TMX Group Annual Report 2010

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FY2010 Annual Report · TMX Group

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TMX GROUP INC.
2010 ANNUAL REPORT

Opportunity

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Opportunity

TMX Group operates cash and derivative markets for multiple asset

classes including equities, fixed income and energy. TMX Group

companies provide listing venues, trading markets, clearing facilities,

information services products and other services to the global

financial community.

The depth, breadth and strength of our diversified company

generates significant opportunity. Our unwavering focus is on

seizing opportunity to produce solid financial and operational

performance. On providing opportunity for our many customers

by offering world-leading exchanges. And on creating opportunity

for future growth and success across our diversified business.

TMX GROUP — A MULTI-AssET CLAss EXChANGE GROUP

EQUITIES
Toronto Stock Exchange
TSX Venture Exchange
Equicom
TMX Select*

DERIVATIVES
Montréal Exchange
CDCC
BOX (53.8%)

FIXED INCOME
Shorcan
CanDeal (47%)

ENERGY
NGX
Shorcan Energy

INFORMATION SERVICES
TMX Datalinx
PC-Bond
DEX Indices

* Subject to regulatory approval.

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Seizing Opportunity

In 2010, TMX Group successfully seized the opportunities presented before

us to generate strong financial and operational results.

sUMMARY Of fINANCIAL PERfORMANCE
(in millions of dollars, except per share amounts)

Revenue
Operating Expense
Net Income
Earnings per share: Basic
Earnings per share: Diluted

Cashflows From Operating Activities

$ 575.5
$ 286.5
$ 196.5
$ 2.64
$ 2.64
$ 280.2

REvENUE DIvERsITY
TMX Group generates revenue from a diverse range of business
activities. This diversification strengthens the company and expands
our opportunities for growth.

$575.5 m

2010 revenue
reported

28% Issuer Services

27% Information Services

20% Equity & Fixed Income
Cash Markets Trading
& Related

14% Derivatives Markets Trading
& Clearing

8% Energy Trading & Clearing

3% Technology Services & Other

2010 KEY ACCOMPLIshMENTs

In 2010, TMX Group successfully advanced its
strategy by executing on a number of initiatives
across the businesses:

TSX Quantum Gateway client implementation

completed

Enterprise Expansion phase 1 implemented

S&P/TSX Clean Technology Index launched

TSX celebrates the 20th Anniversary of the

world’s first ETF

Shorcan Energy, an inter-participant brokerage

facility for energy products, was launched

TMX Information Processor products launched
with data from all Canadian marketplaces

NGX opened 10 new trading and clearing

locations

TMX co-location facility opened for equity

and derivatives trading clients

TSX and TSXV announced new on book non-

displayed order types

Memoranda of understanding signed with

Tel Aviv Stock Exchange and Oslo Bors

TMX Select, TMX Group’s alternative trading

system, announced

Montreal Exchange launched the S&P/TSX

60 VIX Index

TMX SOLA technology implemented at IDEM

TSX and TSXV introduced the new Automated

Jitney Smart Order Router

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EQUITIES

DERIVATIVES

FIXED INCOME

Toronto Stock Exchange

Montréal Exchange

Shorcan

ENERGY

NGX

INFORMATION SERVICES

TMX Datalinx

TSX Venture Exchange

CDCC

CanDeal (47%)

Shorcan Energy

PC-Bond

BOX (53.8%)

DEX Indices

Equicom

TMX Select*

Providing Opportunity

TMX Group exchanges provide the domestic and international trading
communities with the opportunity to participate in the Canadian capital
markets in equities, derivatives, fixed income and energy.

EqUITY CAPITAL TO GROw AND sUCCEED
There were 3,383 financings by Toronto Stock Exchange and
TSX Venture Exchange issuers during 2010, which represents
an increase of 13% compared to 2009.

NEw INvEsTMENT OPPORTUNITY
Toronto Stock Exchange and TSX Venture Exchange welcomed
419 new Canadian issuers and 65 new international issuers through
going public transactions (including New Listings, IPOs, CPC IPOs,
QTs, RTOs and Direct Listings).

TSX in 2010

119 IPOs

60 IPOs in 2009

TSXV in 2010

142 IPOs

72 IPOs in 2009

‘09

‘10

‘09

‘10

‘09 ‘10

TSX
In Billions of Dollars

TSXV
In Billions of Dollars

IPO Financings Raised

Total Financings Raised

COMPARIsON Of MAjOR INDEX PERfORMANCE — 2010

-10

-20

-30

186 Mining

98 CPC

52 ETFs

46 Oil & Gas

30 Structured Products

22 Diversified Industries

12 Technology

9 Real Estate

9 Financial Services

9 Clean Technology

5 Life Sciences

3 Forest Products

2 Manufacturing

1 Comm. & Media

S&P/TSX Venture Composite Index — Index Value 50.45%

S&P/TSX Composite Index — Index Value 14.45%

FTSE AIM All-Share — Index Value

Russell Microcap Index — Index Value

NASDAQ Composite Index (^COMP) — Index Value

Shenzhen Stock Exchange Composite Index — Index Value

S&P 500 Index (^SPX) — Index Value

Dow Jones Industrial Average (^DJI) — Index Value

Hang Seng Index — Index Value

FTSE 100 Index — Index Value

S&P/ASX 200 Index —Index Value

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Shanghai Stock Exchange Composite Index — Index Value

(Source: Capital IQ)

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MONThLY PERCENTAGE Of vOLUME TRADED
bY CANADIAN MARKETPLACEs
Toronto Stock Exchange and TSX Venture Exchange are the central
equity marketplaces in Canada. Combined equity market share
remained stable throughout 2010. We continue to look for ways to serve
our customers better by: investing in leading technology platforms;
maintaining competitive pricing; launching innovative new trading
products to meet new and evolving market needs.

sETTING NEw TRADING hIGhs

In 2010, TSX Venture Exchange set new records in daily
volume, daily transactions, monthly volume, monthly
transactions and annual volume.

Toronto Stock Exchange set an all time transaction record
with 1,609,707 trades on May 6, 2010, which broke the
previous record of 1,490,612 trades set on September, 18, 2008.

Combined transactions on our cash equities markets was
a record 198.34 million in 2010, exceeding the record of
196.66 million set in 2009.

Combined volume traded on our cash equities markets

of 172.44 billion shares exceeded the record of 165.35 billion
shares set in 2009 by 4%.

}

Other
Canadian
Marketplaces

TSX/TSXV

Montreal Exchange set a new annual trading volume record

of 43,456,143 contracts.

A new equity option trading record of 183,136 contracts was

set on Montreal Exchange on December 17.

In 2010, MX set an annual volume record with 44.30 million
contracts traded. MX volumes increased 27% from 34.75
million contracts traded in 2009 and total open interest was
up 30% at the end of 2010 versus the end of 2009.

In 2010, NGX set a new record for total energy volume

with 16.72 million terajoules traded or cleared, surpassing
the previous record of 14.84 million terajoules set in 2009,
representing an overall increase of 13%.

2010
104,555,199,337

2009
118,525,934,101

$1,390,747,798,461

$1,398,386,393,311

189,117,628
2010
67,887,794,824
$34,358,151,228
9,226,926
2010
44,296,907
3,591,754
2010
16,720,050

191,321,204
2009
46,825,340,177
$16,092,576,249
5,336,030
2009
34,753,081
2,769,794
2009
14,842,035

% Change
-11.8

-0.5

-1.2
% Change
+44.9
+113.5
+72.9
% Change
+27.5
+29.7
% Change
+12.7

In percent

100

Jan

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

TRADING bY TMX MARKET

Toronto Stock Exchange
Volume

Value

Transactions
TSX Venture Exchange
Volume
Value
Transactions
Montreal Exchange
Volume (Contracts)
Open Interest (Contracts)
NGX
Total Energy Volume* (Terajoules)

*NGX Total Energy Volume includes trading and clearing in natural gas, crude oil and electricity.

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Creating Opportunity

TMX Group’s corporate strategy is to grow horizontally, vertically
and geographically by offering innovative products and services across
asset classes. Key business strategies and objectives for creating future
opportunity include:

IssUER sERvICEs

EqUITY TRADING

fIXED INCOME TRADING

Enhance our premium brand, improve
customer relationships and continue
to build loyalty

Continue our leadership tradition with
innovative operations, processes and
exchange technology.

Pursue initiatives to increase liquidity
for both cash and futures markets and
develop linkages between assets.

Expand product and service offering.

Expand our customer base and our

Expand product base and

superior product and service offerings,
while maintaining competitive pricing.

diversify revenue.

DERIvATIvEs TRADING & CLEARING

ENERGY TRADING & CLEARING

INfORMATION sERvICEs

Promote the strengths of our growing
Canadian derivatives market: price
transparency, liquidity and central counter
party clearing.

Leverage our OTC clearing service
offering to capitalize on new
opportunities arising as a result
of industry reform.

Maximize the benefits from

international alliances.

Enhance our clearing system with

technological upgrades.

Enhance our core product offering and
add global content across asset classes.

Grow our core businesses by increasing
trading and clearing at Canadian and
U.S. locations.

Expand product into new markets by

Pursue opportunities within our

multi-market environment to provide
low latency consolidated datafeeds,
co-location and data delivery solutions.

adding additional points
of distribution.

Expand international and web

sales efforts.

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Contents

102

103

104

105

Letter from the Chair

Letter from the CEO

Statement of Corporate Governance Practices

2010 Management’s Discussion and Analysis

Management Statement

Independent Auditors’ Report

Consolidated Balance Sheets

Consolidated Statements of Income

Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Shareholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

Three-Year Review – Financial Information

Board of Directors

TMX Group Executive Committee

Shareholder Information

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Letter from the Chair

It is my pleasure to once again report to you on behalf of TMX Group’s Board of Directors as we look back on an important
year in our history.

Canadian and international investors showed renewed faith in Canadian markets and listed issuers. Once again, TMX Group
delivered positive operating results.

Most importantly as we look ahead, TMX Group continues to work towards our vision to be the leading provider of capital
markets infrastructure services in Canada and select capital market services to global market participants.

The Board works with the executive management committee to build on our proud history and realize this vision for TMX
Group’s future.

On February 9, 2011, we took a major step forward in our evolution with the announcement of our proposed merger with
London Stock Exchange Group plc (LSEG). We believe this merger will create a more diversified and international company
and will benefit the multiple and varied stakeholders in both organizations as well as the business communities in Canada,
the UK, Italy and beyond.

A full and complete proposal will be submitted to our shareholders for due consideration and a special meeting will be called to
discuss the proposal and seek your approval. In parallel, we will work with our provincial regulatory authorities and the Canadian
Government through a complex but necessary approval process. We will keep you informed of our progress as we work through this
process, and we will ensure that your voice is heard as we take this important step forward on the global scene.

I look forward to working with my fellow directors and the combined team to create one of the world’s leading exchange groups.

I would like to thank my fellow TMX Group Directors for their contributions in 2010. And in closing, I would like to thank TMX
Group management and employees for their dedicated work in 2010 and determined efforts in moving the company to the
next level.

Wayne Fox
Chair, Board of Directors
TMX Group Inc.
March 25, 2011

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Letter from the CEO

I am extremely proud of TMX Group’s 2010 accomplishments and enthusiastic about our future prospects. I’ll discuss these
accomplishments and also touch on the proposed merger of TMX Group and London Stock Exchange Group in this letter.

2010 in Review

As world markets began to recover from a profoundly difficult 2009, we benefited from the continued execution of our growth strategy
throughout the downturn as well as the depth and strength of the Canadian economy.

That economic strength and sustained investor faith in Canadian capital markets led to a surge of record-setting activity across much of
our business in 2010. We set new record combined trading volumes for Toronto Stock Exchange and TSX Venture Exchange. TSX Venture
Exchange further established a well-earned reputation as the leading small cap market in the world, with a 45% increase in trading
volumes over 2009, eclipsing the previous record set in 2007 by 29%.

