Keep the TSX Canadian

Five months ago the London Stock Exchange (LSE) put in a bid to buy the Toronto Stock Exchange (TSX).  What once looked like a one horse race has now turned into a two horse race with Maple Group Acquisitions Corporation putting in a very decent bid for the TSX. Maple Group is a consortium of 13 major Canadian financial institutions. Here are three reasons why the TSX should not be acquired by the LSE.

Reason #1. The LSE has been in a long, slow steady decline for years. Acquiring the TSX might buy the LSE some time, but it is unlikely to reverse the LSE’s long term viability. The LSE wants to acquire the TSX to bolster its own sagging fortunes. If the two entities become one, the LSE will call the shots from London. Major decisions will be made in London town and what happens in Canada will be secondary. The concern in London is that if the LSE does not acquire the TSX, then the LSE might find itself the target of a takeover but I do not think that this is a good reason to allow the TSX to be taken over by the LSE.

Reason #2:  A vibrant national stock market is fundamental to a country’s wealth generation process.  Entrepreneurs are essential to increasing a country’s innovation and productivity. Canadian entrepreneurs with their upstart companies need a local exchange that understands their special challenges and circumstances.  The TSX has a great global reputation in mining and energy, and the TSX venture exchange is developing an international reputation in alternative energy. Having the LSE manage the TSX does not ensure that Canadian companies are being served in the best way possible.

Reason #3: The TSX has a competitive advantage in mining, materials and energy. Instead of selling this competitive advantage to another exchange, the TSX should be looking at ways to generate more value from this competitive advantage by entering into joint ventures (not mergers) with other mining oriented exchanges (several stock exchanges in South America come to mind).

In sum, these are three reasons why the TSX should remain proudly Canadian.