Compromise sets stage for national junior exchange

The timeless wisdom of Solomon has helped settle a jurisdictional wrangle over where to locate Canada’s new junior stock exchange.

Officials from the Vancouver and Alberta Stock Exchanges (VSE and ASE) have proposed a compromise that would result in the headquarters being based in Calgary, and the day-to-day operations in Vancouver, B.C.

The junior capital market will provide venture capital to entrepreneurs and innovators from all parts of Canada. In addition to the listings currently on the western exchanges, the new exchange will house juniors listed on Ontario’s Canadian Dealing Network (CDN). Market services will be available to all regions of the country.

“Head offices for stock exchanges date back to the days of trading floors and local investors investing in local enterprises,” says James Sorenson, chairman of the ASE. “For our totally computerized trading system and our national approach to financing and investing, a head office is a concept that is irrelevant.”

Regional offices will provide financing, market regulation and marketing services. The office in Calgary will be responsible for planning, finance and management responsibility of the regional offices, which will be located in Montreal, Toronto and Winnipeg. The Vancouver operations office will provide trading, technology, marketing, compliance and market information services.

The electronic market is expected to begin operating by late 1999, using the VSE’s current computerized trading system.

The restructuring plan was recently approved by the boards of governors of the VSE and ASE. The plan calls for the two exchanges to merge into a single entity. The merger will also consolidate the operations of the CDN, a subsidiary of the TSE, as well as junior companies listed on the Montreal Exchange. The Winnipeg Stock Exchange has also been invited to join.

The new junior exchange will graduate its most successful companies to the TSE. “Nowhere else in the world would a country’s junior and senior equity exchanges be so closely aligned,” says Sorenson. “We believe this would substantially increase the participation of companies and investors in this market.”

Sorenson feels that Calgary’s traditional role as the centre for the junior oil and gas industry and Vancouver’s industry expertise in the junior mining sector would be enhanced by the formation of the new exchange.

The restructuring plan is designed to take the best practices and the most efficient and effective services for both companies and investors and apply them to the new exchange. It is also expected to eliminate the redundancy and cost of having several exchanges handling junior listings.

The deal is still subject to government approval, and member firms of the two exchanges will be asked to ratify the merger by the end of June. It is anticipated that the name of the new exchange will be selected by the members at that time.

Roslyn Kunin, chairman of the VSE, says employment levels at the VSE and ASE would not change significantly under the merger. “The exchanges will need current employees to facilitate the merger over the next 12 to 18 months,” she explains. “Once the merger is complete, we anticipate minimal job reduction. However, a number of employees may be re-deployed to new assignments to accommodate the growth of the new exchange.”

The current chief executive officers of the VSE and the ASE, Michael Johnson and Thomas Cumming, respectively, will manage the transition jointly, until the board of the new exchange appoints a permanent CEO.

Kunin says market integrity is the most important asset of any market. She believes that investors in the new exchange “will benefit from a well-regulated, fair and accessible market with enhanced protection through uniform regulatory standards, consistent enforcement and improved market information.”