Although we continue to face domestic and international competition in equities trading, we stabilized our market share throughout
2010 by offering three clear propositions to best serve our customers: market-leading technology, pro-active pricing policies and
effective customer service.

In 2010, we announced two new competitive initiatives to serve customers looking for specialized trading solutions without
compromising the integrity of our existing markets.

Designed for trading customers who are seeking price improvement and seeking to trade with minimal market impact, we have
introduced two new on-book, non-displayed order types on Toronto Stock Exchange and TSX Venture Exchange. These "dark" orders are
fully integrated into the existing order book on each exchange, meaning these new non-displayed orders will interact and trade with
visible as well as other non-displayed orders.

We also submitted regulatory filings to create an alternative trading system (ATS) called TMX Select™, a visible marketplace for trading
equity securities. TMX Select will operate on TMX Group's high-performance TSX Quantum® trading platform, with functionality and
pricing models separate and distinct from Toronto Stock Exchange and TSX Venture Exchange. We are planning to launch TMX Select in
the second quarter of 2011, subject to regulatory approvals.

It was also a successful year for our listings business at home and abroad, as Toronto Stock Exchange and TSX Venture Exchange
welcomed 419 new Canadian issuers including a record 65 new international issuers to market. We feel that our global business
development efforts in previous years, even amidst challenging markets, have been quite successful, as we are now home to over 300
international issuers. Our expertise in nurturing issuers through the early stages of their development and on through the graduation
process to our senior market is unique and attractive to companies in Canada and across the world.

Montreal Exchange (MX) also set an annual volume record in 2010 with 44.3 million contracts traded, an increase of 27% from 2009. The
spike in volumes reflected increased trading in the signature BAX and CGB contracts, but was also fueled by important growth in equity
derivatives trading and an expanded set of participants. CDCC, our derivatives clearinghouse, is currently working with the dealer and
user community to develop the infrastructure for central-counterparty services for the Canadian fixed income market. The launch of the
first initiative, the clearing of OTC fixed income repurchase agreements, is scheduled for the second half of 2011. In addition, CDCC has
proposed a domestic clearing solution for other OTC derivatives that will be linked to other global derivatives clearinghouses.

Our energy business continued its strong year over year growth, with a full year of crude oil trading, adding to our established capabilities
in natural gas and electricity. In 2010, NGX set a new record for energy volume with 16.7 million terajoules of total energy volume traded
or cleared. We continued to build on the success of our NGX U.S. business in 2010 as we added both new clients and additional delivery
hubs and locations. In January 2011, NGX and IntercontinentalExchange, Inc. (ICE) announced the expansion of their existing clearing

Letter from the CEO 7

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and technology alliance to include Canadian and U.S. physical and Canadian financial crude oil products. NGX’s physical crude products
began trading in March on the ICE electronic trading platform. We also added to our energy portfolio in the first quarter of 2010 with the
launch of Shorcan Energy, an inter-participant brokerage facility for matching buyers and sellers of energy products, including crude oil.

Our information services business, formerly called market data, continued to expand the efficiency and reach of its product and service
offerings in 2010. Early in the year, we completed the construction of our new co-location facility, and on June 30, 2010, clients began
installing their trading applications in the TMX data centre. Our co-location facility provides our trading and data clients with a single
point of direct high-speed access to the Toronto Stock Exchange, TSX Venture Exchange and MX trading engines and market data feeds.
In November 2010, we introduced TMXnet GTA (Greater Toronto Area), a new ultra-low latency network which provides international
and domestic firms with technology infrastructure located in the Toronto area. The network reduces latency both in and out of the
Toronto market, reduces cost and improves availability for market participants. The number of subscriptions to both our equities and
derivatives real-time data was up 4% at the end of year compared with the end of 2009. We also added important new indices in both
equities and fixed income throughout 2010.

The new co-location facility is just one example of how we remain committed to delivering leading edge technology to our markets.
Technology underpins each facet of our evolving, diversified business and we will continue to make the necessary investments to
fortify our position as an industry leader. In 2010, we also completed the first phase of our expansion of the trading and data enterprise,
designed to improve our overall market leading infrastructure to better serve our existing customers and to attract additional customers
and order flow to our marketplace. The second phase is currently underway.

Many factors contributed to a strong 2010 for TMX Group. In our relatively short life as a public company, we have diversified and
adapted to compete in a rapidly evolving exchange industry. We have made significant acquisitions here at home including TSX Venture
Exchange in 2001, NGX in 2004 and MX in 2008 and entered significant partnerships like the NGX alliance in the U.S. with ICE and more
recently our technology arrangement with LSEG.

Proposed merger with TMX Group and London Stock Exchange Group

We have, as I outlined in my letter, a strong business with a very promising future. However, as we reviewed the landscape, we identified
an opportunity to accelerate our growth, bring important benefits to Canada’s capital markets and transform our organization into a
truly international player.

On February 9, 2011 we announced the proposed merger of LSE Group and TMX Group. As a combined company, we will create an
international competitor with a significantly improved set of growth opportunities. We believe the terms of the transaction and the
strong existing relationship between our two highly complementary organizations lay the foundation for a very bright future together.

This combination has been structured to provide tangible benefits to all our stakeholders: our listed issuers will have more efficient
access to international pools of capital; our market participants will have access to upgraded technology infrastructure, a wider variety
of investment alternatives, and a wider range of market information services; our employees will be provided with improved career
opportunities, both in their current country and abroad; and our shareholders, who stand to benefit from our improved competitiveness
and global growth opportunities.

Importantly, we have entered into this merger while providing concrete protections that ensure the future of our regulated exchanges.
This is not a merger of the exchanges we operate with the exchanges operated by LSE Group. Our proposal pools their ownership,
delivering important opportunities while maintaining the integrity and operation of our Canadian exchanges. Our exchanges will
remain under Canadian governance and management and Canadian regulators across all jurisdictions will continue to provide sole
regulatory oversight over TMX Group operated exchanges and Canadian listed issuers. In addition, the undertakings to government
include leadership at the merged holding company level, joint headquarters and balanced governance.

Certainly, we are sensitive to the impact of our announcement in Canada and across the world. We remain excited by the promise of
this new organization and the potential it holds. We continue to work with our multiple stakeholders and regulatory bodies in the
various jurisdictions to ensure that their voices are heard and that our vision is clearly communicated. I look forward to updating you
on our progress.

Thomas A. Kloet
CEO
TMX Group Inc.
March 25, 2011

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Statement of Corporate Governance Practices

Overview

Our Board of Directors (Board) and management are committed to remaining at the forefront of good governance and to ensuring the highest
standard of corporate governance. TMX Group’s corporate governance policies and practices are designed to support the Board in discharging
its responsibilities and to enhance shareholder value. We regularly review these policies and practices with a view to enhancing our governance
structure and practices in an ever-evolving corporate governance environment.

TMX Group’s corporate governance system complies with National Policy 58-201—Corporate Governance Guidelines (NP 58-201), National
Instrument 58-101—Disclosure of Corporate Governance Practices (NI 58-101) and National Instrument 52-110—Audit Committees (NI 52-110).
In addition, we continue to review our corporate governance practices with reference to corporate governance guidelines recommended by
institutional and other shareholder organizations.

Board Responsibilities

The Board is responsible for TMX Group’s governance and stewardship and overseeing its corporate strategy, operations and management.
The Board discharges its responsibilities, either directly or, where appropriate, through committees, and by selecting and holding management
accountable for TMX Group’s operations and for implementing its corporate strategy. The Board sets clear policies and direction for management’s
responsibilities and authority. Among its many specific duties, the Board annually monitors the performance of the Chief Executive Officer (CEO)
against corporate objectives (established by the Board with the CEO), and sets the CEO’s compensation. The Board also approves strategic plans and
corporate objectives that the CEO is responsible for meeting, provides advice and counsel to the CEO, oversees ethical and legal conduct of executive
management, and assesses the financial performance of TMX Group. In addition, the Board approves the adequacy and form of compensation paid
to members of the Board (Directors). The Board Charter that describes the Board’s responsibilities is available on our website.

At each regularly scheduled Board meeting, Directors and executive management examine, review and discuss a broad range of issues relevant
to TMX Group’s strategy, business interests and growth initiatives. In addition, management provides the Board with timely, periodic reports on
operational and financial performance. During fiscal 2010, the Board held nine regular meetings and eight special meetings. Attendance by Directors
at these meetings was 95%, either in person, by teleconference or by video conference. The Board plans to hold nine regular meetings in 2011. At
each of these meetings, the Board will meet without management and non-independent Directors to ensure it provides independent assessment
and oversight. Each of the Finance and Audit Committee, Governance Committee and the Human Resources Committee can, in its discretion, retain
an outside advisor or expert. An individual Director or any other committee of the Board can retain an outside advisor or expert with the approval of
the Governance Committee.

Board Independence and Composition

As at February 28, 2011, the Board has a non-executive Chair and knowledgeable and experienced Directors, 13 out of 14 (93%) of whom, including
the Chair, are “independent” within the meaning of section 1.4 of NI 52 110 and our recognition order issued by the Ontario Securities Commission
(Recognition Order). The Recognition Order requires at least 50% of Directors to be “independent”, within the meaning of section 1.4 of NI 52-110.
Furthermore, pursuant to the Recognition Order the Board adopted more restrictive standards than those imposed by NI 52-110 to determine
whether individual members of the Board are independent from TMX Group. Those standards are available on our website.

The Board also derives strength from the background, qualities, skills and experience of its Directors. The Governance Committee, on an annual
basis, recommends candidates to the Board who are suitable for nomination to the Board. In identifying suitable candidates, the Governance
Committee will consider independence, professional or board expertise, capital markets experience, public venture market experience, derivatives
market experience, energy market experience, clearing experience, technology expertise and regulated company experience. As well, representation
from geographic regions relevant to TMX Group’s strategic priorities and Quebec residency requirements are taken into consideration. Qualities
such as integrity, good character and high regard in his or her community or professional field will always be basic criteria for Board members.

Director Education, Access to Management, and Board/Committee Meetings

We provide new Directors with a Directors’ Manual, which serves as a corporate reference, as well as with orientation materials describing our
business, strategy, objectives and initiatives, so new Directors understand the nature and operations of our business and the role of the Board and
its committees, as well as the contribution individual Directors are expected to make. To assist in the integration and orientation of new Directors,
the Governance Committee assigns a member of the Board as a mentor to each new Director. Furthermore, Directors are invited to spend time at our
offices and also have timely, periodic one-on-one meetings with the CEO and members of executive management.

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Statement of Corporate Governance Practices 9

The Chair sets the agenda for Board meetings and Directors receive a comprehensive package of information prior to each Board and committee
meeting. As well, each committee delivers a report to the full Board on its work after each committee meeting. TMX Group also provides the
Directors with a variety of other materials and presentations on an ad hoc basis, to keep them informed about internal developments as well as
developments in, or which affect, our industry. All of these materials and other corporate materials are also accessible by Directors on a permanent,
secure extranet.

Board and Director Evaluation

The Governance Committee annually evaluates the overall performance and effectiveness of the Board, its committees and all Directors. This
evaluation is conducted by written self-assessment and peer questionnaires and through formal interviews of each Director (other than the
Chair) by the Chair of the Board and of the Chair by the chair of the Governance Committee. The Chair of the Board reports summary findings to
the Governance Committee and to the full Board.

Code of Conduct

The Board’s Code of Conduct (Board Code) for Directors sets standards for ethical behaviour of the Board, including for managing conflicts of
interest. The Board monitors compliance with the Board Code and is responsible for considering and granting waivers from compliance with the
Board Code, if any. No waivers have been granted nor have there been any violations of the Board Code. A copy of the Board Code is available on
our website.

