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TMX POV - What we heard at The TSX Venture Exchange Trading Roundtable

June 27, 2019

By Brady Fletcher, Managing Director and Head of TSXV

TSX Venture Exchange (TSXV) occupies a strong and unique position in global capital markets: we are the premier capital formation platform in the world for early-stage companies. But it didn't happen overnight and it didn't happen by accident or simply as a matter of policy. Although they may be contributing factors, it takes more than "right-sized" regulation and progressive policies to establish a leading marketplace. The fact is, Canada's venture community and stakeholders across our country's capital markets ecosystem have a long-standing history of supporting domestic and international TSXV companies through the crucial earliest stages of their lifecycle. The venture community is the bedrock of TSXV's success and the ongoing success and viability of this community is our highest priority.

Often these early-stage companies are cash flow negative and looking for growth capital to fund the development of their business. As Managing Director and Head of TSXV, I am focused on maintaining the integrity of our markets for investors and providing our issuers with the most efficient access to growth capital. As such, I am in close contact with our listed issuers, prospective issuers, investors, and the broader stakeholder community across the country.

As a result of these interactions and my team's discussions with various members of the venture community, we decided to host the TSX Venture Exchange Trading Roundtable, a forum for constructive dialogue aimed at solving ongoing challenges and facilitating positive change on issues we all face. Our stakeholders (including listed issuers, investors, traders, bankers, and regulators) shared their views on the state of the venture marketplace and four broad themes emerged: liquidity, regulation, education and transparency.

The views aggregated during the roundtable are summarized in our recently published TSXV Trading Roundtable white paper, and while there are no easy answers to any of the challenges and they cannot be addressed by TSXV alone, the roundtable has created a platform to foster discussion across our market on how to address some of them.

We can all agree that markets have evolved dramatically in recent years and this has contributed to the need for market structures to adapt accordingly. Participants brought up the notion that having 14 markets trading illiquid stocks can, in certain situations, fragment liquidity, making it difficult for buyers and sellers to match. This discussion has resulted in the recommendation that we explore allowing illiquid issuers to trade on their listing market only.

Short-selling was also much-discussed. Issuers in particular raised concerns about "shorting on a downtick" right at the end of the day and thus creating downward pressure on a stock. As such, TSXV will engage CSA and IIROC on the potential for a re-evaluation of short-selling rules for TSXV-listed securities. The re-evaluation could be used to determine whether the tick test should be reinstated, or whether other short-sale restrictions may be warranted.

While many of the topics echoed conversations I've been having with clients and stakeholders over the years, one theme remained very clear: the need for education. While we have made progress, there continues to be a need for education on venture and growth capital for investors, companies and market participants in order for TSXV to continue as the premier platform for issuers around the world to access public venture capital.

I encourage you to read our findings as this is just one piece of an ongoing discussion. We are soliciting feedback through venturefeedback@tmx.com-- that will help build momentum behind some of these topics as well as input that will help to spur discussions on topics that may not have been covered in the roundtable.

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