New York-based Nasdaq Inc. said Thursday it has applied to operate an exchange in Canada, a move that could bring foreign competition to a market currently dominated by the TMX Group, operator of the Toronto Stock Exchange (TSX).
According to a posting on the Ontario Securities Commission (OSC) website, Nasdaq Canada and its parent company, Ensoleillement Inc., have applied for recognition as exchanges in Canada, starting the clock on a 30-day comment period to close Nov. 13.
Nasdaq is not currently proposing to list issuers' securities and, if it decides to do so later, the OSC said its listing rules would have to be reviewed, published for comment and presented to the commission for approval.
Chi-X Canada, an alternative trading system for the TSX, was purchased by Nasdaq in February 2016. Applying for an exchange licence was the next "logical step" for Nasdaq after completing technology migration to Chi-X, spokesman Joe Christinat said in an email.
He wouldn't say when or if the company will start listing securities but said it is talking to clients about their needs. Asked what kinds of securities Nasdaq might go after, he said it lists many asset classes including equities, derivatives, futures, commodities and structured products.
Nasdaq Canada currently operates equity trading facilities in Ontario as alternative trading systems for TMX's TSX and TSX Venture Exchange listings, with 66 subscribers and trading offered in 4,100 securities.
"Nasdaq Canada will transition its market operations from those of an ATS to those of an exchange, with no substantial changes to its current trading platform or operations," it says in its OSC application.
"Functionality currently in place to support the Nasdaq ATS trading platform will continue to be available after the recognition date. ... Nasdaq Canada will operate a continuous auction market Monday through Friday, excluding Canadian banking holidays."
Richard Carleton, CEO of the alternative Canadian Securities Exchange (CSE) — one of the few existing competitors to the TSX — said he doesn't think much will change in the short term because Nasdaq is not initially applying to provide listing services.
"With their apparent decision not to pursue listings at this time, it's not clear that there will be an immediate impact on the competitive landscape for trading services," he said in an email on Thursday.
"They are a well-respected international exchange operator; as time goes on we would expect to see an even more competitive market."
Nasdaq could spur real competition in Canada if it decides to co-list in Canada technology stocks it now lists in the United States such as Apple Inc. and Microsoft Corp., said Jim Dale, CEO of national independent investment dealer Leede Jones Gable.
"That would potentially create competition with the TMX. It would make it a much more attractive exchange for other tech companies to list on," he said.
The CSE offers an alternative to the TSX Venture exchange but a credible listing service by Nasdaq would provide needed competition for the Toronto Stock Exchange, he added.
The CSE lists more than 300 companies, about one-tenth the 3,142 listings as of Aug. 31 on the TSX and TSX venture exchanges.
Maureen Jensen, OSC chairwoman and CEO, said Thursday during OSC Dialogue 2017 in Toronto that staff at Canada's biggest securities regulator have reviewed an application by Nasdaq to operate a stock exchange in Canada but it hasn't yet come before the board.
TMX Group CEO Lou Eccleston said in a statement the company is reviewing Nasdaq's exchange application.
"The scope of our review, as it is in all such matters, is to ensure Canada's markets remain fair and efficient and operate in the public interest."