Alpha Group says key TMX assets must stay in Canada

TORONTO Wed Mar 2, 2011 6:31pm EST

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TORONTO (Reuters) - The head of the Toronto Stock Exchange's main rival questioned on Wednesday what will happen to Canada's strategic exchange assets if the London Stock Exchange's (LSE.L) friendly takeover of TMX Group (X.TO) goes ahead.

Alpha Group's chief executive, Jos Schmitt, said a merged LSE-TMX would see the Toronto Stock Exchange's center of gravity shift to London.

Schmitt told Ontario lawmakers on the first day of hearings into the merger, that control of TMX assets like the S&P60 and the TMX Clearing House for derivatives should stay in Canada. He suggested either their divestiture before any deal is completed or clarifying regulations surrounding the entities.

"Strategic assets need to remain under full Canadian control," said Schmitt, during hearings by the province's all-party legislative panel.

"I can see some very interesting developments taking place when there's a new crisis over who is going to call the shots."

Alpha Group, founded by Canada's biggest banks and the Canadian Pension Plan Investment Board, is an alternative trading system that has become the TSX's biggest domestic competitor since its launch less than two and a half years ago.

Alpha, which currently represent roughly 20 percent of the volume traded in TSX-listed securities, has applied for exchange status. Schmitt said its recognition as an exchange would be an important part of enabling healthy competition in Canada.

"What's happening with this development is that we are becoming the largest marketplace that is truly anchored in Canada," Schmitt told Reuters earlier.

(Editing by Rob Wilson)

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