TMX Group CFO Michael Ptasznik jumps ship to Nasdaq

Nasdaq Inc said it named Michael Ptasznik as chief financial officer after he resigned from a similar role at TMX Group Inc, the operator of the Toronto Stock Exchange.

The appointment of Ptasznik is seen as a coup for Nasdaq, which is looking to expand its footprint in Canada.

Peter J. Thompson/National Post

Peter J. Thompson/National PostMichael Ptasznik, right, opens the TMX in 2008 with interim CEO Rik Parkhill, left, and Luc Bertrand, CEO of the Montreal Exchange.

Nasdaq announced in March that it plans to seek regulatory approval to turn its existing alternative trading systems in Canada, which are more lightly regulated than exchanges, into full-blown stock exchanges, enabling it to rival the TSX.

Ptasznik, who became TMX CFO in 2000 and oversaw events including the company’s initial public offering, will join Nasdaq from July 11.

Frank DiLiso, vice president of corporate finance and administration, has been named interim CFO by TMX while Nasdaq said Ronald Hassen, senior vice president and interim CFO, will remain with the company in an advisory capacity.

TMX shares were down 2.9 per cent at $52 in late morning trading.

© Thomson Reuters 2016

TMX readying for showdown with Nasdaq over Canadian tech unicorns

 The owner of Canada’s largest stock exchange is trying to make the company more enticing to technology startups amid new competition from Nasdaq Inc., the global heavyweight in tech listings.

TMX Group Ltd. wants more tech firms on its venue for small companies, the TSX Venture Exchange, with the goal of attracting companies from Silicon Valley and Canada’s technology hubs, Chief Executive Officer Lou Eccleston told reporters in Toronto on Thursday. TMX is cutting administrative and compliance costs and combating the perception the Venture Exchange is only for natural-resource firms, he added.

Nasdaq recently agreed to buy Chi-X Canada, which competes with the TMX platforms and handles roughly an eighth of the country’s stock trading. Nasdaq’s main U.S. exchange is home to the four biggest technology companies in the world — Apple Inc., Alphabet Inc., Microsoft Corp. and Facebook Inc. — which together have a market value of US$1.9 trillion. That’s bigger than the entire US$1.6 trillion Canadian equity market. Eccleston said his company can fend off Nasdaq.

“Nobody is just going to walk in and hang a shingle and take business,” said Eccleston, who recommends buying TMX shares after they plunged about 18 per cent following news of Nasdaq’s acquisition on Dec. 8. “I think there’s been a big overreaction. I think everybody is like, ‘Oh no, that name is coming in.’”

TMX’s markets, including the Toronto Stock Exchange, handle about 70 per cent of Canadian equity trading volume.

The company’s new initiative comes amid a renaissance in Canada’s tech scene, where Ottawa-based Shopify Inc.’s debut as a US$2-billion stock earlier this year has stoked speculation Canada is home to more tech unicorns — or startups valued at US$1 billion or more.

Bloomberg News

TMX about to face heavyweight competition as Nasdaq to expand north of border

TMX Group Ltd.’s control of Canada’s capital markets is under assault from several nimbler rivals striving to knock the country’s incumbent equity exchange operator off its tall perch on Bay Street. And now, a seasoned and deep-pocketed competitor in the U.S. has finalized its plans to expand north of the border.

Nasdaq Inc. announced Tuesday that it has agreed to purchase Chi-X Canada, a venue registered as an alternative trading system where securities that are listed on exchanges can be bought and sold, for an undisclosed sum.

Nasdaq’s foray north via Chi-X “intensifies competition that had already been stepped up with the recent launch of Aequitas,” a new stock exchange, said National Bank Financial analyst Shubha Khan.

Aequitas Innovations Inc., the parent company of Aequitas Neo, also revealed on Tuesday that it has filed a complaint with the Competition Bureau of Canada alleging that TMX Group is gouging investment dealers and their clients by charging exorbitant fees for gaining access to its proprietary market data feeds, clinging to its monopolistic past to the detriment of ordinary investors who have a partial view of public markets.

Jos Schmitt, who runs Aequitas, said the bill his company pays for a subscription to TMX Group’s data is “marginal.” Instead, he says that he is championing the cause for dealers that have to pay hefty costs each month to connect clients to real-time data feeds, costs that are then likely transferred to their clients.

