UPDATE 1-TMX to move into private market in race with rival Aequitas

Tue Mar 25, 2014 1:38pm EDT

(Adds TMX executive and analysts comments)

By Euan Rocha and Cameron French

TORONTO, March 25 (Reuters) - TMX Group Ltd, the operator of the Toronto Stock Exchange and the TSX Venture Exchange, said on Tuesday it plans to launch a new business to allow capital raising and the trading of securities of privately owned entities.

The move to launch the business appears to be a pre-emptive gambit to thwart the threat posed by privately-held Aequitas Innovations Inc, which is in the process of seeking regulatory approval in order to launch a new Canadian stock exchange.

Toronto-based TMX said the new business dubbed TSX Private Markets will serve companies throughout their evolution from the start-up stage, and further down the road.

"We are always looking for ways to facilitate companies and this is one more tool in that toolbox," Kevan Cowan, president of TSX Markets and group head of equities at TMX Group, told Reuters.

Aequitas, which is backed by Barclays Plc, BCE Inc , CI Financial Corp, IGM Financial Inc , OMERS Capital Markets and Royal Bank of Canada , among others, last year outlined plans to also launch a unique trading platform for private securities that would seek to allow for capital raising and liquidity for small and mid-sized issuers.

"The way I look at it this is a pre-emptive move to secure TMX's monopoly position in the listing business," CIBC World Markets analyst Paul Holden said in an interview.

Asked if Aequitas was motivation to get in to the private market, Cowan noted TMX "has always been committed to companies at all levels of the maturity cycle."

He said the segment is appealing in part because of signs policymakers are opening the door to alternative funding for small enterprise, pointing to proposed rules by the Ontario Securities Commission earlier this month that would allow smaller businesses to raise equity online.

The TSX Private Markets platform will be run by TMX subsidiary Shorcan Brokers Limited, and is expected to launch in the third quarter of 2014, subject to final regulatory approval.

TMX said it will provide capital formation and secondary trading of companies in the exempt market, which is a low-cost market for small companies, with lighter disclosure requirements and availability to a narrower group of investors.

Shares of TMX were up 41 Canadian cents at C$53.25.

(Editing by Marguerita Choy)

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