Committees

The Board has four standing committees with specific areas of responsibility to effectively govern TMX Group: Finance and Audit Committee,
Governance Committee, Human Resources Committee and Public Venture Market Committee. All of the members of the Finance and Audit
Committee, Governance Committee, Human Resources Committee and Public Venture Market Committee are independent. All of the committees
also consist solely of non-management Directors. The Board believes that the composition of its committees ensures that they operate
independently from management to protect all shareholders’ interests. The Board also believes that the members of the Finance and Audit
Committee are financially literate, given their education and experience. Each standing Board committee has a formal written Charter, approved by
the Board. These Charters are reviewed at least annually and are available on our website.

Majority Voting

In 2007, the Board adopted a policy that provides that in an uncontested election of directors, any nominee of TMX Group who does not receive the
support of a majority of the votes cast at an annual meeting of the shareholders will tender his or her resignation to the Board, to be effective when
accepted by the Board. The Governance Committee will consider the resignation and recommend to the Board the action to be taken. The Board will
have 90 days following the annual meeting to make its decision and announce it by way of press release.

Risk Management

TMX Group recognizes that risk management is integral to its business, operations and financial performance, and we follow an integrated
risk management program to identify, assess and prioritize principal business risks, and consider the likelihood and potential impact of each
risk. We develop strategies to manage and mitigate each identified risk. One of these mitigating strategies includes a plan to mitigate the risk
of interruptions to our critical business functions. The plan integrates disaster recovery and business continuity for critical functions to protect
personnel and resources and to enable us to continue critical business functions if a disaster occurs. The Board provides oversight with respect to
our risk management program and our strategies to mitigate such risks. Also, we have an internal audit function, which reports to the Finance and
Audit Committee, and which independently assesses the adequacy and effectiveness of internal controls.

Say on Pay

At its annual meeting, TMX Group provides shareholders the opportunity to vote on executive compensation, on a non-binding advisory basis.
The adoption of advisory votes on executive compensation is an evolving governance practice in Canada and such a vote was first offered by TMX
Group in 2010. TMX Group is committed to demonstrating leadership in evolving governance issues including in the area of executive compensation.

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Investor Communication

TMX Group and the Board are committed to open and proactive investor communication. Our investor relations staff provides information to
current and potential investors and responds to their inquiries. We broadcast quarterly earnings conference calls live and archive these calls on our
website. We also make recordings available via telephone to interested investors, the media and members of the public for three months after each
call. Audio webcasts of such recordings are also available on our website for six months after each call. We promptly make available presentations
from investor conferences on our website. We also make disclosure documents available via our website.

Shareholders who would like to communicate with the Board should contact us using email at shareholder@tmx.com. Your communication will be
provided to the Board for its consideration and response, if required.

Additional Information

For a full report on our corporate governance practices, please refer to our Management Information Circular, which may be accessed through www.
sedar.com or through our website at www.tmx.com. The Circular also describes our corporate governance practices, and provides information about
Directors, and the composition, responsibilities and activities of the Board’s standing committees. All information about corporate governance
practices in our Annual Report and in the Management Information Circular was adopted and approved by our Board.

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Statement of Corporate Governance Practices

2010 Management’s Discussion and Analysis

Caution Regarding Forward-Looking Information

This Management’s discussion and analysis (MD&A) of TMX Group Inc. (TMX Group) contains “forward-looking information” (as defined in
applicable Canadian securities legislation) that is based on expectations, assumptions, estimates, projections and other factors that management
believes to be relevant as of the date of this MD&A. Often, but not always, such forward-looking information can be identified by the use of
forward-looking words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “targeted”, “estimates”, “forecasts”, “intends”, “anticipates”,
“believes”, or variations or the negatives of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”,
“might” or “will” be taken, occur or be achieved or not be taken, occur or be achieved. Forward-looking information, by its nature, requires us to
make assumptions and is subject to significant risks and uncertainties which may give rise to the possibility that our expectations or conclusions
will not prove to be accurate and that our assumptions may not be correct.

Examples of such forward-looking information in this MD&A include, but are not limited to, factors relating to stock, derivatives and energy
exchanges and clearing houses and the business, strategic goals and priorities, market condition, pricing, proposed technology and other
initiatives, financial condition, operations and prospects of TMX Group, which are subject to significant risks and uncertainties. These risks include:
competition from other exchanges or marketplaces, including alternative trading systems and new technologies, on a national and international
basis; dependence on the economy of Canada; adverse effects on our results caused by global economic uncertainties; failure to retain and attract
qualified personnel; geopolitical and other factors which could cause business interruption; dependence on information technology; vulnerability
of our networks and third party service providers to security risks; failure to implement our strategies; regulatory constraints; risks of litigation;
dependence on adequate numbers of customers; failure to develop or gain acceptance of new products; currency risk; adverse effect of new
business activities; not being able to meet cash requirements because of our holding company structure and restrictions on paying dividends;
dependence and restrictions imposed by licenses and other arrangements; dependence of trading operations on a small number of clients; new
technologies making it easier to disseminate our information; risks associated with our clearing operations; challenges related to international
expansion; restrictions on ownership of TMX Group shares; inability to protect our intellectual property; dependence on third party suppliers;
adverse effect of a systemic market event on our derivatives business; risks associated with the credit of customers; cost structures being largely
fixed; risks associated with integrating the operations, systems, and personnel of new acquisitions; and dependence on market activity that cannot
be controlled.

The forward looking information contained in this MD&A is presented for the purpose of assisting readers of this document in understanding our
financial condition and results of operations and our strategies, priorities and objectives and may not be appropriate for other purposes. Actual
results, events, performances, achievements and developments are likely to differ, and may differ materially, from those expressed or implied by the
forward-looking information contained in this MD&A.

Such forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions
in connection with the ability of TMX Group to successfully compete against global and regional marketplaces; business and economic conditions
generally; exchange rates (including estimates of the U.S. dollar – Canadian dollar exchange rate), the level of trading and activity on markets,
and particularly the level of trading in TMX Group’s key products; the continued availability of financing on appropriate terms for future projects;
productivity at TMX Group, as well as that of TMX Group’s competitors; market competition; research & development activities; the successful
introduction of new products; tax benefits/changes; the impact on TMX Group and its customers of various regulations; TMX Group’s ongoing
relations with its employees; and the extent of any labour, equipment or other disruptions at any of its operations of any significance other than
any planned maintenance or similar shutdowns.

While we anticipate that subsequent events and developments may cause our views to change, we have no intention to update this forward-
looking information, except as required by applicable securities law. This forward-looking information should not be relied upon as representing
our views as of any date subsequent to the date of this MD&A. We have attempted to identify important factors that could cause actual actions,
events or results to differ materially from those current expectations described in forward-looking information. However, there may be other
factors that cause actions, events or results not to be as anticipated, estimated or intended and that could cause actual actions, events or results
to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as actual
results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance
on forward-looking information. These factors are not intended to represent a complete list of the factors that could affect us. A description of the
above-mentioned items is contained in this Annual MD&A under the heading Risks and Uncertainties.

12 TMX Group Annual Report | 2010

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Management’s Discussion and Analysis

February 9, 2011

This MD&A of TMX Group’s financial condition and results of operations is provided to enable a reader to assess our financial condition,
material changes in our financial condition and our results of operations, including our liquidity and capital resources, for the year ended
December 31, 2010, compared with the year ended December 31, 2009. This MD&A is dated February 9, 2011 and should be read carefully
together with our 2010 audited annual financial statements, including notes, which are prepared in accordance with Canadian generally
accepted accounting principles (GAAP). Each of these documents is filed with Canadian securities regulators and can be accessed through
www.sedar.com or our website at www.tmx.com. The financial measures included in this MD&A are based on financial statements prepared in
accordance with Canadian GAAP, unless otherwise specified. All amounts are in Canadian dollars unless otherwise indicated.

Our MD&A is organized into the following key sections:

• Overview of the Business – a discussion of our business segments and key revenue drivers;

• Vision, Corporate Strategy, Initiatives and Accomplishments – our vision, strategic initiatives for future growth and recent accomplishments;

• Market Conditions;

• Our Business;

• Results of Operations – a year over year comparison of our results, both on a consolidated and segmented basis;

• Selected Annual and Quarterly Information;

• Liquidity and Capital Resources – a discussion of changes in our cash flow, our outstanding debt and the resources available to finance

existing and future commitments;

• Accounting and Control Matters – a discussion of our critical accounting estimates and changes to our current accounting policies and
future accounting changes, including the 2011 conversion to International Financial Reporting Standards (IFRS) and an evaluation of our
disclosure controls and procedures, internal control over financial reporting and changes to internal control over financial reporting; and

• Risks and Uncertainties – a discussion of the risks to our business as identified through our risk management process.

On May 1, 2009, we completed the acquisition of NetThruPut Inc. (NTP), a leading Canadian electronic trading platform and clearing facility for
crude oil products. We have included its results in our consolidated financial statements from that date.

Certain comparative figures have been reclassified in order to conform with the financial presentation adopted in the current year. In particular,
commencing in 2010, provisions for doubtful accounts receivable are included in General and Administration expense whereas, in 2009, these
provisions were reflected as a reduction in various sources of revenue. The comparative figures for both revenue and expenses in 2009 and 2008
have been reclassified to conform with the financial presentation adopted in 2010. The impact of the reclassification is not material.

Additional information about TMX Group, including our most recent Annual Information Form is available through www.sedar.com and on our
website, www.tmx.com. We are not incorporating information contained on the website in this MD&A.

Non-GAAP Financial Measures

Certain measures used in this MD&A do not have standardized meanings prescribed by Canadian GAAP and therefore are unlikely to be comparable
to similar measures presented by other Canadian issuers.

“Issuer services fees billed”, “Initial listing fees billed”, “additional listing fees billed”, “issuer services revenue based on initial
and additional listing fees billed” and “total revenue based on initial and additional listing fees billed”

Toronto Stock Exchange customers are billed for initial and additional listing fees, and there is a lag between the time when securities are issued
or reserved and the time when these listing fees are paid by Toronto Stock Exchange listed issuers. For TSX Venture Exchange issuers, fees are paid
either prior to, or at the time of, listing or reserving securities. In order to reflect these activities, we use the terms “issuer services fees billed”,
“initial listing fees billed”, “additional listing fees billed”, “issuer services revenue based on initial and additional listing fees billed” and “total
revenue based on initial and additional listing fees billed”.

Management uses these measures to assess the effectiveness of our strategy to serve our listed issuers and to manage the listings portion of
our business. This is how our international peers, who currently report using IFRS, account for these fees. We will be adopting IFRS effective
January 1, 2011 (see Future Changes in Accounting Policies – Transition to IFRS). These non-GAAP revenue measures provide investors with an
indication of how initial and additional listing activity and the fees billed or received in connection with the listing or reserving of securities
impact the financial performance and cash flows of our business.