“When you look at who is facing this issue, it’s not our shareholders any more or less than anyone who isn’t a shareholder. It’s an industry challenge,” Schmitt said Tuesday in an interview, referring to the financial backers of Aequitas, including Royal Bank of Canada, CI Investments Inc. and ITG Canada Corp. Other large Bay Street banks and funds own stakes in TMX Group, pitting these titans against one another.

“Enough is enough,” said Schmitt, who was optimistic about Nasdaq’s entry into Canada. “That makes two of us that can, in a serious way, now tackle some of these anti-competitive behaviours.”

TMX Group rejected both these developments on Tuesday. “We charge competitively for our market data,” the company said in an email statement, adding that it “operates within applicable laws” and is “confident” that it fulfills its regulatory role of delivering best execution to all investors. In a separate statement about Nasdaq’s arrival to Canada, TMX Group dismisses the new threat, saying nobody knows this market better.

“Nobody knows this market like TMX does and nobody is better positioned to serve this market like TMX,” it said in the other emailed statement, which was attributed to TMX Group’s chief executive Lou Eccleston.

But one former employee believes that any recent improvements made by TMX Group have been reactive.

“If you’re in first place, you can maybe retain it, but people will be coming after you,” said the former employee who spoke on the condition of anonymity. “And when you’re the monopoly, you have nowhere to go but down.”

cpellegrini@nationalpost.com

‘A vote of confidence’: Nasdaq, NYSE take steps to embrace bitcoin

The biggest U.S. stock exchange operators are taking steps to embrace bitcoin, spurring speculation the digital currency is coming up from underground.

Nasdaq OMX Group Inc. revealed Tuesday that New York-based Noble Markets, a platform for trading bitcoin, has agreed to license Nasdaq’s X-stream technology. Noble is adopting the same software used by securities exchanges around the world, and a related system runs the Nasdaq Stock Market, one of the biggest equity exchanges. The news follows the New York Stock Exchange’s January agreement to invest in Coinbase, another platform for trading the digital currency.

Markets for buying and selling bitcoin took a reputational hit when one of the biggest, Mt. Gox, failed in 2014. Mt. Gox filed for bankruptcy after discovering it had lost bitcoins belonging to customers and itself. Deploying Nasdaq’s software could give Noble greater legitimacy.

“It is a vote of confidence in bitcoin the technology,” Nicholas Colas, chief market strategist at Convergex Group, said in an interview. “Now that you are seeing big organizations providing technology, there’s a feeling that bitcoin is here to stay.”

While some bitcoin startups have recently built their own trading technology, Nasdaq’s system has been battle-tested for years. Nasdaq provides trading software to companies including Japan Exchange Group Inc. and Singapore Exchange Ltd., which are among the biggest market operators in the world.

Other Exchanges

“Nasdaq is open to providing its technology to other bitcoin exchanges,” Ryan Wells, a Nasdaq spokesman, said during an interview.

Noble was founded by John Betts, whose resume features stints at Goldman Sachs Group Inc., Morgan Stanley and UBS Group AG. Betts said his finance career included designing trading systems. His time working for the giants of finance may be a sign of maturation for bitcoin, and contrasts with Mt. Gox, which was originally envisioned as a place to buy and sell playing cards for the game Magic: The Gathering.

Nasdaq’s involvement is a good sign, according to Adam Draper, a venture capitalist at Boost VC who invests in bitcoin startups.

It “obviously shows that they think bitcoin is here to stay,” he wrote in an e-mail, referring to Nasdaq.

— With assistance from Sam Mamudi in New York

Bloomberg News

Paralyzed Nasdaq opted for caution over speed in restoring equities trade

NEW YORK — Thirty minutes into the crippling outage that hobbled the Nasdaq stock market on Thursday afternoon, stopping all trading in US$5.9 trillion worth of U.S. equities, exchange officials had the problem fixed.

It was another two-and-a-half hours, however, before they were ready to flip the switch and turn the all-electronic market back on.

Most of the 191 minutes that the exchange was dark was spent in sometimes frantic conversation with scores of banks, brokers, investment companies and rival exchanges who wanted Nasdaq’s assurance that a restoration of trading would be orderly and would not lead to panic.

“We had to make sure all the exchanges were connected to us successfully and if the firms on the outside could get in,” said one Nasdaq official who spoke on condition of anonymity.

Meanwhile, banks’ trading desks were cautioning Nasdaq, operated by Nasdaq OMX Group Inc, not to rush to reopen, fearing that a restart full of technical errors would only sap more confidence from rattled markets, according to three sources at brokerages and banks who declined to be identified.

