TMX Group Inc. (TMXGF.PK)

Q2 2010 Earnings Call Transcript

July 28, 2010 8:00 am ET


Paul Malcolmson – Director, IR and Government Relations

Tom Kloet – CEO

Michael Ptasznik – CFO


John Reucassel – BMO Capital Markets

Graham Riding [ph] – TD Newcrest

Shubha Khan – National Bank Financial

Geoff Kwan – RBC Capital Markets

Ed Ditmire – Macquarie

Jeff Fenwick – Cormark Securities



Good morning. My name is Shannon, and I will be your conference operator today. At this time, I would like to welcome everyone to the TMX Group Q2 2010 conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. (Operator Instructions). Thank you.

I would now like to turn the call over to Paul Malcolmson, Director of Investor and Government Relations. Paul, you may begin.

Paul Malcolmson

Thank you, Shannon; and good morning. Thank you, everyone, for joining us this morning for the second quarter 2010 conference call for TMX Group. As you know, we announced our second quarter 2010 results this morning. A copy of the press release is available on our website under Investor Relations. Today, we have with us Tom Kloet, our Chief Executive Officer; and Michael Ptasznik, our Chief Financial Officer. Following the opening remarks from Tom and Michael, we will have a question and answer session.

Before we begin, I want to remind you that certain statements made on the call today may be considered forward-looking, and I would refer you to the Risk Factors outlined in today's press release and reports filed by TMX Group with regulatory authorities. In addition, we may discuss certain financial measures that may include adjustments to our earnings per share, issuer services build, initial listings fees build, and additional listings fees build, that do not have standardized meanings prescribed by Canadian GAAP. These measures, therefore, are unlikely to be comparable to similar measures that are presented by other issuers.

And now, I would like to turn the call over to Tom.

Tom Kloet

Thank you, Paul; and good morning, everyone. Thank you for joining us to discuss TMX Group's second quarter performance. Michael will walk you through our financial results in detail in a moment, but first, I would like to take a few minutes to review our operational results, as well as our business initiatives and activities.

It was an eventful quarter for TMX Group. It is perhaps an understatement to say that it was an eventful period for the capital markets and for the country. Most impactful were the flash crash in the US, and the G8 and G20 summits held here in Canada. But it certainly isn't often that Toronto experiences an earthquake, riots in the streets, and a flood, all in one week. But I do want to note the work done by the TMX Group teams, who ensured the uninterrupted operation of our markets, including price discovery and capital formation throughout this period.

I will take a few moments to share my thoughts on the flash crash first. Simply put, the events of May 6 were a wake-up call. The extreme inexplicable market volatility on that day harmed issuers and investors and it revealed very serious systematic flaws and weaknesses. There is the general consensus is that a fragmented marketplace with multiple trading venues working under very different rules was an important factor, and that these disparate and uncoordinated rules are not understood by many investors, or listed companies. While the flash crash was in the US, regulators around the world have taken note, and are proactively working to ensure similar events do not occur elsewhere.

TMX Group welcomes and strongly supports the Canadian regulators' review of both the May 6 market event, and the broader regulatory and policy issues it raised. We stand prepared to assist in any way, and to share our insight as steps are taken to fix the problems that were exposed by market activity on that day. In fact, we have been participating in a marketplace committee that has been working to provide input to the CSA on issues like single stock circuit breakers. This is encouraging, because by demonstrating the common will to eliminate the flaws, and sure up those weaknesses going forward, we will strengthen the Canadian capital markets.

The quarter's other impactful event was the G8 and G20 summits. While it was massively inconvenient for Toronto's heavily populated financial district, hosting the G8 and G20 summits provided Canada with a great opportunity to showcase the unique attributes of the Canadian marketplace to the world. The exposure was helpful for TMX Group, because it was well aligned with our efforts to promote the Canadian marketplace as a listing and trading venue internationally. Canada's economy weathered the economic storms of 2008 and 2009 relatively well, and the summit gave the country a chance to demonstrate needed leadership on a global scale. While much of the outcome of this meeting cannot be measured in immediate economic terms, we believe the visibility will ultimately help the Canadian economy.

There have been signs of renewed economic activity in Canada, including signs that Canada is experiencing a more robust recovery than many parts of the world. Canada's GDP rose 6.1% in the first quarter of 2010. Since then, the rate of growth has slowed somewhat, but Canada's growth is expected to outpace other G8 economies for some time. The Bank of Canada recently bumped up essential rate, and there were other encouraging economic indicators, for example, lower unemployment numbers at the end of the second quarter.

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