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Management’s Discussion and Analysis

Reconciliations

(in millions of dollars)

Initial listing fees billed
Initial listing fees billed and deferred to future periods
Recognition of initial listing fees billed and previously included in deferred revenue
Initial listing fees reported

Additional listing fees billed
Additional listing fees billed and deferred to future periods
Recognition of additional listing fees billed and previously included in deferred revenue
Additional listing fees reported

Initial and additional listing fees billed
Initial and additional listing fees billed and deferred to future periods
Recognition of initial and additional listing fees billed and previously included in deferred revenue
Initial and additional listing fees reported

Initial and additional listing fees billed
Sustaining listing fees
Other issuer services
Issuer services revenue based on initial and additional listing fees billed
Initial and additional listing fees billed and deferred to future periods
Recognition of initial and additional listing fees billed and previously included in deferred revenue
Issuer services revenue based on initial and additional listing fees reported

Issuer services revenue based on initial and additional listing fees billed
Trading, Clearing and Related Revenue
Information services Revenue
Technology services and Other Revenue
Total revenue based on initial and additional listing fee revenue billed
Excess of initial and additional listing fees billed over initial and additional listing revenue reported
Total revenue based on initial and additional listing fees reported

“Adjusted net income” and “Adjusted earnings per share”

$
$
$
$
$

2010
28.7
(27.4)
17.4
18.7

106.1
(100.7)
60.6
66.0

134.8
(128.1)
78.0
84.7

134.8
65.0
13.3
213.1
(128.1)
78.0
163.0

213.1
242.2
154.4
15.9
625.6
(50.1)
575.5

$
$
$
$
$

2009
12.8
(12.3)
16.4
16.9

92.0
(87.5)
53.1
57.6

104.8
(99.8)
69.5
74.5

104.8
55.1
13.4
173.3
(99.8)
69.5
143.0

173.3
237.5
149.0
30.6
590.4
(30.3)
560.1

We present “adjusted net income” and “adjusted earnings per share” as an indication of operating performance exclusive of:

(i)

for 2010, the non-cash write-down of our 19.9% investment in EDX to its estimated fair value;

(ii)

for 2009, the non-cash goodwill impairment charge in 2009 related to our investment in BOX;

(iii)

(iv)

for 2009, income tax charge related to lower Ontario corporate income tax rates, which reduced the value of future tax assets and
liabilities; and

for 2008, the payment made on April 1, 2008 to ISE Ventures, LLC (ISE Ventures), a wholly-owned subsidiary of International Securities
Exchange Holdings, Inc. (ISE), related to terminating DEX, our proposed derivatives joint venture.

These measures allow management and investors to assess operating performance excluding non-cash items such as the non-cash write-down
of our investment in EDX in 2010, the non-cash impairment charge related to BOX in 2009, as well as the net impact from reductions in the value
of future tax assets and liabilities in 2009. In addition, it allows them to assess operating performance excluding the impact of non-recurring
payments such as that made to ISE Ventures in 2008.

14 TMX Group Annual Report | 2010

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Overview of the Business

We own and operate cash, derivatives and energy markets and clearing houses in Canada and the U.S. We list, trade and clear securities as well as
physical commodities. In addition, we provide real-time market data to customers around the world.

Toronto Stock Exchange is Canada’s senior equities market, providing domestic and international investors
with access to the Canadian marketplace. At December 31, 2010, 1,516 issuers with an aggregate market
capitalization of $2.2 trillion were listed on Toronto Stock Exchange. Volume traded on Toronto Stock
Exchange was 104.56 billion securities in 2010 on 189.12 million transactions.

TSX Venture Exchange is Canada’s junior listings market, providing companies at the early stages of
growth the opportunity to raise capital. At December 31, 2010, 2,376 issuers with an aggregate market
capitalization of $72.1 billion were listed on TSX Venture Exchange. Volume traded on TSX Venture Exchange
was 67.89 billion securities in 2010 on 9.23 million transactions.

The Equicom Group Inc. (Equicom), our investor relations subsidiary, is a leading provider of investor
relations and corporate communications services.

Shorcan Brokers Inc. (Shorcan) is Canada’s first inter-dealer broker (IDB), providing facilities for matching
orders for federal, provincial, corporate and mortgage bonds and treasury bills for anonymous buyers and
sellers in the secondary market.

Candeal.ca Inc. (CanDeal) is a dealer to client electronic fixed income platform of which we own 47%.

Montréal Exchange Inc. (MX) is Canada’s standardized financial derivatives exchange. Headquartered in
Montréal, MX offers trading in interest rate, index and equity derivatives. In 2010, a record 44.3 million
contracts were traded on MX.

Canadian Derivatives Clearing Corporation (CDCC) offers clearing and settlement services for all transactions
carried out on MX and is the guarantor for options and futures contracts traded on the market. It is the only
clearinghouse in North America to offer clearing services on equity options, futures, and options on futures
products. CDCC has a long-term rating of AA and a short-term rating of A1 from Standard and Poor’s.

MX has a 53.8% ownership interest in BOX, a U.S. automated equity options market for which MX is also
the technical operator and technology developer. In 2010, 91.8 million contracts were traded on BOX.

Natural Gas Exchange Inc. (NGX) is a Canadian-based exchange through which customers can trade, clear
and settle natural gas, crude oil and electricity contracts across North America. In 2010, NGX set a new
record for energy volume with 16.72 million terajoules of total energy volume# traded or cleared.

Shorcan Energy Brokers Inc. (Shorcan Energy), a wholly-owned subsidiary of Shorcan, is a facility launched
in 2010 for matching buyers and sellers of energy products, including crude oil.

TMX Datalinx sells real time data and other market information to a global customer base. Toronto Stock
Exchange and TSX Venture Exchange data was distributed through an average of 154,039+ professional and
equivalent real-time subscriptions in 2010. The average number of subscriptions to MX derivatives data in
2010 was 23,191+.

PC-Bond offers the leading Canadian fixed income indices and PC-Bond analytics applications.

(47% Ownership)

(53.8% Ownership)

# NGX Total Energy Volume includes trading and clearing in natural gas, crude oil and electricity.

Includes a base number of subscriptions for customers that have entered into enterprise agreements.

Management’s Discussion and Analysis

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2010 Revenue
($M)

Cash

Derivatives

Energy

TSX

TSXV

Equicom

Issuer Services
Trading & Clearing
Information Services

$ 163
$ 242

(formerly Market Data)

$ 154

Technology Services
& Other (formerly
Business Services)

Total

$ 16
$ 575

√
√

√

√
√

√

Shorcan
Fixed
Income

√

PC Bond

BOX

CDCC

NGX

√

Shorcan
Energy

√

Vision, Corporate Strategy, Initiatives and Accomplishments1

Our Vision: To be the leading provider of capital markets infrastructure services in Canada and select capital market services to global market
participants.

Corporate Strategy: To grow horizontally, vertically and geographically by offering innovative products and services across asset classes.

Enhance core multi-asset class trading:

Maintain superior technology, identify new means and sources of order flow, and develop and sell new and innovative products
and services.

Adjust pricing for commoditized offerings and develop customer relationships through packaged pricing and superior customer service.

Diversify revenue base, either organically or through corporate development:

Horizontal: Expand in new asset and product types (especially in derivatives and commodities).

Vertical: Expand into expanded issuer services, clearing services, risk management services, trade execution services, and software
solutions.

Leverage our competitive advantages abroad to become the leading global exchange group for small to medium sized enterprises (SMEs) and
resource companies:

Attract issuers and trading participants to Canada.

Sell data, technology and services.

TMX Group Business Strategies, Initiatives and Accomplishments2

Business Strategies

Issuer Services

• Enhance our premium brand, improve customer relationships and continue to build loyalty.

• Expand product and service offering.

Equity Trading

• Continue our leadership tradition with innovative operations, processes and exchange technology.

• Expand our customer base and our superior product and service offerings, while maintaining competitive pricing.

Fixed Income Trading

• Pursue initiatives to increase liquidity for both cash and futures markets and develop linkages between assets.

• Expand product base and diversify revenue.

The “Vision, Corporate Strategy, Initiatives and Accomplishments” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking
Information” for a discussion of risks and uncertainties related to such statements.

The “TMX Group’s Business Strategies, Initiatives and Accomplishments” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking
Information, Risks and Uncertainties” for a discussion of risks and uncertainties related to such statements.

16 TMX Group Annual Report | 2010

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Derivatives Trading and Clearing

• Promote the strengths of our growing Canadian derivatives market: price transparency, liquidity and central counter party clearing.

• Leverage our OTC clearing service offering to capitalize on new opportunities arising as a result of industry reform.

• Maximize the benefits from international alliances.

Energy Trading and Clearing

• Enhance our clearing system with technological upgrades.

• Grow our core businesses by increasing trading and clearing at Canadian and U.S. locations.

• Expand/enter into new markets by adding additional points of distribution.

Information services

• Enhance our core product offering and add global content across asset classes.

• Pursue opportunities within our multi-market environment to provide low latency consolidated datafeeds, co-location and data

delivery solutions.

• Expand international and web sales efforts.

Initiatives and Accomplishments

In 2010 and to date in 2011, we successfully advanced our strategy by executing on a number of initiatives across our business:

Issuer Services

In 2010, Toronto Stock Exchange and TSX Venture Exchange added 419 new Canadian issuers through going public transactions (including
New Listings, IPOs, CPC IPOs, QTs, RTOs and Direct Listings). We also continued to realize the benefits of our international expansion efforts,
adding a record 65 issuers through going public transactions on Toronto Stock Exchange and TSX Venture Exchange, compared with 38 of these
transactions in 2009.

Equity Trading

In 2010, we set a new record for combined volume traded on Toronto Stock Exchange and TSX Venture Exchange. Our two equity markets traded
172.44 billion securities in 2010, a 4% increase over the previous record of 165.35 billion, set in 2009. This was due largely to the continued
strength in trading on TSX Venture Exchange, which traded volume of 67.89 billion, up 45% over 2009 and 29% higher than the previous record of
52.63 billion set in 2007. Toronto Stock Exchange volume was down 12% compared to 2009.

In 2010, we announced the introduction of two new on-book non-displayed order types on Toronto Stock Exchange and TSX Venture Exchange.
Designed for trading customers who are seeking price improvement and seeking to trade with minimal market impact, these “dark” orders will be
fully integrated into the existing order book on each exchange, meaning these new non-displayed orders will interact and trade with visible as well
as other non-displayed orders.

We also announced that we had submitted regulatory filings to create an alternative trading system (ATS). TMX Select™, a wholly-owned subsidiary
of TMX Group, will offer a visible marketplace for trading equity securities. TMX Select will operate on TMX Group’s high-performance TSX Quantum®
trading platform, with functionality and pricing models separate and distinct from Toronto Stock Exchange and TSX Venture Exchange.

Fixed Income Trading

In 2010, Shorcan expanded its product and client base while growing its market share to about 38% from about 32% in 2009.

Derivatives Trading and Clearing

In 2010, MX set an annual volume record with 44.30 million contracts traded, which exceeded the previous record of 42.74 million contracts traded
set in 2007. Volumes increased 27% from 2009 and total open interest was up 30% over 2009. MX also set a new equity options daily high on
January 21, 2011 with 205,910 contracts traded, surpassing the previous record of 183,136 contracts set on December 17, 2010.

Management’s Discussion and Analysis

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CDCC is currently working with the dealer and user community to develop the infrastructure for central-counterparty services for the Canadian
fixed income market. In addition, CDCC has proposed a domestic clearing solution for other OTC derivatives that is linked to other global derivatives
clearinghouses.

Energy Trading and Clearing

NGX achieved a record in trading volume in 2010, with 16.72 million terajoules traded and/or cleared, 13% higher than the previous record of
14.84 million terajoules traded and/or cleared set in 2009.

During 2010, NGX launched clearing services at ten new hubs in the U.S. bringing the number of U.S. clearing locations to 30 at December 31, 2010.
NGX also clears crude oil at ten locations and clears physical gas at 17 locations in Canada in addition to offering two financial gas products and
two financial power products. In 2010, we also launched Shorcan Energy, a wholly owned subsidiary of Shorcan, that provides an inter-participant
brokerage facility for matching buyers and sellers of energy products, including crude oil.

In January 2011, NGX and IntercontinentalExchange Inc. (ICE) announced an agreement to add Canadian and U.S. physical and Canadian financial
crude oil products to their existing clearing and technology alliance. Under the terms of the agreement, NGX’s Canadian physical crude products
will be offered for trading through ICE’s electronic trading platform. NGX will provide clearing services for the new physical crude contracts that will
be traded on ICE. ICE and NGX expect to launch the combined offering in Q1/11.

Information services

In 2010, we completed the construction of our new co-location facility, and on June 30, 2010, clients began installing their trading applications in
the TMX data centre. Our co-location facility provides our trading and data clients with a single point of direct high-speed access to the Toronto
Stock Exchange, TSX Venture Exchange and MX trading engines and market data feeds.

