TSX Venture Exchange (TSXV), Canada's public venture market, has published its second progress report on its "Revitalizing TSX Venture Exchange" initiative. This follows from its initial progress report issued in March 2016 (see our March 24, 2016 MarketCaps) and TSXV's original December 17, 2015 white paper which announced plans to revitalize Canada's public venture market through a series of targeted initiatives aimed at addressing current challenges in the marketplace. Since launching the revitalizing project, TSXV has been among the best performing markets in the world year-to-date, up 60% from its low on January 20, 2016. Although this market performance has largely come from a rebound in mining shares, following through on implementing key priorities of the revitalization project should bode well for TSXV market participants.
Gowling WLG Focus
The progress report shows TSXV's continuing commitment to address a range of issues impacting market participants. This includes increasing the attractiveness of the TSXV marketplace for early stage companies, both in Canada and internationally.
As an international law firm, we welcome TSXV's efforts to evolve as a marketplace that is welcoming to investors and issuers around the world and share a global vision towards the Canadian capital markets.
The revitalization project aims to address a number of near-term issues as well as to provide long-term benefits for market participants. In substance, TSXV is attempting to address challenges in Canada's public venture market by making or proposing changes in three key areas with a view to:
- reducing administrative and compliance costs for issuers;
- expanding the investor base to finance TSXV companies and enhance liquidity; and
- diversifying and growing its list of issuers by appealing to emerging non-resource companies, such as tech, financial services, clean tech and renewable energy companies.
Periodic Auction Proposal
The March 2016 progress report noted that a new priority would be to address concerns relating to market structure and short selling rules. In furtherance of this, TSXV reports that in June 2016 it presented a proposal to IIROC and certain Canadian provincial securities regulators aimed at mitigating some of the concerns with short selling, liquidity, electronic trading and issues associated with a fractured market structure. The proposal is to examine the use of a periodic auction market (also known as a batch auction market), whereby buy and sell orders are aggregated and matched at set times during the trading day, as opposed to a continuous auction market. TSXV is examining using such a market model exclusively for less liquid companies that choose to participate in such alternative trading model. The report discusses how such a model may mitigate current concerns, and suggests that a pilot program could be an effective way to explore this option. Although of interest, given the nature of this proposal and regulatory approval process, it is unlikely that this proposal would be implemented in the short-term.
The report references a July 6, 2016 TSXV announcement of a new market making service called TSXV LiquidityPro, which is scheduled to launch in September 2016. The service is designed to enhance liquidity for TSXV issuers. The optional program will allow TSXV issuers to select from a pool of TSXV LiquidityPro Providers (LPPs) to provide certain services for a negotiated fee, including quotation services, facilitating price discovery and increasing overall liquidity for issuers.
Status of Strategic Objectives
The balance of the report provides details on the status of 24 specific action items that are proposed in furtherance of the three overall strategic objectives. Many of the action items involve TSXV policy amendments, and such amendments require regulatory approval to be effective. The updates in the progress report suggest that the majority of these policy amendments are scheduled to commence in the third quarter of 2016.
Among the more material amendments are the elimination of the "sponsorship" requirement for TSXV companies and the elimination of the shareholder approval requirements in most circumstances for inactive companies completing arm's length transactions to go public via a reverse takeover (RTO) or a Qualifying Transaction with a Capital Pool Company, as well as Change of Business transactions. TSXV estimates that for a simple RTO, the elimination of sponsorship and shareholder approval may reduce the cost of going public on TSXV by as much as 40%.
On the service commitment front, the report notes that TSXV recently received securities commission approval to discount listed issuer filing fees by $500 if TSXV does not respond to certain exchange filings within three business days.
In the covering letter to the report, TSXV President John McCoach announced that this was his final progress report as he would be retiring shortly. Members of our firm have had various positive dealings with John over the years and we wish him well in his retirement from TSXV. As is noted in the report, TSXV will continue to move forward with the various action items and will share further progress updates going forward.
The Revitalizing TSX Venture Exchange initiative has its own website landing page in which you can keep up-to-date and track the progress of the initiative as well as connect to social media links to provide feedback: www.revitalizingtsxv.ca.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.