{"id":471157,"date":"2010-03-25T08:57:00","date_gmt":"2010-03-25T12:57:00","guid":{"rendered":"e2249889-c78b-43e3-9643-b1d7d4aa587b:413172"},"modified":"2010-03-25T08:57:00","modified_gmt":"2010-03-25T12:57:00","slug":"tmx-group-initiated-at-underperform","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/471157","title":{"rendered":"TMX Group initiated at Underperform"},"content":{"rendered":"<p>Shares of <a href=\"http:\/\/www.financialpost.com\/markets\/company\/index.html?symbol=X&amp;id=6213470\" >TMX Group Inc.<\/a> may come under pressure after National Bank Financial analyst Shubha Khan initiated coverage with an Underperform rating and $31 price target on the stock. TMX shares closed at $30 on Wednesday.<\/p>\n<p>\u201cOngoing market share erosion in equities trading is proving to be the biggest impediment to earnings growth,\u201d Mr. Khan said in a report. \u201cThe migration of liquidity to Alternative Trading Systems (ATS) has continued unabated, particularly since the late 2008 launch of Alpha, an ATS backed by Canada\u2019s largest liquidity providers.\u201d<\/p>\n<p>This competition has been compounded by falling yields on trading volumes as TMX seeks to lure high frequency trading to pre-empt ATS competition. Mr. Khan said the negative impact of lower fees has outweighed any potential volume benefits so far. He believes the current fee structure wil encourage deeper penetration by Electronic Liquidity Providers, which will erode trading revenue even further.<\/p>\n<p>February statistics released by IIROC showed that TMX\u2019s market share (based on volume traded) fell to 71.9% from 74.0% in January and 93.1% a year earlier. Rival Alpha saw its market share climb to 21.0% from 19.7% in January and 3.3% a year earlier.<\/p>\n<p>With TMX losing 2% for a second consecutive month, GMP Securities analyst Stephen Boland sees no reason why this will not continue.<\/p>\n<p>\u201cWe continue to believe that X is under intense pressure from the ATSs (specifically Alpha) and that price reductions are defensive actions aimed at preserving (rather than growing) market share,\u201d Mr. Boland said in a note to clients this week. \u201cWe continue to view shares of X with caution as market share remains under pressure (which we believe will persist in the near to medium term).\u201d He rates the stock a Hold with a $30.50 price target.<\/p>\n<p>On March 19, TMX announced that it would reduce trading fees for securities trading at $1 and higher on the TSX and TSX Venture. The changes are set to take effect on April 1. Management said the move is intended to \u201cencourage higher volume and liquidity levels, reduce the cost of raising capital for listed issuers and strengthen the Canadian capital markets overall.\u201d <\/p>\n<p>The company estimates the change will potentially reduce revenue by $11-million to $15-million annually (2% to 2.7%), assuming no offsets. The revision reduces TMX\u2019s active trading fees to a level below Alpha, its primary competitor, for high volume participants.<\/p>\n<p>Scotia Capital\u2019s Phil Hardie told clients that the move should help stabilize TMX\u2019s waning market share. He rates the stock Sector Perform with a $34 one-year price target. While the analyst reduced his estimates to reflect the fee cut, he warned that they may prove conservative given that any material offsetting benefits in the form of higher trading volumes are not included.<a href=\"mailto:jratner@nationalpost.com\"> <\/a><\/p>\n<p><a href=\"mailto:jratner@nationalpost.com\">Jonathan Ratner<\/a> <\/p>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/network.nationalpost.com\/NP\/aggbug.aspx?PostID=413172\" width=\"1\" height=\"1\"><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Shares of TMX Group Inc. may come under pressure after National Bank Financial analyst Shubha Khan initiated coverage with an Underperform rating and $31 price target on the stock. TMX shares closed at $30 on Wednesday. \u201cOngoing market share erosion in equities trading is proving to be the biggest impediment to earnings growth,\u201d Mr. Khan [&hellip;]<\/p>\n","protected":false},"author":4059,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-471157","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/471157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4059"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=471157"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/471157\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=471157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=471157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=471157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}