CDN to nurture COATS: Letters to the Editor

Regarding your editorial “The wasted potential of COATS” (T.N.M., Jan. 28/91), we at the Toronto Stock Exchange would like to present our perspective on the issue.

The Canadian Dealer Network (CDN), the exchange-subsidiary successor to COATS, has a clear objective: to facilitate fair dealing and enhance capital formation by junior issuers through the provision of a quality over-the-counter trade reporting and quotation system.

That is a commitment the TSE has made to the Ontario Securities Commission (OSC), and it is a commitment we take seriously. For while we recognize the importance of a “less formal” junior market, a well-regulated market can only bring greater benefits to Canadian investors, while in no way impeding the potential of the COATS market.

In addition, the growth of the unlisted market can, in time, naturally lead to more companies being listed on the TSE. Thus both markets can work hand in hand to strengthen the economy.

The analogy you draw between the Canadian over-the-counter market and the “farm” systems in professional sports that develop young players until they are ready for the big leagues is actually an apt description of the relationship between the exchange and the unlisted market.

Much like the “farm” systems, CDN is a system in which deserving junior companies can be nurtured until, in many cases, they grow to meet the requirements necessary to list on the exchange.

Indeed, far from being competitors, the TSE and the CDN complement each other. As you note, “both are in the business of facilitating trading in securities.” Yet, I must add that each of them serves a specific niche that the other cannot appropriately satisfy: the exchange is focused on senior companies while the CDN is a place to raise capital for higher-risk and junior enterprises.

Leonard Petrillo

vice-president of corporate affairs

The Toronto Stock Exchange

Toronto, Ontario