Editorial “Big Bang” hits Bay Street

Nothing, it seems, can safely insulate itself from change these days — not even the snug brokerage fraternity. And we are not referring to the trend to automated trading systems, which uses microcomputer terminals to provide ** instant market information to match and execute orders worldwide. **

Rather, it is what is being dubbed the “big bang” as announced by ** Ontario’s Financial Institutions Minister Monte Kwinter this past week that has thrown the lucrative Bay Street club into something of a dither. It’s

tantamount to an open invitation to banks, trust companies, insurance **

companies, etcetera — both domestic and foreign — to join in a new ** free-for-all securities industry. Indeed, non-resident investors will soon be

** able to own anything up to 100% of any Canadian securities firm. **

While securities regulations in this country come under provincial ** jurisdiction, banks are under federal control. However, Ottawa has intimated that it will go right along with the Ontario plan by changing its Bank Act

and regulations with respect to insurance and trust companies despite ** objections of a strong investment dealer lobby. This willingness to go along

with Ontario’s bold and sudden move could relate in part to political ** compensation by the Mulroney administration for its recent designation of Montreal and Vancouver as international financial centres, a move that brought cries from Toronto’s gleaming bank towers. Elimination of present ownership restrictions on investment dealers will in all probability bolster that city’s

** dominance as Canada’s financial capital. **

“Deregulation of Ontario’s financial securities industry, opening the

door to greater foreign ownership, is not meant to bolster free-trade ** negotiations with the United States,” says Premier David Peterson. “We are not prepared to sit back and see Ontario or Toronto become a boutique economy catering to a few small transactions to satisfy some ideological whim.” ** Money and more money (i.e. capital) is becoming the name of the game in this

** business. Watch for a flood of takeovers. **

Fact is, much of Canadian government and corporate borrowing is already being handled by foreign investment dealers, many of whom are much larger than their Canadian counterparts, commanding a much stronger financial clout.

If Canada is to compete in the big but shrinking world of international finance, it is simply going to have to open its doors or be left behind. Its investment business has been protected and pampered long enough. Now it is

going to be a case of separating the men from the boys. There will, of ** course, be winners and losers. But so be it, as long as public confidence in the solvency of this new financial system be regarded as paramount. (It was interesting to see that immediately following the Kwinter announcement, there was heavy buying in the half dozen or so brokerage firms that are listed on

** the TSE, jumping about 20% on average). **

We see nothing wrong with deregulation. Indeed it’s the only way to ** ensure that the financing of Canadian business is done as efficiently and as cheaply as possible and at the same time ensuring that investors like John Q Public are able to trade stocks in markets that are as broad and liquid as possible. In any truly competitive market, the basic criterion is to decide which firm — be it large or small, old or new, domestic or foreign — offers

** the best service at the best price. **

Sure, there will be some problems, especially in the knotty field of ** conflict of interests. But we have no doubt that the Ontario Securities ** Commission, in whose jurisdiction this will fall, will be able to cope. **