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Canada’s TMX ‘in talks for US exchange Direct Edge’
Posted on Thursday, 12 July 2012 10:42
Canadian exchange operator TMX is in talks to buy US peer Direct Edge Holdings, according to the Wall Street Journal (WSJ), citing people with knowledge of the matter.
The group, which owns the country’s two bourses - Toronto Stock Exchange and TSX Venture Exchange - is currently the target of a takeover by a consortium of national banks and pension funds.
Although this tie-up has won approval from regulators, including the Competition Bureau, it is still awaiting the green light from shareholders, although the WSJ said they are expected to back the deal.
Just over a year ago, the group’s stockholders vetoed a proposed tie-up with the London Stock Exchange, paving the way for the rival bid by the Canadian investor group.
Earlier this year, TMX announced a 42.0 per cent rise in its finance income for the first quarter of 2012, reflecting an increase in cash available for investment.
The company also said it will continue to explore growth opportunities, including those which offer the prospect of geographical expansion.
This explains TMX’s interest in buying Direct Edge, which would provide the Canadian business with a way into the competitive US stock trading market.
The New Jersey-based exchange operates two platforms - EDGA and EDGX - and on any given trading day, it is ranked as the third or fourth largest stock market in the US, according to its website.
It was formed in 1998 as Attain ECN, and in 2005 was bought by Knight Capital Group and rebranded as Direct Edge ECN.
In 2007, Knight spun off the business as an independent company and brought in Citadel Securities and Goldman Sachs as partners.
A year later, the International Securities Exchange (ISE) picked up a 31.5 per cent stake in Direct Edge, diluting the shareholdings of the three existing owners to 20.0 per cent, and as part of the deal Direct Edge took operational control of ISE.
In January, the WSJ quoted William O’Brien, chief executive of the New Jersey-based group, as saying that the company is looking at strategic options which could include a flotation or sale.
The paper said representatives of TMX and Direct Edge declined to comment.
Shares in the Canadian exchange closed up 0.4 per cent yesterday at CAD 48.85 (USD 47.86).
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