TSX seeks input on ticker extensions

(August 19, 2005) The Toronto Stock Exchange is seeking comment from market participants on the use of stock ticker extensions to denote voting status of the different classes of shares listed on the market.

The new standard came into effect September 30, 2004 and added suffixes such as “SV”, “NV” and “MV” to shares to indicate whether the shares are subordinated-voting, non-voting, or multiple-voting shares, respectively. Other extensions include “RV” for restricted voting rights and “LV” denoting limited voting rights.

For example, the ticker symbol for B-class shares of Rogers Communications (the corporate parent of Advisor.ca) was changed from “RCI.B” to RCI.NV.B”. The changes affected 135 symbols on the TSX, including 29 symbols inter-listed on other exchanges, and 19 symbols on the TSX Venture Exchange.

The TSX released a discussion paper today, which explained the move: “Unequal voting rights inherent in dual-class share structures have the potential to weaken the accountability of management and the board of directors to all of the shareholders of the corporation. Others have argued that these founder-controlled public companies have generated superior returns for all shareholders.”

“TSX believed that the symbol extension initiative would augment market efficiency and price discovery by providing investors with increased information concerning share class structure,” the company explained. With the one year anniversary approaching, TSX wants to analyze the effects of the initiative.

The exchange says companies have continued to use dual-class voting structures since the new ticker convention was introduced, although the numbers have declined. Of the 137 initial public offerings since September 2004, only 6 issues have used dual-class voting structures. Over the same period, two existing subordinated voting issuer symbols have been removed.

“It is difficult to draw any definitive conclusions, given the brief period of observation and the transition in the type of new listings towards income trust and fund of funds,” the exchange said in its discussion paper.

Feedback so far has included commentary from issuers that the new symbols may confuse investors and that they may be difficult to remember. However, many market participants have applauded the increased transparency, the TSX adds.

On the downside: “Concern has also been expressed that any potential benefit of symbol extensions from a transparency and investor awareness perspective has likely been offset by the inherent complexity of the extensions and resulting confusion of the investor.”

Meanwhile, the extensions have caused confusion among American investors, where extensions are rare. On the Nasdaq, a two digit extension is used to indicate a suspended stock, which could negatively impact investor confidence in Canadian issues.

TSX is accepting submissions on the discussion paper until October 7, 2005.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com