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Toronto exchange looks south of border

Rather than following the NYSE's lead, the Canadian exchange seeks to acquire or ally itself with a North American rival.

By ASSOCIATED PRESS
Published June 10, 2006

NEW YORK - The Toronto Stock Exchange isn't looking overseas for a major deal to compete with bigger U.S. rivals. Instead, chief executive Richard Nesbitt said Friday that the TSE hopes to become a North American financial powerhouse by acquiring an American futures exchange.

"Supercontinental exchanges are on the horizon," Nesbitt said in a speech at the Sandler O'Neill conference on financial markets, noting that both the New York Stock Exchange and Nasdaq are working toward acquisitions overseas.

However, the TSE will be content to acquire or ally itself with a North American futures exchange - with targets including the New York Mercantile Exchange, the Chicago Mercantile Exchange or Intercontinental Exchange Inc. "We are monitoring opportunities in the market place, and really see ourselves as a North American exchange and not a Canadian exchange," Nesbitt said.

While the TSE is flush with cash since going public in 2002, Nesbitt said he will be disciplined in making any deal to buy a rival exchange. The consolidation of global exchanges has driven up their share prices, and Nesbitt said any deal must come with opportunities to cut costs and expand revenue.

Keeping up with the pace of exchange consolidation won't be easy. NYSE Group Inc., the parent of the New York Stock Exchange, reached an agreement last week to acquire Euronext NV. Taking over Europe's second-largest exchange will give NYSE trading platforms in Paris, Amsterdam, Brussels and Lisbon, Portugal.

The NYSE-Euronext deal - valued at about $10-billion - still faces a competing bid by Deutsche Boerse AG. The Frankfurt-based exchange also is said to be interested in getting a foothold in the United States by acquiring the Chicago Mercantile Exchange.

Meanwhile, Nesbitt is also monitoring moves by Nasdaq to acquire the London Stock Exchange. The Nasdaq, whose offer was rebuffed by the LSE, owns more than a 25 percent stake of the London exchange and is considering making another bid later this year.

While many of its rivals are positioning their business models to capture more overseas business, Nesbitt said the Toronto Stock Exchange's strategy during the past two years has been to bulk up in the United States. About 40 percent of the exchange's trading already comes from the United States, and there are more than 100 American companies with TSE listings.

Further, Nesbitt has expanded TSE's reach by setting up offices in New York, California and Texas.

[Last modified June 10, 2006, 07:41:59]