Merger with London Stock Exchange plc3

We announced on February 9, 2011 an agreement to combine our operations with London Stock Exchange Group plc (“LSEG”) in an all-share
merger of equals. The merger is being unanimously recommended by the Board of Directors of both TMX Group and the Board of Directors
of LSEG. The merger will be implemented by means of a Canadian plan of arrangement under which TMX Group shareholders will receive
2.9963 LSEG shares for each TMX Group share they hold. TMX Group shareholders that are residents of Canada for tax purposes will be entitled
to elect to receive exchangeable shares (each an “Exchangeable”) in a Canadian subsidiary of LSEG for each TMX Group share that they hold.
TMX Group shareholders electing to receive Exchangeables will receive the same number of Exchangeables as the number of new ordinary LSEG
shares to which they would otherwise have been entitled to receive under the terms of the merger. On an ongoing basis, each Exchangeable will
carry the right to be exchanged for one LSEG share and will carry mirror-image economic rights to an LSEG share (together with certain ancillary
rights). In addition, each Exchangeable will permit the holder to vote one LSEG share at any shareholder meeting of LSEG. The Exchangeables
allow Canadian resident TMX Group shareholders to participate in the transaction on a tax-deferred basis, provided they file a valid tax election.
The Exchangeables will also allow Canadian resident TMX Group shareholders to receive dividends from a Canadian corporation, which are
generally subject to more favourable tax treatment than dividends from a non-Canadian corporation. TMX Group shareholders will therefore
own 45% and LSEG shareholders will own 55% of the new TMX Group-LSEG combined group (“Merged Group”). The shares of the Merged Group
will be listed on Toronto Stock Exchange, trading in Canadian Dollars and London Stock Exchange, trading in Sterling. The Exchangeables will
also be listed on Toronto Stock Exchange, trading in Canadian Dollars.

The Merged Group will be jointly headquartered in Toronto and London. In addition, the merger agreement recognizes the existing centres of
excellence within the Merged Group and reinforces these strengths by assigning global responsibility across its geographic footprint.

The boards of TMX Group and LSEG believe that the merger is strategically compelling and will create a more diversified business with greater scale,
scope, reach and efficiencies, generating substantial benefits for all stakeholders:

• Global listings hub – The Merged Group will be the leading listings franchise globally with a flexible and deep pool of international capital
and investment expertise as well as international markets in seven countries for businesses of all sizes, from venture-funded companies,
through SMEs to large global corporations. The combined entity will rank #1 globally in terms of the following:

§ number of listings – over 6,700 companies with an aggregate market capitalization of $5.8 trillion

§ number of natural resources, mining, energy and clean technology companies

§ number of international listings from emerging and growth markets

§ number of listings for SMEs with over 3,600 combined AIM and TSX Venture Exchange listings providing deep expertise in supporting

small-cap and early stage companies

The “Merger With London Stock Exchange plc” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information, Risks and Uncertainties”
for a discussion of risks and uncertainties related to such statements.

18 TMX Group Annual Report | 2010

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• Breadth of markets – The Merged Group will offer 20 trading markets across North America and Europe, providing trading in equities,
derivatives, fixed income and energy. In addition, the trading operations will be supported by strong regional post-trade operations and
information services.

•

Information services leader – The Merged Group will have an extensive set of global information, market data and index businesses,
offering customers an increased suite of products.

• Technology expertise – The Merged Group will have a shared technology strategy focusing on market-leading, high-speed and cost-
effective cash and derivatives trading technologies applied across the merged companies. In addition, the Merged Group will offer
efficiently marketed and delivered technologies to the global financial services and exchange industries.

The Merged Group is expected to create substantial value for all stakeholders and shareholders, with a robust capital structure from which to
capture future growth opportunities. The benefits of the transaction are as follows:

• Revenue benefits – The Merged Group is targeting $56.0 million in year three growing to $160.0 million annual run-rate revenue benefits
in year five following completion of the transaction. Revenue benefits are targeted to arise across the Merged Group’s diversified lines
of business and activities, including primary markets (including listings and other issuer services) and derivatives, post-trade, data and
information and technology.

• Cost synergies – The Merged Group is targeting annual run-rate cost synergies and other transaction-related cost savings, comprising IT
and non-IT related savings, of $56.0 million by end of year two following completion of the merger. Associated one-time implementation
costs, which are expected to be incurred over two years, are estimated at approximately $64.0 million + stamp duty, primarily driven by
transitioning to common technology platforms.

• Value creation – The transaction is expected to be accretive to adjusted earnings per share-post-cost synergies∇ for both TMX Group and

LSEG shareholders in the first full year following completion.

Completion of the merger is subject to regulatory, shareholder and other approvals as well as certain other conditions. The following provides an
overview of certain approvals and conditions that must be met:

Approval by at least 66 2/3% of the votes cast by shareholders of TMX Group at a special meeting of TMX Group shareholders;

Approval by a majority of votes cast by LSEG shareholders at a general meeting of LSEG shareholders;

Ontario court approval of the Plan of Arrangement;

Certain regulatory approvals, including under the Investment Canada Act, Competition Act (Canada), as well as from the Ontario
Securities Commission, Autorité des marchés financiers (Québec), Alberta Securities Commission, British Columbia Securities
Commission, U.S. Securities and Exchange Commission, Financial Services Authority (UK), Bank of Italy and Commissione Nazionale per
le Società e la Borsa; and

Listing of the LSEG shares and the Exchangeables on Toronto Stock Exchange and listing of the LSEG shares issuable pursuant to the Plan
of Arrangement on London Stock Exchange.

The merger agreement, which provides for a long-stop date of November 9, 2011 (with up to a 30-day extension in certain circumstances), contains
customary provisions for a transaction of this nature, including customary representations and warranties, covenants, undertakings and conditions.
In the merger agreement, each of TMX Group and LSEG have agreed not to solicit other offers. The merger agreement provides that the Boards of
Directors of each of TMX Group and LSEG may, under certain circumstances, terminate the agreement in favour of an unsolicited superior proposal,
subject to a payment of a termination fee of 1% of the market capitalization of the LSEG at the time of entering into the agreement, and subject to
a right by each party to match the superior proposal in question.

It is anticipated that the relevant shareholders’ meetings will take place in the second quarter of 2011 and court approval will be sought within three
business days of TMX Group’s shareholders approving the merger. Subject to obtaining shareholder, court and regulatory approvals, the merger is
expected to become effective in the third quarter of 2011.

∇

Adjusted earnings per share-post-cost synergies is derived from IFRS basic earnings per share adjusted to exclude the impact of exceptional items (being items of income and expense that
are material by size and/or nature and are non-recurring) and amortisation of acquired intangible assets. It is not a measure required under IFRS, does not have standardised meaning under
IFRS and may, therefore, not be comparable to similar measures presented by other peers. We may present this measure in order to quantify the impact of combining LSEG and TMX on
financial performance.

In determining accretion of adjusted earnings per share, one-off costs to achieve synergies and deal related costs are also excluded in addition to the above.

Management’s Discussion and Analysis

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Market Conditions4

Our revenue is impacted by the levels and nature of market activity on our exchanges. This activity is influenced by customer and product mix,
including: volumes / contracts traded in cash equities and fixed income products, as well as derivatives and energy products; the number and
market capitalization of listed issuers; the number and value of new and additional listings; as well as the number of subscribers to market data.
While it is not possible to quantify the potential changes in some of these measures, future economic and market conditions will continue to affect
these revenue drivers and impact future revenue and net income given our largely fixed cost structure.

We operate in the highly competitive exchange industry. Since entering the Canadian equities market, ATSs have fragmented trading volumes.
Though our share of equity trading was relatively stable in 2010, we expect to continue to face significant competitive pressure in this multi-
marketplace environment. We compete for listings both in North America and internationally, particularly for SMEs and resource companies.

In addition to competition from foreign derivatives exchanges that offer comparable derivatives products, MX faces domestic competition from
OTC derivatives trading that occurs bilaterally between institutions. We may in the future also face competition from other Canadian marketplaces.
In the United States, MX competes for market share of trading single stock options based on Canadian-based interlistings, or dual listings. However,
options traded in the U.S. are not fungible with those traded in Canada.

Our subsidiary Boston Options Exchange Group, LLC, or BOX, continues to face intense competition in the U.S. equity options market.

In 2010, we have seen renewed corporate development activity in the exchange sector. In June, U.S. options exchange CBOE Holdings Inc. (CBOE)
completed an initial public offering. In October 2010, Singapore Exchange Ltd. offered approximately US$8.3 billion for all of ASX Ltd., the operator
of the Australian Securities Exchange. As part of our strategic planning process, we regularly assess different strategic alternatives available to us,
which would enable us to further enhance our competitive position in Canada and the global capital markets. We remain committed to exploring
and regularly do explore, including conducting discussions with third parties, opportunities for growth, whether organically, or in other ways such
as acquisitions, investments, partnerships or business combinations, that both fit our strategic plan and provide shareholder value.

From a macro perspective, a continued recovery in the global and Canadian economies should have an overall positive impact on our key revenue
drivers, as a growing economy typically leads to new public offerings and higher financing activity; the growth of capital may in turn drive more
investing and trading activity across all asset classes and venues. We saw some of that in 2010 with an increase in IPO activity, commodity
speculation and a marked increase in fixed income cash and futures trading that accompanied a rising short-term interest rate environment.

Our belief is that over the long term, well-regulated neutral exchanges and clearing houses with ownership structures that are free of conflict will
continue to play a key role in the success of capital markets. We provide transparent markets for capital formation and price discovery along with
effectively collateralized clearing mechanisms for managing counterparty credit risk. We believe we are strategically positioned domestically and
internationally to continue to succeed in this environment.

Our Business

We derive revenue primarily from issuer services, trading and clearing and information services.

2010 revenue reported of $575.5 million

2009 revenue reported of $560.1 million***

Information
Services 27%

Issuer Services 28%

Information
Services 27%

Issuer Services 26%

Technology Services
& Other 3%

Energy Trading
& Clearing 8%

Derivatives Markets
Trading & Clearing 14%

Equity and Fixed Income
Cash Markets Trading &
Related 20%

Technology Services
& Other 5%

Energy Trading
& Clearing 7%

Derivatives Markets
Trading & Clearing 14%

Equity and Fixed Income
Cash Markets Trading &
Related 21%

The “Market Conditions and Outlook” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion of risks
and uncertainties related to such statements.

*** Includes revenue from NTP from May 1, 2009.

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Canadian GAAP requires that we recognize initial and additional listing fees over an estimated service period related to the fees, which we have
determined to be ten years, even though we receive these fees upon completion of the transaction and they are non-refundable to customers.
We believe it is helpful to also show total revenue based on initial and additional listing fees billed* as this measure links these listing fees more
closely with the listing transactions and cash flows we generate from these transactions. This is how our international peers, who report using IFRS,
currently account for these fees. We will be adopting IFRS effective January 1, 2011 (see Future Changes in Accounting Policies – Transition to IFRS).

2010 revenue of $625.6 million
(total revenue based on initial and additional listing fees billed*)

2009 revenue of $590.4 million
(total revenue based on initial and additional listing fees billed*)

Information
Services 25%

Issuer Services 34%

Information
Services 25%

Issuer Services 29%

Technology Services
& Other 3%

Energy Trading
& Clearing 7%

Technology Services
& Other 5%

Energy*** Trading
& Clearing 7%

Derivatives Markets
Trading & Clearing 13%

Equity and Fixed Income
Cash Markets Trading &
Related 18%

Derivatives Markets
Trading & Clearing 14%

Equity and Fixed Income
Cash Markets Trading &
Related 20%

Issuer Services

Revenue Composition

2010 issuer services reported revenue of $163.0 million

2009 issuer services reported revenue of $143.0 million

Toronto Stock
Exchange 68%

TSX Venture
Exchange 25%

Equicom 7%

Toronto Stock
Exchange 68%

TSX Venture
Exchange 24%

Equicom 8%

2010 issuer services revenue based on initial and additional
listing fees billed* of $213.1 million

2009 issuer services revenue based on initial and additional
listing fees billed* of $173.3 million

Toronto Stock
Exchange 66%

TSX Venture
Exchange 28%

Equicom 6%

Toronto Stock
Exchange 69%

TSX Venture
Exchange 24%

Equicom 7%

See discussion and reconciliation under the heading Non-GAAP Financial Measures.