In the end, the reopening of trading did go relatively well.

Transactions first restarted at 3 p.m. EDT in a single microcap stock, Atlantic American Corp, a test case picked for its front-of-the-alphabet ticker. Twenty-five minutes later, the rest of the market opened, and, according to a Nasdaq statement, “The trading day finished in normal course.”

Shares of Nasdaq itself, which initially fell by more than 5% when trading resumed, recovered some of their lost ground to close the day 3.4% lower. The widely tracked Nasdaq Composite Index gained nearly 1.1%.

PERSISTENT GLITCHES

While the worst case scenarios may have been averted, the outage still stands as among the most serious in a series of recent technological failures to hit the U.S. securities business, including a software issue at the Chicago Board Options Exchange this spring that delayed the start of trading there for half a day.

It was also the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle SEC civil charges over its mishandling of Facebook’s initial public offering in 2012.

Late Thursday Nasdaq identified the problem as a “connectivity issue between an exchange participant and the SIP,” or Securities Information Processor – essentially the system that receives all traffic on quotes and orders for stocks on the exchange.

This problem “led to degradation in the ability of the SIP to disseminate consolidated quotes and trades,” Nasdaq said in a statement. “The cause of the issue has been identified and addressed.”

Whether it has been addressed to the satisfaction of regulators is another question. U.S. Securities and Exchange Commission Chair Mary Jo White called for a meeting of Wall Street leaders to help insure the “continuous and orderly” functioning of securities markets.

The incident “should reinforce our collective commitment to addressing technological vulnerabilities of exchanges and other market participants,” she said.

Thursday’s outage could well give White fodder to press ahead with new rules, proposed in March, that would hold exchanges, clearing agencies and certain “dark pool” trading venues more accountable for taking steps to prevent potential systems disruptions.

The rules, if adopted, would replace the current regulatory model in which exchanges rely on voluntary guidance known as “Automation Review Policies” to address security and stability issues with their systems.

The SEC rushed to roll out its proposal as a direct response to several high-profile software problems last year, including Nasdaq’s debacle with the Facebook IPO and a near-collapse at Knight Capital, a major Nasdaq market maker, as well as the two-day shutdown of the U.S. equity market due to Superstorm Sandy.

Exchanges, including Nasdaq and rival NYSE Euronext, parent of the New York Stock Exchange, pushed back, citing a number of concerns, including costs and an “unduly broad” requirement to disseminate information to member firms about certain incidents. “This requirement would likely have a chilling effect on communications,” they wrote.

The SEC agreed to extend the comment period on the rule, effectively delaying it, but late Thursday after this latest incident, White said she will push to get it completed.

AVOIDING THE ‘DOOMSDAY SCENARIO’

The problems surfaced at 12:14:03 p.m., when all traffic through Nasdaq stopped abruptly.

During the shutdown, trading of shares not listed on Nasdaq continued, but transactions could not be executed on the Nasdaq platform. Options trading was also halted. All rival exchanges agreed to halt trading of any Nasdaq-listed issue.

In Nasdaq’s Transaction Services division, it was quickly emergency mode as soon as the outage struck, the Nasdaq official said.

The team focused primarily on whether the exchange should reopen trading as the clock ticked toward the regular 4 p.m. close. They raised the “doomsday” scenario of reopening and not being able to execute a flood of orders.

“We asked all the what-if questions,” the official said.

As frustrated as Nasdaq customers were by the outage, they were more concerned that the exchange have all its ducks in a row before attempting to restart.

“The general feedback given to Nasdaq was, ‘Don’t rush back to fix it. It will be 10 times worse to come back online in a rush than to take time and get it right,’” said one source.

At Nasdaq, coordination was tight between the exchange’s technology staff, rival exchanges that had halted their trading of Nasdaq stocks, brokerage firm members and the firms’ major customers.

“It’s not an excuse, but anyone who understands the complexities of the trading and matching systems and the difficulties of having multiple exchanges operating and trading the same stocks can understand how difficult this was,” the Nasdaq official said. “It worked. It looks like the customers and the public did not get hurt.”

Not all will agree with that assessment, but it could be some time before the size of losses, if any, can be determined. And Nasdaq faces a reputational risk that could damage its listings business.

“If you’re advising companies to really go public, are you advising them to go public on Nasdaq?” said one source.

© Thomson Reuters 2013