stock Exchange would be screaming bloody murder at the idea of being
"merged" into the shrinking, unprofitable Vancouver Stock Exchange.
There are a substantial number of members of the ASE who are not also members of the VSE, and it is
somewhat curious why the powers-that-be are so confident that they will vote in favour of the proposed
merger, given the recent difference in the fiscal performance of the two exchanges.
In the 21 months between Jan. 1, 1998 and Sept. 30, 1999, the VSE's expenses have exceeded its
revenues -- the exchanges hesitate to use the words "profit" or "loss" because of their not-for-profit
status -- by $2,184,000, not counting its merger costs. On the same basis, that is, excluding merger costs,
and over the same period, the ASE's revenues have exceeded its expenses by $1,568,218. The difference
between them is an imposing $3,752,218. As well, the VSE spent $1,842,000 in relation to the merger by
Sept. 30, while the ASE's restructuring costs to the same date were just $684,180. By the time the entire
process is over, they estimate that the total restructuring costs for the two exchanges will be $9,762,000.
At the end of December, 1997, the Vancouver members' equity per seat was $352,000 for each of the 70
seats, and at the end of December, 1998, this was down to $321,000. By the end of September, 1999, it
had fallen further, to $294,000. The ASE has not provided its equivalent figures. On the basis of its
present 60 seats the members' equity per seat would have been $299,000 at the end of 1997, $311,000 at
the end of 1998, and $315,000 at Sept. 30, 1999.
The members' equity figures at the end of September may be slightly inflated (by $25,000 for Vancouver
and $29,167 for Alberta), because they have shown the $1.75-miilion paid by each of them to the
Montreal Exchange as a deposit, rather than an expense. Those payments were made on May 1, 1999,
pursuant to the Memorandum of Agreement entered into as of March 15, 1999, between the two western
exchanges, the ME, and the TSE on behalf of itself and the Canadian Dealing Network.
Under that agreement, which provides for the restructuring of the entire Canadian securities industry, the
ME is to receive $28-million by May 1, 2001. This is to provide it with part of the money needed to
develop the derivatives market, which will be Montreal's niche under the restructuring program. Toronto
is obligated to pay $21-miilion, and has already paid $10-million. Alberta and Vancouver must pay
$3.5-million each. The reason given for showing the $1.75-million already paid by them as deposits was
that the restructuring agreement had not received final approval, and until then the money paid would be
shown as a deposit made to the ME.
Under the March 15 agreement, any of the exchanges can terminate it after March 31, 2000, if certain
conditions are not complied with by then. One of those conditions is that the exchanges shall be satisfied
that the rationalization of the activities of the ASE and the VSE will proceed as contemplated, or as
otherwise agreed by the exchanges. If the restructuring agreement is terminated, the ME must repay all
the sums received from the other exchanges.
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