Since the proposed merger between the TMX Group and the London Stock Exchange Group (LSE) was announced last month, pressure has been mounting on all fronts. An array of differing views is showcased daily, with the latest being the announcement that four of Canada’s six leading financial institutions are opposing the deal, claiming it “would result in the loss of a viable global entity and perhaps thousands of well-paying jobs.” The banks’ influence weighs heavily, given that they drive more than 60% of the trading taking place on the TSX.

According to a recent study by Compas Inc., the business community is by and large supportive of the merger, which it sees as a major opportunity for Canadian companies to gain access to more capital and remain major players in a global financial services hub. Supporters of the transaction, which include Gord Nixon, CEO, Royal Bank of Canada, have expressed their concern over the potential risks linked to missing out on an opportunity of this scale. Mr. Nixon stated that “if Toronto is going to grow as a global financial centre, the benefits of a global exchange co-headquartered in Toronto likely outweigh the implications of a local exchange that will become increasingly less relevant over time as trading and exchanges globalize.” We can expect his opinion to be endorsed by a majority of business leaders, especially if the proposed US$10.2 billion takeover of NYSE Euronext by Deutsche Boerse is finalized in the coming months.

Those opposing the deal have made arguments based on pressing concerns about the impact on sovereignty, employment, clout as a financial centre, and loss of regulatory control over our own financial system.  Both Ontario finance minister Dwight Duncan and former federal industry minister Jim Prentice are calling for a formal review of the regulatory implications. After all, it was Canada’s strong regulatory regime that was credited in being a significant advantage in weathering the global financial crisis.  Moreover, Canada has recently exercised caution in dealing with foreign takeover issues. Last November’s quashing of the PotashCorp takeover by BHP Billiton can be considered one of the more controversial decisions the government has had to face.  The TMX-LSE merger, while not focused on control of natural resources, takes this debate to a new level.  We’re talking about a fundamental piece of our free market economy.  As international markets become increasingly intertwined, we should expect this trend to continue.

It is not surprising that the TSX matter has now moved from the business arena to the political one. In order to resolve this issue and achieve the best outcome for all, and most importantly for our businesses, an open and fair dialogue involving key players of our economy is critical.

Recognizing the urgency for such a dialogue to take place, the Ontario Chamber of Commerce will feature Thomas Kloet, CEO of the TMX Group at a special meeting of the Ontario Business Advisory Council (OBAC) on Thursday March 24^th, 2011.  The meeting will provide leaders from our business community with a timely opportunity to share their concerns, obtain clear answers relating to the deal and offer input. For more information about this OBAC session, please visit: http://occ.on.ca/events/obac/.

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The Market Monitoring Group will be studying weak points and vulnerabilities in the global financial system that could potentially cause large problems. The group will analyze the system and suggest ways to safeguard it from risks. Let us know in the comments what you think some of the major issues are.