*** Includes revenue from NTP from May 1, 2009.

Management’s Discussion and Analysis 21

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Overview and Description of Products and Services

We carry out our listings operations through Toronto Stock Exchange, our senior market, and TSX Venture Exchange, our junior market. TSX Venture
Exchange also offers a board called NEX5 for issuers that have fallen below TSX Venture Exchange’s ongoing listing standards.

In general, issuers initially list on Toronto Stock Exchange either in connection with their initial public offerings (IPOs), or by graduating from TSX
Venture Exchange. Junior companies generally list on TSX Venture Exchange either in connection with their IPOs or through alternative methods
such as TSX Venture Exchange’s Capital Pool Company® (CPC) program or reverse takeovers.

Issuers list a number of different types of securities including conventional securities such as common shares, preferred shares, rights and warrants,
and a variety of alternative types of structures such as exchangeable shares, convertible debt instruments, limited partnership units, ETFs and
structured products.

Listed issuers that meet initial and ongoing listing requirements of Toronto Stock Exchange or TSX Venture Exchange receive a range of benefits,
including opportunities to efficiently access public capital, liquidity for existing investors, access to mentorship programs and the prestige and
market exposure associated with being listed on one of Canada’s premier national stock exchanges. While we list issuers from a wide range of
industries, we are a leader in listing issuers in the resource sectors, including mining and oil and gas companies. In addition, we are a leader in
listing SMEs, as well as issuers in the Clean Technology sector.

In 2010, while total financings raised on Toronto Stock Exchange were $44.1 billion, down 27% from the record $60.0 billion raised in 2009,
IPO financing on Toronto Stock Exchange was $10.7 billion, up 123% from $4.8 billion in 2009. Total financings raised on TSX Venture Exchange in
2010 were $9.9 billion, up 94% from $5.1 billion in 2009. Between our two equity exchanges, we had 524 entities going public or graduating in 2010,
the second highest yearly total in our history. TMX Group equity exchanges were eighth in the world by equity capital raised in 2010.

Key Statistics

• At December 31, 2010, 1,516 issuers with an aggregate market capitalization of $2.2 trillion were listed on Toronto Stock Exchange,
compared with 1,462 issuers at December 31, 2009 with an aggregate market capitalization of $1.8 trillion. The S&P/TSX Composite Index≠
level was 13,443.22 on December 31, 2010, a 14% increase from 11,746.11 on December 31, 2009.

• At December 31, 2010, 2,376 issuers with an aggregate market capitalization of $72.1 billion were listed on TSX Venture Exchange,
compared with 2,375 issuers at December 31, 2009 with an aggregate market capitalization of $36.3 billion. The S&P/TSX Venture
Composite Index≠ level was at 2,287.85 on December 31, 2010, a 50% increase from 1,520.72 on December 31, 2009.

Pricing

We generate issuer services revenue primarily by charging issuers the following types of fees:

Initial Listing Fees

Toronto Stock Exchange and TSX Venture Exchange issuers pay initial fees based on the value of the securities to be listed or reserved, subject to
minimum and maximum fees. Initial listing fees billed fluctuate with the number of transactions and value of securities being listed or reserved
in a given period. For accounting purposes, we currently recognize revenue from initial listing fees on a straight-line basis over a ten year period.
Unamortized balances are recorded as part of “Deferred revenue – initial and additional listing fees” on the consolidated balance sheet. Effective
January 1, 2011, we will recognize this revenue in full in the period when the listings occur (see Future Changes in Accounting Policies – Transition
to IFRS).

Additional Listing Fees

Issuers already listed on one of our equity exchanges pay fees in connection with subsequent capital market transactions, such as the raising of
new capital through the sale of additional securities. Additional listing fees are based on the value of the securities to be listed or reserved, subject
to minimum and maximum fees. Additional listing fees billed fluctuate with the number of transactions and value of securities being listed or
reserved in a given period. For accounting purposes, we currently recognize additional listing fees on a straight-line basis over a ten year period.
Unamortized balances are recorded as part of “Deferred revenue – initial and additional listing fees” on the consolidated balance sheet. Effective
January 1, 2011, we will recognize this revenue in full in the period when the additional listings occur (see Future Changes in Accounting Policies –
Transition to IFRS).

≠

Unless otherwise indicated, market statistics and financial information for TSX Venture Exchange includes information for NEX.

“S&P” is the trademark of Standard & Poor’s and “TSX” is the trademark of TSX Inc.

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Sustaining Listing Fees6

Issuers listed on one of our equity exchanges pay annual fees to maintain their listing, based on their market capitalization at the end of the prior
calendar year, subject to minimum and maximum fees. Sustaining listing fees provide a recurring revenue stream that typically fluctuates with
the number of companies listed and their market capitalization. Sustaining listing fees are billed during the first quarter of the year, recorded as
deferred revenue and amortized over the year on a straight-line basis. Sustaining listing fees are accounted for in the same way under IFRS and
Canadian GAAP.

Because sustaining fees are tied to the market capitalization of our issuers and typically rise in positive markets and decline in negative markets,
Toronto Stock Exchange and TSX Venture Exchange expect an increase in sustaining fees in 2011, due to generally higher market capitalization
at the end of 2010 when compared with the end 2009. At December 31, 2010, there were a combined 3,892 issuers with an aggregate market
capitalization of $2.3 trillion listed on Toronto Stock Exchange and TSX Venture Exchange, compared with 3,837 issuers with an aggregate market
capitalization of $1.8 trillion at December 31, 2009.

Prior to becoming effective, changes to Toronto Stock Exchange listing fees are filed with the Ontario Securities Commission (OSC). Any changes
to TSX Venture Exchange listing fees must receive approval from the British Columbia Securities Commission (BCSC) and the Alberta Securities
Commission (ASC).

2011 Pricing7

Toronto Stock Exchange

We implemented a new Toronto Stock Exchange listing fee schedule effective January 1, 2011. The key amendments include changes to the
additional listing minimum fees (maximum fees remain unchanged). Initial listing and sustaining listing fee rates remain unchanged. Listing fees at
all major exchanges were reviewed to ensure Toronto Stock Exchange fees remain competitive with those marketplaces.

TSX Venture Exchange

We implemented a new TSX Venture Exchange listing fee schedule effective January 1, 2011. The changes include increases to certain minimum
and maximum sustaining fees. Other changes include increases to the base application fees and an increase in the maximum additional listing fee.

Competition

We compete for listings both in North America and internationally, particularly for SMEs and resource companies. Domestically, we compete for
junior listings with Canadian National Stock Exchange (CNSX). In April, 2010, the ATS created by a group of Canadian banks and investment dealers
to trade Toronto Stock Exchange and TSX Venture Exchange listed securities submitted an application with the OSC for recognition as an exchange
which, if granted, would give them the ability to list securities.

While some Canadian companies seek a listing on another major North American or international exchange, historically, the vast majority of these
issuers tend to list on Toronto Stock Exchange or TSX Venture Exchange and do not bypass our markets. At December 31, 2010 there were 312
issuers interlisted on other exchanges, including 95 on NYSE, 43 on NASDAQ, 39 on AIM and 33 on ASX. As at December 31 2010, only 19 Canadian
issuers bypassed our markets and were listed solely outside of Canada.

Trading and Clearing – Toronto Stock Exchange and TSX Venture Exchange, MX, NGX,
Shorcan and Shorcan Energy

2010 trading, clearing and related revenue of $242.2 million

2009 trading, clearing and related revenue of $237.5 million

Derivatives –
MX & BOX 34%

Derivatives –
MX & BOX 33%

Energy**** 19%

Energy*** 17%

Cash Markets 47%

Cash Markets 50%

The “Sustaining Listing Fees” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion of risks and
uncertainties related to such statements.

The “2011 Pricing-Toronto Stock Exchange” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion
of risks and uncertainties related to such statements.

*** Includes revenue from NTP from May 1, 2009.

**** Includes revenue from Shorcan Energy from February 1, 2010.

Management’s Discussion and Analysis 23

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Toronto Stock Exchange and TSX Venture Exchange – Cash Equities Trading

Overview and Description of Products and Services8

Toronto Stock Exchange and TSX Venture Exchange trading occurs on a continuous basis on our fully electronic trading systems throughout the
day. Participating Organizations (POs), acting as principals or agents for retail and institutional investors, place orders to buy or sell securities.
Trading sessions begin with the market open in an auction format. Toronto Stock Exchange sessions end with an extended trading session in which
trades occur at the closing price, referred to as a single price closing call market. Trading also occurs through crosses in which POs internally match
orders and report them through the exchanges. All trades are cleared and settled through The Canadian Depository for Securities Limited (CDS),
a recognized clearing agency in which we have an approximate 18% ownership interest. The other owners of CDS are the major Canadian chartered
banks and the Investment Industry Regulatory Organization of Canada (IIROC).

In September 2010, we announced the introduction of two new on-book non-displayed order types on Toronto Stock Exchange and TSX Venture
Exchange. Designed for trading customers who are seeking price improvement and seeking to trade with minimal market impact, these “dark”
orders will be fully integrated into the existing order book on each exchange, meaning these new non-displayed orders will interact and trade with
visible as well as other non-displayed orders. The Toronto Stock Exchange/TSX Venture Exchange non-displayed order types were released into the
customer test environment in November 2010. We expect to introduce the new order types into the market by the end of Q1 2011.

In October 2010, we announced that we had submitted regulatory filings to create a new ATS, TMX Select, a wholly-owned subsidiary of TMX Group.
TMX Select will operate using our TSX Quantum trading platform, with functionality and pricing models separate and distinct from Toronto Stock
Exchange and TSX Venture Exchange. Its distinct features from our existing exchanges include: expanded trading hours; additional opportunities
to execute trades; a simplified market structure with continuous trading of board lots only and no special terms; and strict price-time priority for
visible orders. The launch of TMX Select is expected to occur in Q2/11, subject to regulatory approvals.

In December 2010, we introduced the Smart Order Router (SOR) Automated Jitney service to subscribers through our existing SOR trading solution
on Toronto Stock Exchange and TSX Venture Exchange. The SOR Automated Jitney service uses leading-edge routing algorithms to automatically
execute orders at the best price across all Canadian marketplaces, eliminating the need for multiple marketplace memberships. The solution is
designed to help participants reduce costs associated with market fragmentation, while meeting regulatory best price obligations.

Technology9

Key Statistics

• Volume traded on Toronto Stock Exchange was 104.56 billion securities in 2010, a 12% decrease over 118.53 billion securities traded in

2009. Transactions of 189.12 million in 2010 decreased by 1% compared with 191.32 million in 2009.

• Volume traded on TSX Venture Exchange was 67.89 billion securities in 2010, a 45% increase over 46.83 billion securities in 2009.

Transactions of 9.23 million in 2010 increased by 73% compared with 5.34 million in 2009.

• The combined volume traded on our cash equities markets of 172.45 billion exceeded the record of 165.36 billion set in 2009 by 4%.
The combined transactions on our cash equities markets was a record 198.34 million in 2010, exceeding the record of 196.66 million set in 2009.

Pricing

We have a volume-based fee structure for issues traded on Toronto Stock Exchange and TSX Venture Exchange. This model was structured so
that market participants have an incentive to enter orders in the central limit order book. When liquidity is added to the central limit order book,
executed passive orders receive a credit on a per security basis, and when liquidity is removed from the central limit order book, each executed
active order is charged on a per security basis. This trading revenue is recognized on the date when the trade is executed.

