Merge Canada's Capital Markets or Others Will Control Our Investments

Article excerpt


Chair, Ontario Securities Commission

The world's securities trading systems face a variety of challenges: electronic competition, market fragmentation, and the staggering cost of technology. To address these challenges, Canadians have two choices. We can have a capital market which serves our country's needs, or we can have a capital market controlled and directed by other countries. To achieve the first, waste, inefficiencies and fragmentation need to be eliminated. Accomplishing this requires one homogeneous capital market for Canada. Speech to The Canadian Club of Toronto, April 12, 1999.

I would, of course, welcome any opportunity to address a gathering of the historic Canadian Club of Toronto. But this invitation comes at a particularly eventful time, following almost immediately the unveiling by various Canadian stock exchanges of their proposal to re-align their businesses.

To illustrate just how current, and hot, this topic is, last Wednesday I spent 12 hours of quality time in Frankfurt. The purpose of this whirlwind trip was to meet with heads of the securities regulators in the major world markets. The principal topic of discussion was the world's securities trading systems -- the challenges facing them, the drastic measures that some will need to take to survive.

Unquestionably, the stock exchanges in their markets are facing many of the same issues that we face in Canada: competition from alternative electronic exchanges; fragmentation of markets; the staggering cost of technology; the difficulties faced by member-owned exchanges in responding to these threats.

As our discussions progressed, it became clear that some jurisdictions are far ahead of Canada in addressing these issues. But we are not at the back of the pack. Equally clear, however, was that securities trading will move away from those markets that are too slow in responding to those which have their act together.

That is why I'm here today; to talk about a crucial aspect of our capital markets and the state of its health as we count down to the millennium.

And there is, perhaps, no better venue than the Canadian Club to place the stock exchange proposal into a larger -- and in many ways uniquely Canadian -- context.

That context includes the world of trading and the changes it will experience as we turn the corner into the new century. It also includes the position of Ontario in relation to Canada's capital markets and of Canada's capital market in relation to its international competitors.

Canadians have two clear choices:

* We can have our own capital market in this country, one that serves Canadian companies seeking to raise capital and serves investors wishing to invest in those companies, (in other words a capital market which serves the needs of this country).

* Or we can have a capital market controlled and directed by other countries, in which only premium Canadian companies and major-league Canadian investors will be able to participate.

I believe that the survival of an independent capital market in Canada very much depends on making those choices now, and on the speed and efficiency with which we implement needed change.

Let's begin by looking at the main trends that are impacting Canadian markets in general and Canadian money managers in particular. I'll be referring to the work that was done on behalf of the Canadian exchanges, work which has motivated some of the proposals you've been reading about lately and, consequently, the invitation for me to be here today.

I might add that Canadian money managers have no choice but to respond to these trends. Given their responsibilities to their clients, they simply cannot incur unnecessary costs or sacrifice efficiency in order to support Canadian service providers.

The first trend is globalization. As noted in the TSE's "Blueprint for Success," issued last fall, evidence of globalization is widespread, with issuing companies continuing to expand operations internationally and increasingly sourcing world markets for the capital they need to expand. …