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TMX shares climb on news of exchange merger

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Shares of Toronto Stock Exchange operator TMX Group (X-T) raced higher Monday on speculation of further global exchange mergers after news of a big takeover deal between two Asia-Pacific exchanges.

 

Singapore Exchange has agreed to an $8.3 billion US takeover of Australia's ASX Ltd. to create Asia's fourth-largest stock exchange, aiming to cut costs and fight growing competition.

 

The plan faces regulatory hurdles, including getting Australia's government to lift a 15 percent ownership cap on the ASX and winning approval of the country's Foreign Investment Review Board.

 

Shubha Khan, an analyst at National Bank Financial, said the merger news "could mean global exchange mergers might be back on the agenda.'' He added that the probability of TMX being taken over is low, "but not zero.''

 

"TMX, like the ASX, is a resource-based equity exchange. It's also one of the few remaining exchanges that is sort of not married up with global peers. From that perspective, it's an attractive asset,'' he said in an interview.

 

On the flip side, the well-documented competitive pressures from smaller rivals, or alternative trading systems, could ward off potential buyers until the marketplace is more settled, said Khan.

 

Furthermore, regulatory hurdles are high, since there is a 10 percent ownership limit in TMX, and both Ontario and Quebec's securities watchdogs would have to assent to any proposed deal, he added.

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