Canadian Securities Exchange Considers CBOE Canada Acquisition to Expand Market Reach
The Canadian Securities Exchange is looking at buying Cboe Canada, according to a source familiar with the matter, in a deal that could transform the domestic capital markets landscape.
Formerly known as the NEO Exchange before being acquired by Cboe Global Markets Inc. in 2021, Cboe Canada is home to 270 exchange-traded funds, 150 Canadian Depositary Receipts and 25 operating businesses. Chicago-based Cboe put its Canadian and Australian operations up for sale in late October.
The CSE, which made its first-ever acquisition in Australia earlier this year, is considering buying both Cboe Canada and Cboe Australia, the source said. However, the source added talks are preliminary and there is no guarantee any deal will emerge.
The Globe and Mail has agreed not to identify the source as they are not authorized to discuss the matter publicly.
Cboe spokesperson Angela Tu said via e-mail that the company was selling its Canadian business after only a few years because “Cboe is realigning its portfolio of businesses to sharpen its strategic focus on core strengths and emerging growth opportunities.”
Ms. Tu declined to comment on discussions with potential buyers. The CSE also declined to comment.
Consolidating Canada’s two smaller stock exchanges would create the largest homegrown rival to the dominant TMX Group Ltd. – owner of the Toronto Stock Exchange and the TSX Venture Exchange – that the country’s largest public markets platform has ever faced. The CSE had 744 listed issuers as of Oct. 31 and combining with Cboe would push that total to nearly 1,200. The TSX, by comparison, had 2,017 listed issuers as of Oct. 31 and the TSX Venture Exchange had 1,546.
TMX spokesperson Shane Quinn declined to comment on whether the company was also considering bidding on Cboe Canada, saying via e-mail “we continue to evaluate strategic growth opportunities across the global business landscape.”
After launching in 2015, the upstart NEO Exchange originally had ambitious plans to topple the TSX monopoly, portraying itself as the “Nasdaq of the north” (Nasdaq actually does maintain some Canadian operations, though it does not operate a stock exchange in this country). That dream was never realized, though NEO’s founding shareholders – which included Royal Bank of Canada, Barclays, CI Investments, OMERS Capital Markets and PSP Investments among other large backers – did have a lucrative exit when the exchange was sold to Cboe.
Financial terms of that transaction were never publicly disclosed, though a separate source with knowledge of the deal said the total purchase price for NEO was more than US$315-million. Combined with the roughly US$37-million that Cboe paid for Canadian alternative trading system MATCHNow a few months before buying NEO, the current entity known as Cboe Canada would have cost the Chicago company more than US$350-million to acquire less than five years ago.
Cboe is now expected to sell its Canadian assets for significantly less than it paid for them, the source said, given its domestic market share has been in a state of decline. The Globe is not naming the source as they are not authorized to publicly disclose transaction details.
When the NEO deal closed in 2022, Cboe Canada controlled more than 16 per cent of the Canadian equities market, as measured by trading volume, the company said at the time. By the third quarter of 2024, Cboe disclosed that its Canadian market share had fallen to 14.6 per cent and in its most recent quarter that figure was just 12.5 per cent.
Craig Donohue, who joined Cboe as chief executive officer in May, has beaten a rapid retreat from its global corporate listings business. Barely two months after Mr. Donohue took the top job, Cboe shuttered its Japanese equities business and trading platform. And the same day the company put its Canadian and Australian businesses up for sale, Mr. Donohue also announced plans to discontinue all U.S. and European corporate listings efforts.
“We feel like we’ve done a very good job in Australia and Canada,” Mr. Donohue told analysts on an Oct. 31 conference call. “But at the same time, our best opportunities for growth are in our current large core businesses that are hugely successful, where we’ve got a critical mass of successful markets, products, liquidity and customers.”
“We don’t feel that our presence in Australia, Japan or Canada are really vital to the continued globalization strategy that we have for the firm,” he said.
This article was first reported by The Globe and Mail