Effective March 1, 2010, we reduced trading fees for securities trading under $1.00 on TSX Venture Exchange and Toronto Stock Exchange. The new
fee structure, designed to benefit both active and passive traders of all sizes, includes the elimination of the tiered pricing model that saw fees
adjusted based on trader volumes and its replacement by a new, lower single fee schedule for securities trading under $1.00.

The “Overview and Description of Products and Services” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a
discussion of risks and uncertainties related to such statements.

The “Technology” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion of risks and uncertainties
related to such statements.

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Effective April 1, 2010, we reduced trading fees for securities trading at $1.00 and higher on Toronto Stock Exchange and TSX Venture Exchange.
These changes were designed to encourage higher volume and liquidity levels and further enhance our competitive position. The changes included
replacing the previous three-tiered, volume based fee structure with a simpler two-tier structure and reducing the active fee paid by customers
trading in the lower tier, and increasing the liquidity providing rebate to both the low and mid tier customer. In addition, we introduced a separate
program to reward qualifying high-volume POs.

Prior to becoming effective, changes to Toronto Stock Exchange and TSX Venture Exchange trading fees are filed with the OSC, BCSC and ASC.

2011 Pricing10

Effective March 1, 2011, we will create volume incentives by reducing the fees for significant usage for our Market on Open (MOO) facility, subject
to regulatory approval. This change introduces a fee cap for top MOO volume firms. We will also introduce residual credit pay outs, or rebates,
for trading in our continuous limit order book. These fee changes are subject to regulatory approval.

Competition and Market Share

On December 1, 2001, regulatory changes permitting the creation of ATSs in Canada were introduced. There are currently a number of ATSs operating
or who intend to operate in Canada, both dark and visible trading venues, including mechanisms to internalize order flow within a PO. The largest
competitive impact thus far has been from an ATS created by a group of Canada’s leading banks and investment dealers with multiple interests.

In 2010, Toronto Stock Exchange and TSX Venture Exchange combined held an average 73% share of equities volume traded in Canada, compared
with 86% in 2009. Our market share was stable throughout 2010.

Monthly Percentage of Volume Traded by Canadian Marketplaces°

100%

75%

50%

25%

}

Other
Canadian
Marketplaces

TSX/TSXV

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2010

The competitive landscape in Canada has changed significantly as competitors pursue aggressive tactics while leveraging their liquidity relationships
in order to procure market share from our equity exchanges. Our international and domestic business development efforts, core technology initiatives
and the development of responsive new products are fundamental to growing overall trading volumes on our equity exchanges.

We also compete for trading activity in the United States for those issuers that seek additional listings on other exchanges, referred to as
interlistings, or dual listings. Interlistings generally raise the profile of issuers in the global market, and trading volumes for these issuers’ securities
often increase across all markets as well as on Toronto Stock Exchange. Whether a significant portion of trading of a particular issuer remains
in Canada following its interlisting depends on a number of factors, including the location of the issuer’s shareholder base and the location of
research analysts who cover the issuer. Our cash equities sales team is focused on the goal of attracting more U.S. participants and order flow by
raising the level of awareness regarding the benefits of trading on Toronto Stock Exchange and TSX Venture Exchange.

The “Pricing 2011” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information, Risks and Uncertainties” for a discussion of
risks and uncertainties related to such statements.

Source: The Investment Industry Regulatory Organization of Canada.

Management’s Discussion and Analysis 25

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MX and BOX – Derivatives Trading and Clearing

Overview and Description of Products and Services

Our financial derivatives trading is conducted through MX, Canada’s only standardized financial derivatives exchange. In addition, MX owns 53.8%
of BOX, a U.S. automated equity options market. Our derivatives markets derive revenue from MX’s trading, clearing, information services and
technology services activities as well as from trading and information services on BOX.

Technology – SOLA

MX developed a state-of-the-art robust, scalable and reliable electronic trading platform, called SOLA, currently in use at MX, BOX, EDX, Oslo Børs
and IDEM. In June 2009, we successfully launched the SOLA Clearing system. This new clearing platform, which leverages the strength of the SOLA
technology, provides the flexibility to enhance CDCC’s product offering.

Products and Services

Derivatives – Trading

MX offers interest rate, index and equity derivatives. Currently, the most important of these products are the Three-Month Canadian Bankers’
Acceptance Futures contract (BAX®), the Ten-Year Government of Canada Bond Futures contract (CGB®) and the S&P Canada 60 Index Futures
contract (SXF). MX connects participants to its derivatives markets, builds business relationships with them and works with them to ensure that the
derivatives offerings meet investor needs. In 2009, we re-introduced a five-year Government of Canada bond futures contract, introduced implied
pricing functionality for our flagship Bankers’ Acceptance interest rate futures contract and launched a mini-sized futures contract on the S&P/TSX
Composite Index.

BOX

BOX is an all-electronic equity derivatives market and was created as a simpler, faster, more transparent and less costly alternative to the existing
U.S. market models. BOX was established in February 2002 by the Boston Stock Exchange, Inc. (BSE), MX and Interactive Brokers Group LLC, with MX
as the principal shareholder.

BOX is one of multiple equity options markets in the U.S., offering an electronic equity derivatives market on almost 1,500 options classes.
The equity options market in the U.S. is highly competitive. BOX had a unique make-or-take pricing structure rather than the payment for order flow
model which became industry standard. As market share erosion accelerated in 2009 and into 2010, BOX changed the pricing model considerably in
three stages, eliminating the make-or-take pricing and transitioning to more standard pricing. BOX has made no further pricing changes for 2011
(see 2011 Pricing).

Derivatives – Clearing11

Through CDCC, MX’s wholly-owned subsidiary, we generate revenue from clearing and settlement, as well as from options and futures exercise
activities. CDCC offers central counterparty and clearing and settlement services for all transactions carried out on MX’s markets and on some OTC
products. In addition, CDCC is the issuer of options traded on MX markets and the clearing house and guarantor for options and futures contracts
traded on MX markets and for some products on the OTC market. CDCC reduces investor risk by guaranteeing all contractual commitments made
between parties for transactions executed on MX’s markets. CDCC has a long-term rating of AA and a short-term rating of A1 from Standard and Poor’s.

In December 2009, the Investment Industry Association of Canada (IIAC) announced that it had selected CDCC as a preferred partner to develop the
infrastructure for central-counterparty services to the Canadian fixed income market. CDCC has been working with industry and regulatory authorities
to develop a domestic solution and the launch of the first initiative, the clearing of OTC fixed income repurchase agreements, is scheduled for 2H/11.
Plans are underway to develop further products like general collateral repos, interest rate swaps and other potential OTC products.

Derivatives – Regulatory Division

MX is a self-regulatory organization (SRO) that has a major responsibility for maintaining the transparency, credibility and integrity of the exchange-
traded derivatives market in Canada. MX’s Regulatory Division, which is operated independently of its other operations, is responsible for the
regulation of its markets and its trading participants. The Regulatory Division is subject to the sole internal oversight of MX’s Special Committee –
Regulatory Division. The Special Committee – Regulatory Division, which is appointed by the Board of Directors of MX, is composed of a majority
of independent members, none of whom is a member of the Board of Directors of MX or CDCC. The Regulatory Division operates on a non-profit/
cost-recovery basis.

The “Derivatives-Clearing” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information, Risks and Uncertainties” for a
discussion of risks and uncertainties related to such statements.

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Revenues generated by the Regulatory Division are from two sources: (1) regulatory fees, which are principally comprised of market surveillance
fees collected by MX on behalf of its Regulatory Division, and (2) regulatory fine revenues, which are generated from fines levied by the Regulatory
Division. Market regulation fees are recognized in the month in which the services are provided.

Any surplus in the Regulatory Division must be, subject to the approval of the Special Committee – Regulatory Division, redistributed to MX’s approved
participants (excluding regulatory fine revenues, which cannot be redistributed) and any shortfall must be made up by a special assessment by MX’s
participants or by MX upon recommendation of the Special Committee – Regulatory Division. Regulatory fine revenues are accounted for separately
from regulatory fees revenues and can be used only for specifically approved purposes, such as charitable or educational donations.

Key Statistics

•

In 2010, MX set an annual volume record with 44.30 million contracts traded. MX volumes increased 27% from 34.75 million contracts
traded in 2009 and total open interest was up 30% at the end of 2010 versus the end of 2009.

• BOX volumes decreased by 33% (91.75 million contracts in 2010 versus 137.78 million contracts traded in 2009).

Pricing

MX participants are charged fees for buying and selling derivatives products on a per transaction basis, determined principally by contract type and
participant status. Since MX trading fee rates are charged on a per transaction basis, this trading revenue is directly correlated to the volume of
contracts traded on the derivatives market. Derivatives trading revenue is recognized on the transaction date of the related transaction.

MX participants are charged fees for clearing and settlement on a per contract basis. These fees are charged at various rates based on the type of
customer or member. Clearing and settlement revenues are correlated to the trading volume of such products and therefore fluctuate based on the
same factors that affect our derivatives trading volume. Derivatives clearing revenue is recognized on the settlement date of the related transaction.

Effective May 1, 2010, MX introduced a rebate program for large cross transactions of equity options and ETF options.

BOX participants are charged fees on a per transaction basis. Trading fees are directly correlated to the volume of contracts traded. Transaction
fee revenue is considered earned upon execution of a trade and is recognized on a trade date basis. Options Regulatory Fees are fees based on the
number of customer contracts executed by participant firms. On January 1, 2010, BOX adjusted its pricing by establishing a tiered pricing schedule
for market makers based on average daily volume. In addition, BOX reduced fees related to removing liquidity in various products as well as in
contracts traded via its Price Improvement Period (PIP) mechanism. In Q3/10, BOX adjusted its fee schedule for trades executed inside the PIP and
began charging public customers for trades executed outside the PIP.

Prior to becoming effective, changes to MX trading fees are filed with the Autorité des marchés financiers (AMF). Changes to BOX trading fees are
filed with the U.S. Securities and Exchange Commission (SEC).

2011 Pricing

To date, there have been no significant price changes announced for MX and BOX for 2011.

Competition12

In Canada, our competition in derivatives is the OTC market and internationally we compete for a share of trading in derivatives of interlisted equities.

While MX and CDCC are the only standardized financial derivatives exchange and clearing house in Canada, their various component activities are
exposed, in varying degrees, to competition. We compete by offering market participants a state-of-the-art electronic trading platform, an efficient,
cost-effective and liquid marketplace for trade execution, transparent market and quotation data and excellent product design. Additionally, we are
continually enhancing our product offering and providing additional efficiencies to our customers. We are committed to improving the technology,
services, market integrity and liquidity of our markets. In addition to competition from foreign derivatives exchanges that offer comparable
derivatives products, the majority of derivatives trading occurs OTC or bilaterally between institutions. We may in the future also face competition
from other Canadian marketplaces.

With respect to providing clearing services for certain OTC-traded contracts, CDCC is targeting markets that already are or could easily be the focus
of foreign clearing houses. The nature of these markets makes them attractive targets for all clearing houses in good standing throughout the
world. Once such services are in place in a given clearing house, the main criterion for attracting such business is merely that both counterparties to
a transaction clear through members of the clearing house.

In the United States, MX competes for market share of trading single stock options based on Canadian-based interlistings, or dual listings. However,
options traded in the U.S. are not fungible with those traded in Canada.

The “Competition” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion of risks and uncertainties
related to such statements.

Management’s Discussion and Analysis 27

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BOX operates in the highly competitive U.S. equity options market. BOX’s overall market share decreased from 4.0% in 2009 to 2.6% in 2010. BOX
competes for market share with NYSE Amex Options, NYSE Arca Options, CBOE, International Securities Exchange (ISE), The NASDAQ Options Market
and NASDAQ OMX PHLX among others.

