(Bloomberg) — TMX Group Ltd. is the worst- performing exchange stock in North America this year, as a rout in global commodity prices cuts equity trading volume and a bank-led competitor prepares to enter the business.
Shares of Toronto-based TMX have dropped 11 percent in 2013, the only decline among a group of six North American exchange providers including NYSE Euronext and Nasdaq OMX Group Inc., according to data compiled by Bloomberg. The top performer, Chicago-based CBOE Holdings Inc., has gained 70 percent in the same period.
The owner of the Toronto Stock Exchange, TSX Venture Exchange, and Alpha and TMX Select trading platforms, posted a 17 percent slide in stock-trading volume through the first half of the year as investors exited the resource-dominated Standard & Poor’s/TSX Composite Index. The company today reported second- quarter profit that topped analysts’ estimates after higher listing fees boosted revenue.
“It’s well known that trading is down in the TSX and on the sell side every day we live with that,” Ed Sollbach, a strategist with Desjardins Securities Inc. in Toronto, said in a telephone interview July 30. “A lot of it is because the TSX is 40 percent energy and materials. People chase performance, and the U.S. market is one of the strongest markets globally, so that helps them.”
The benchmark S&P/TSX has risen 0.4 percent this year, compared with an 18 percent advance in the S&P 500.
Net Income
TMX’s net income was C$25.5 million ($24.8 million), or 47 cents a share, the company said today in a statement. Revenue was C$182.3 million. The numbers from a year earlier aren’t strictly comparable because a new company was formed by the sale of the exchange owner to a group of banks and pension funds.
The company reported profit of 89 Canadian cents a share excluding some items, beating the 83-cent average estimate of analysts surveyed by Bloomberg.
TMX’s equity exchanges have traded about 73.4 billion shares valued at C$764.1 billion this year, compared with 88.4 billion shares for C$868.8 billion a year ago, company data show. In Canada, TMX had about 82 percent of equity trading by volume as of June, according to data from the Investment Industry Regulatory Organization of Canada in Toronto.
Maple Group Acquisition Corp., a collective including Toronto-Dominion Bank, Canada Pension Plan Investment Board and Manulife Financial Corp., acquired the former TMX Group Inc. along with Alpha Trading Systems and the Canadian Depository for Securities Ltd. in a C$3.73 billion deal that closed in September.
Rival Exchange
Royal Bank of Canada, Canada’s largest bank, along with five partners including Barclays Plc and CI Financial Corp., announced in June the creation of Aequitas Innovations Inc., which will operate a stock exchange to compete directly with the TSX.
Joanne Kearney, a spokeswoman for Aequitas, said the company will apply for regulatory approval with the Ontario Securities Commission in late autumn and expects to be in operation by late 2014.
Shares of TMX dropped 2.3 percent when Royal Bank announced Aequitas on June 25, falling to the lowest close since the company began trading in September after completion of the Maple Group acquisition. The shares rose 1.2 percent to C$45.20 in Toronto yesterday.
“We are a strong domestic and international competitor,” said Tom Kloet, Chief Executive Officer with TMX, in a conference call this morning. “We’ve faced new competition for a long time now. It’s a fact of life. We’re prepared to compete effectively. Our focus will be on providing leading technology and innovative products, and competitive pricing.”
