(April 28) – “Surely the NASDAQ Stock Market and the Quebec government are the strangest of bedfellows,” writes Peter Foster in an editorial in today’s Financial Post.. “New York-based NASDAQ, driven by the vision of its head, Frank Zarb, has become the very symbol of globalization. The home for high-tech corporations that are changing the way business is done worldwide, its ambition is to make stock trading a 24-hour-a-day phenomenon from Peoria to Perth.
“Contrast this to the intensely nationalist approach of the Parti Québécois, which is anti-global in almost every way. Hence, Wednesday’s announcement of an agreement between Quebec and the NASDAQ to create a new stock exchange, NASDAQ Canada, comes as a shock.”
Foster says the move severely undermines the deal worked out last year to divide Canadian markets among different jurisdictions. “In fact, the NASDAQ/Quebec arrangement indicates how flawed that deal, based on the concept of gentlemanly accommodation, always was.
“Under last year’s arrangement, the Vancouver and Alberta exchanges merged to form the wildly successful Canadian Venture Exchange (CDNX), while the Montreal Stock Exchange gave up its senior listings to Toronto in return for the transfer of all derivatives trading, a futures trading system and a big chunk of cash.
“The first issue was whether such a tidy arrangement could work in a world where capital markets were growing and mutating at light speed. But the time bomb at its heart was political rather than technical or economic: the fact that the Quebec government, while agreeing reluctantly, always hated it. Why would you want to be part of an integrated Canadian trading system if you didn’t want to be part of Canada?
“The CDNX has regarded itself from the start as a kind of high-tech kindergarten, from which the most promising companies would one day ‘graduate’ to a senior exchange. The TSE’s increasing fear has been that the best and the brightest would go straight to the NASDAQ. NASDAQ Canada may eventually prove a direct rival to the CDNX, but could also increasingly funnel ‘graduating’ Canadian companies to its parent.”
Although that threat is some way off, Foster argues that “Wednesday’s announcement represented perhaps the greatest challenge yet to the TSE’s perennially upbeat president, Barbara Stymiest, to come up with a positive spin …
“For Canadian investors and companies,” Foster concludes, “the creation of NASDAQ Canada can only be regarded as positive. But for Canada’s stock exchanges outside La Belle Province, it looks more like a dark cloud.”