Capital market restructuring suggested by ME president

The president of the Montreal Exchange has called for a far-reaching restructuring of the Canadian capital market.

Although the Canadian financial services industry has gone through a substantial restructuring during the past decade, “Canadians have failed to define the role of exchanges in the restructuring of the financial services industry,” Gerald Lacoste said in Montreal.

“The consensus behind financial services restructuring is that Canada needs strong entities to compete in the global market. The same holds true for exchanges.”

The greatest challenge, he said, comes from the U.S. exchanges, where almost 50% of the trading in Canadian-based, inter-listed stocks is being handled. Despite record volumes on Canadian markets, the U.S. share of trading has continued to grow during the past years.

Lacoste suggested that Canadian exchanges pool capital and human resources, and avoid duplicating complicated trading and settlement technologies.

Referring to the development of the Intermarket Trading System (ITS) by U.S. exchanges, Lacoste commented that this concept may well be the missing link in the reform of Canadian financial services.

(ITS is a communication and routing system designed to facilitate trading in listed stocks amongst competing markets.)