Organization

Montréal – The Autorité des marchés financiers (AMF) has approved the application filed by Montréal Exchange to combine its operations with TSX Group. The AMF believes that the proposal includes key undertakings with respect to activities based in Montréal while offering the newly created TMX Group the flexibility needed to optimize its operations.

"Following our analysis of the Montréal Exchange application and discussions with TSX Group, we are satisfied with the undertakings we have been given and the expected benefits from the combination," said Jean St-Gelais, AMF President and CEO.

The public consultation that took place helped to highlight the need for the right balance between more stringent conditions and greater flexibility for development of the Montréal Exchange. The AMF believes that the general undertakings given by TSX Group pertaining to exchange activities in Montréal are preferable to detailed function-based undertakings. The AMF will ensure that the spirit and intent of the undertakings are respected at all times.

Expected benefits

  • The Montréal Exchange, the Canadian derivatives exchange of TMX Group, will be based in Montréal;
  • The Canadian Derivatives Clearing Corporation (CDCC) will be based in Montréal;
  • The climate exchange of TMX Group will be based in Montréal;
  • The AMF will be the lead regulator for derivatives in Canada.

Summary

Ownership:

  • No person may own more than 10% of the shares of TMX Group without the prior approval of the AMF;
  • No person may own more than 10% of the shares of Montréal Exchange without the prior approval of the AMF, other than TMX Group;
  • TMX Group may not cease to be the controlling shareholder (more than 50%) of the Montréal Exchange without the prior approval of the AMF;

Governance:

  • 25% of TMX Group directors must be residents of Québec (within the meaning of the Québec Taxation Act), with no time limit;
  • 25% of Montréal Exchange directors must be residents of Québec (within the meaning of the Québec Taxation Act), with no time limit;
  • The boards of directors must have adequate representation of directors who have derivatives expertise;
  • TMX Group must, following approval by its board of directors, furnish the AMF with an annual strategic plan in respect of derivatives;
  • The Special Committee charged with overseeing the regulatory activities of the Montréal Exchange will be required to have expertise in derivatives, the majority of its members will be residents of Québec (within the meaning of the Québec Taxation Act) and the quorum will be a majority of persons who are residents of Québec.

Activities in Montréal:

  • Current derivatives trading activities of Montréal Exchange will remain in Montréal;
  • Montréal Exchange will continue to expand as the Canadian exchange for derivatives trading and related products;
  • The climate exchange of TMX Group will be based in Montréal (operator for trading carbon and emission credits in Canada);
  • The head office and the executive office of both Montréal Exchange and the CDCC will remain in Montréal, and the most senior officer of each entity must be a Québec resident;
  • TSX Group has undertaken to allocate to the Montréal Exchange sufficient financial and other resources to ensure its financial viability, its operations and the performance of its division’s functions as a self-regulatory organization;
  • Montréal Exchange must allocate sufficient financial and other resources to ensure its financial viability, its operations and the performance of its functions as a self-regulatory organization;
  • Montréal Exchange services will be maintained in French in Québec;
  • The Montréal Exchange must obtain prior approval from the AMF before entering into outsourcing agreements in respect of its regulatory activities or providing regulatory activities to other exchanges;
  • TMX Group will give the AMF access to any information required to monitor Montréal Exchange’s operations.

Although the AMF has been given undertakings, it is important to stress that any material change in the ownership, structure or activities of Montréal Exchange would be subject to a review of the AMF’s recognition decisions.

Mr. St-Gelais highlighted the AMF's competency with respect to overseeing derivatives products in Canada. He believes that all elements are present to ensure that Montréal Exchange achieves success within TMX Group. He also noted that the Québec Government yesterday tabled Bill 77 Derivatives Act in the National Assembly; it is modeled on best practices that will ensure that Québec remains at the forefront of the industry.

Lastly, Mr. St-Gelais thanked all entities who participated in the AMF's public consultation. Given the quality of their briefs, this consultation was a crucial step in the AMF's decision-making process.

The AMF's decision and the undertakings of TSX Group Inc. are available in the Public Consultations section of the AMF website and will be published in the AMF Bulletin this Friday.

The Autorité des marchés financiers (AMF) is the regulatory and oversight body for Québec’s financial sector.

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