You might have heard that earlier this week, TMX Group made a minority investment in VettaFi. Maybe from me, seeing as how I crowed about it on TV, which isn’t particularly like me. But I have a soft spot for Canada — and, specifically, for Toronto.
Back in the early ’90s when I was, if I’m being honest, very young, stupid, and probably not all that fun to hang out with, I was a baby-MD for Wells Fargo Nikko Investment Advisors, the progenitor of what would become Barclays Global Investors and eventually BlackRock’s iShares.
I lost what little money I had invested in 1987 (a few car payments’ worth), and I was absolutely fascinated by the experience.
I followed the post-crash drama with academic fervor. When faxes with SEC speeches and commentary started flying — remember: there was no Google to consult, nor a usable SEC website — I, along with anyone even tangentially related to indexing, devoured the hundreds of pages the SEC had published, going all the way back to 1988. What was especially interesting was the bit where the SEC actually suggested a new form of basket trading as a way to solve what was seen as the unintended consequences of the futures market dominating the world of index trading (as it did at the time).
Toronto heard the message, loud and clear. Two years later, in March 1990, Toronto 35 Index Participation Units (TIPs) started trading on the Toronto Stock Exchange.
Since then, Toronto has been a hub of ETF innovation. By my count, the exchange has been home to the world’s first bond ETF, the first ETF using options, the first physically backed crypto ETFs, and the first semi-transparent active funds.
All of that ETF innovation originates from the dedicated group of folks at TMX, who eat, sleep, and breathe entrepreneurship (and who maintained genuinely bilateral working relationships with their regulators).
But that innovative spirit goes beyond ETFs. Chances are, if something interesting is happening in securities, someone at TMX is on it.
Consider one of my favorite little corners of the market: the Toronto Venture Exchange (TSXV). At first glance, it would be easy to assume it was equivalent to the OTC markets in the U.S., but that would be wrong.
TSXV is a bespoke exchange just for smaller companies who want to expand their access to capital. Many firms end up there through the “Capital Pool Company” (CPC) process — a cousin to SPACs without all the baggage. CPCs allow a tiny pool of assets — under $1 million — to raise money from public markets in a way that’s frankly impossible in other jurisdictions. For all the big talk of “democratizing” access to private equity, actually doing so is just another day in the market in Toronto.
While innovation is often the product of constraints, it also thrives when there’s diversity in approach, opinion, and implementation. I’m looking forward to working with the highly innovative team at TMX in the coming days to explore where the future is really taking finance. The innovation pipeline between the Canadian and U.S. markets is fat and bilateral, and I’m excited to help explore ways that VettaFi readers, customers, and licensees on both sides of the border can benefit from being part of our expanded community.
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