TSE renames CDNX, revamps TSE 300 Index

It looks as if “rebranding” fever has hit the Toronto Stock Exchange hard.

In a follow-up to its $50-million takeover of the Canadian Venture Exchange (CDNX) in May 2001, the TSE has renamed the junior equity market the “TSX Venture Exchange,” while its sister company, TSE/CDNX Markets, has been renamed the “TSX Markets.”

From May 1 onwards, the TSE, the TSX Venture Exchange and the TSX Markets are to be operated under an umbrella organization named the “TSX Group,” which will be headquartered in Toronto, with offices in Vancouver, Calgary, Winnipeg and Montreal.

Barbara Stymiest will continue as president and chairman of the TSE and the TSX Group. Richard Nesbitt is president of TSX Markets and, in April, Linda Hohol was named president of the TSX Venture Exchange, replacing William Hess.

Furthermore, the TSE has joined forces with Standard & Poor’s to carry out extensive changes to the TSE indices.

The TSE 300 Composite Index, developed in 1977, has been renamed the S&P/TSE Composite Index and will soon have fewer constituent companies once a new set of inclusion criteria are applied.

The TSE describes the old TSE 300 index as being “no longer a relevant benchmark,” since the bottom 100 companies represented only 2% of the portfolio.

Also, the TSE 100, TSE 200 and Toronto 35 indices will no longer be calculated.

The S&P/TSE Composite will be further divided into three indices: the S&P/TSE 60 (seen to be a counterpart to the S&P 500 Index in the U.S.); the S&P/TSE Canadian MidCap; and the S&P/TSE Canadian SmallCap.

The TSE 300’s 14 groups have been reduced to 13, which will include two of particular interest to the mining industry: Gold, and Metals and Mining.

The TSE’s new groups have been chosen to fit more easily into the Global Industry Classification System (GICS), developed jointly by S&P and Morgan Stanley Capital International — a system designed to ease comparisons of industries on a global basis.

The transition from the old index-inclusion rules to the new will take place over three quarterly adjustments.

In June, to remain in the index, a company must fulfil three conditions:

– have a minimum trade-weighted price of 50 over the three months ended May 31, 2002;

– have a minimum weight in the index of 0.01% as of the end of May; and

– meet certain liquidity levels.

In September, the bar will be raised to a 75 share price and a weighting of 0.02%, and by December, the minimum will be a $1 share price and a 0.025% weighting.

S&P estimates that the total impact of all non-compliant companies being removed from the main index will be less than 2.5% of the total weight of the S&P/TSE Composite Index, which will represent about $50 billion in market capitalization.

In another small change, the annual revision of the S&P/TSE Composite Index did not take place in March, and is being replaced by quarterly reviews starting in June 2002.

In 1999, the former Vancouver and Alberta Stock Exchanges merged to form the Canadian Venture Exchange, which assumed control of junior equities in Canada. By 2001, after some twists and turns, the Montreal Exchange became only the centre for derivatives trading in Canada.

With the TSE’s purchase of the CDNX last summer, all of Canada’s equity trading began to take place under one organization for the first time.

Since the takeover, all support functions, including legal, finance, administration, human resources, technology and communications, have been centralized at the TSE. All CDNX trading was moved to the TSE’s trading engine in December 2001.

The new index changes represent only the latest step in a long evolution of the TSE’s indices. The first two TSE indices, formed in 1934, were the Industrials Index and the Gold and Base Metals Index, to which the Western Oil Index was added in 1938. These indices were simple mathematical averages, much as the Dow Jones Industrial Average is today.