Canada on the verge of

Canada’s capital markets are in the midst of a golden age and could soon become a powerful global competitor, says TSX president Richard Nesbitt.

In a speech on Thursday at the University of New Brunswick in Fredericton, Nesbitt noted that the S&P/TSX Composite Index broke through the $1 trillion mark in trading volume for the first time in 2005 and the index itself soared 22%.

“This wasn’t a short-term performance,” he added. “S&P/TSX indices in virtually every sector have been outpacing the comparable U.S. indices for the past six years.”

In fact, from December 31, 1999 to December 31, 2005, the TSX was up 48.1% on a total return basis, Nesbitt says, while the S&P 500 lost 6.6% over the same time period.

Of course, skeptics will point to Canada’s booming energy sector, and Nesbitt concedes that’s been the largest component of the exchange’s success. But financial services, consumer staples and utilities have also done better than their U.S. equivalents, he says.

“In other words, the Canadian capital markets have become increasingly important on both relative and absolute terms within North America. Last year, for example, more IPO capital was raised on TSX exchanges than on the Nasdaq — $12.8 billion US versus $12.2 billion US. And in our areas of strength, such as energy and mining, we continue to lead the world.”

There have also been a series of positive developments on the regulatory front, Nesbitt said, pointing out that the new chair of the OSC understands the markets and appears open to new ideas. The head of Quebec’s securities regulator is also chair of the Canadian Securities Administrators and has shown a desire work cooperatively with the TSX and others, Nesbitt added.

The TSX president also praised the Alberta Securities Commission’s new chair and commended B.C.’s recent change of heart to support the passport system.

And he said the IDA’s decision to separate its regulatory and trade association functions could “possibly permit consolidation of other SROs into a more effective and efficient form of national self-regulation.”

Although Canada continues to lack a national securities regulator, Nesbitt said the idea is being discussed coast-to-coast, with the recent Crawford report being evaluated as a potential model.

“This is the first time in a long time that the factors I just mentioned and others are causing meaningful change to be contemplated,” he said. “It’s just a glimmer, but that glimmer might actually become national consensus.”

Filed by Doug Watt, Advisor.ca, doug.watt@advisor.rogers.com