NGX

Overview and Description of Products and Services13

NGX is a Canadian-based energy exchange with an electronic platform that trades and provides clearing and settlement services for natural gas,
crude oil and electricity contracts. In 2008, we formed a technology and clearing alliance for the North American natural gas and Canadian power
markets between NGX and ICE. Under the arrangement, North American physical natural gas and Canadian electricity products are offered through
ICE’s leading electronic commodities trading platform. NGX serves as the clearinghouse for these products.

On May 1, 2009, we completed the acquisition of NTP, a leading Canadian electronic trading platform and clearing facility for crude oil products,
and launched crude oil products on NGX’s trading system and clearing facility. The NGX model provides significant capital efficiencies to customers
who trade in multiple commodities, however, the transition to a fully collateralized model is not automatic and we continue to work with customers
to communicate the benefits and increase utilization of a Central Counterparty (CCP) model. All but two NTP customers have moved to NGX and
over 30 are active.

NGX also owns The Alberta Watt Exchange (Watt-Ex), a provider of ancillary services to the Alberta Electric System Operator which is used to balance
supply and demand on the Alberta grid.

In 2010, NGX launched clearing services at ten new natural gas hubs in the U.S. bringing the number of U.S. natural gas clearing locations to 30 at
December 31, 2010. NGX also clears crude oil at ten locations and clears physical gas at 17 locations in Canada in addition to offering two financial
gas products and two financial power products.

On January 18, 2011, NGX and ICE announced an agreement to add Canadian and U.S. physical and Canadian financial crude oil products to their
existing clearing and technology alliance. NGX and ICE expect to launch the combined offering in the first quarter of 2011.

Key Statistics

•

In 2010, NGX set a new record for total energy volume# with 16.72 million terajoules traded or cleared, surpassing the previous record of
14.84 million terajoules set in 2009, representing an overall increase of 13%.

• As of December 31, 2010, NGX listed over 15 crude oil grades at 10 locations in Canada and the U.S.

Pricing

NGX generates trading and clearing revenue by applying fees to all transactions based on the contract volume traded or centrally cleared through
the exchange, and charges a monthly fixed subscription fee to each trading customer who trades on NGX.

Fee changes are filed with the ASC and U.S. Commodity Futures Trading Commission (CFTC).

2011 Pricing

To date, there have been no major price changes announced for 2011.

Competition

NGX’s business of trading and clearing natural gas, electricity and crude oil contracts faces primary competition in energy markets in Canada and
the United States from other exchanges, electronic trading and clearing platforms and from the OTC or bilateral markets (with support from voice
brokers). Voice brokers continue to provide efficient contract matching services for both standardized and structured products and are expanding
their service offerings to include access to clearing facilities for trading parties who may have credit constraints. Our alliance with ICE positions
us to compete in the OTC markets for trading while providing clearing for OTC bilateral contracts. NGX is working with the energy voice brokers to
provide clearing alternatives for standard off-exchange bilateral energy transactions.

# NGX Total Energy Volume includes trading and clearing in natural gas, crude oil and electricity.

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Shorcan – Fixed Income & Energy Trading

Overview and Description of Products and Services

Shorcan’s fixed income operations primarily provide a facility for matching orders for Canadian federal, provincial, corporate and mortgage bonds
and treasury bills and derivatives for anonymous or name-give-up buyers and sellers in the secondary market. Shorcan Energy, a wholly owned
subsidiary of Shorcan, provides an inter-participant brokerage facility for matching buyers and sellers of energy products, including crude oil.

Key Statistics

•

In 2010, we estimate that the IDB market represented about 38% of total fixed income trading in Canada and that Shorcan’s share of this
market was about 38%.

• We estimate Shorcan Energy’s inter-participant market share is approximately 50%.

Pricing

Shorcan and Shorcan Energy charge a commission on orders that are matched against an existing communicated order.

2011 Pricing

To date, there have been no price changes announced for 2011.

Competition

Shorcan, and Shorcan Energy have several competitors in the fixed income IDB and energy markets in Canada. Shorcan continues to work towards
increasing market share as well as diversifying revenue.

Information Services (formerly Market Data) – TMX Datalinx, MX and BOX

2010 information services revenue of $154.4 million

2009 information services revenue of $149.0 million

Fixed Income

Non-Canadian
Subscriptions
Top of Book (CEG)

Data Delivery
Solutions

Derivatives

TSX Top
of Book
(Level 1)

3rd Party Data

Online/Historical/Other

Non-pro Usage

TSXV Top of Book
(Level 1)

TSX Depth of Book (Level 2)

TSXV
Depth of Book
(Level 2)

Fixed Income

Data Delivery
Solutions

Derivatives

3rd Party Data

Non-Canadian
Subscriptions
Top of Book (CEG)

TSX Top
of Book
(Level 1)

Online/Historical/Other

Non-pro Usage

TSXV Top of Book
(Level 1)

TSXV Depth
of Book
(Level 2)

TSX Depth
of Book
(Level 2)

Overview and Description of Products and Services

Real-Time Market Data Products14 – CEG, Level 1 and Level 2, Non-pro usage

Trading activity on our equity exchanges produces a stream of real-time data reflecting orders and executed transactions. This stream of data is
supplemented with value added content (e.g. dividends, earnings) and packaged by TMX Datalinx into real-time market data products and delivered,
directly or indirectly, to end users directly or via more than 100 Canadian and global market data vendors that sell data feeds and desktop market data.

For our cash equities markets, we offer Level 1 and Level 2 real-time services for Toronto Stock Exchange and TSX Venture Exchange, including NEX.
Level 1 provides trades, quotes, corporate actions and index level information. Our Level 2 services provide a more in-depth look at the order book.
Level 2 real-time products include Market-by-Price and Market Book for Toronto Stock Exchange and MarketDepth by Price and MarketDepth by
Order for TSX Venture Exchange, which display all committed orders and trades. We offer direct data feeds to clients with trading strategies that
require lower latency. We also provide market participants with low-latency access to consolidated real-time market data by way of our Consolidated
Data Feed (CDF™), Canadian Best Bid and Offer (CBBO®), and Consolidated Depth of Book (CDB™).

TMX Datalinx Canadian market data is available globally through connectivity to NYSE Technologies’ Secure Financial Transaction Infrastructure®
(SFTI®) locations across the United States and Europe.

The “Real-Time Market Data Products” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion of
risks and uncertainties related to such statements.

Management’s Discussion and Analysis 29

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Online, Historical, Other Market Data Products

Historical market data products include market information (such as historical pricing, index constituents and weightings) and corporate
information (such as dividends and corporate actions) used in research, analysis and trade clearing.

In 2010, we upgraded www.tmxmoney.com, providing additional content and enhanced investment tools for Canadian and North American investors.

Third Party Data

In addition to providing consolidated Canadian equities data, we also redistribute exchange data from other markets in North America.
We also provide live inter-bank foreign exchange rates, fixed income rates from CanDeal and offer TMX/CP equities news in partnership with
The Canadian Press.

Real-Time Market Data Derivatives Products

MX sells real-time trading and historical data to market participants on a global basis.

The SOLA High Speed Vendor Feed (HSVF) is a real-time service for MX’s real-time trading and statistical information (comprised of trades, quotes,
market depth, strategies, bulletins, summaries and other statistics). The MX Data Feed provides access to both level one and level two real-time
data. The feed covers all securities traded on MX, including Canadian interest rate, currency, index and equity derivatives contracts.

Information services revenue is also generated by the sale of data to resellers of information as well as the sale of individual quotes via the Internet.

BOX also resells its market data. Like the other U.S. options markets, it resells such data through a marketplace service known as OPRA (Options
Price Reporting Authority), which collects data from the options exchanges and disseminates it to entities which then resell it.

Data Delivery Solutions15

As part of our on-going effort to deliver low-latency solutions that support the wide range of market participants, in 2008 we introduced co-
location services, providing clients the opportunity to locate their trading and data applications in the TMX data centre. In Q3/09, we announced
phases 3 and 4 of our major expansion of our co-location services and facilities in response to significant international demand. The new facility is
designed to accommodate up to 200 co-location spaces, which will meet current and medium-term demand for the services. Capital expenditures
of approximately $7.2 million associated with the third phase of the expansion project were incurred in 2010. We expect to incur approximately
$2.3 million of additional capital expenditures associated with this phase. The new facility now provides space for 100 cabinets. In June 2010, we
announced that construction of the new co-location facility was complete and on June 30, 2010, clients began installing their trading applications
in the TMX data centre and receiving the benefits of direct high-speed access to the Toronto Stock Exchange, TSX Venture Exchange and MX trading
engines and market data feeds. We began to realize incremental revenue in 2H/10.

In November 2010, TMX Datalinx introduced TMXnet GTA, an ultra-low latency network designed to provide international and domestic firms with
technology infrastructure located in Downtown Toronto.

Index Products – Equities and Derivatives

TMX Datalinx has an arrangement with Standard & Poor’s under which we share license fees received from organizations that create products, such
as mutual funds and ETFs, based on the S&P/TSX≠ indices. In general, these license fees are based on a percentage of funds under management in
respect of those products.

Together with Standard & Poor’s, we launched new Toronto Stock Exchange indices in 2010 to complement our core S&P/TSX benchmark indices and
provide innovative products for the capital markets: S&P/TSX 60 130/30 Strategy Index, S&P/TSX Clean Technology Index, S&P/TSX MegaCap Index,
S&P/TSX Equity Income, S&P/TSX Dividend Composite, six S&P/TSX North American Preferred Stock Indices, and three S&P/TSX Equal Weight Indices:
Global Base Metals, Diversified Banks and Oil & Gas.

On October 18, 2010, together with Standard & Poor’s, we launched the S&P/TSX 60 VIX index≠≠. Developed as a means to gauge volatility, this
new index measures the 30-day implied volatility of the Canadian stock market using near-term and next-term S&P/TSX 60 Index options, which
trade on MX.

≠

The “Data Delivery Solutions” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion of risks and
uncertainties related to such statements.

“S&P” is the trade-mark of Standard & Poor’s and “TSX” is the trade-mark of TSX Inc.

≠≠ “VIX”, “VIXC” and “VIXCanada” are the trade-marks of the Chicago Board Options Exchange (“CBOE”), used by Standard &Poor’s (“S&P”), TSX Inc. (“TSX”) and its affiliates with the

permission of CBOE. “S&P” is the trade-mark of S&P and “TSX” is the trade-mark of TSX. The VIX Methodology is the property of the CBOE. CBOE has granted S&P, a license to use the
VIX Methodology to create the S&P/TSX 60 VIX index and has agreed that S&P may permit values of the S&P/TSX 60 VIX index to be disseminated. S&P has granted TSX and its affiliates
a license to use the S&P/TSX 60 VIX index, with the permission of CBOE. Neither CBOE nor S&P nor TSX or their respective affiliates makes any representation regarding such index or the
advisability of relying on such index for any purpose. Neither CBOE nor S&P or their respective affiliate’s sponsors, endorses, sells or promotes any investment product that is based or
may be based on the S&P/TSX 60 VIX index. Neither TSX nor its affiliates sponsors, endorses or promotes any third party investment product that is or may be based on the S&P/TSX 60
VIX index.

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Fixed Income – Index and Analytics Products

Our PC-Bond fixed income indices are widely used fixed income performance benchmarks in Canada. The best known of these indices is the
Universe Bond Index, which tracks the broad Canadian bond market. In addition to this index, we now publish a variety of sub-indices for different
term and credit sectors, as well as indices for tracking other segments of the market, including high yield bonds, Euro Canadian bonds, maple
bonds (Canadian dollar bonds issued by a non-Canadian issuer), yankee bonds, inflation-indexed real return bonds, treasury bills and residential
and commercial mortgage-backed securities. In March, 2010, RBC Capital Markets introduced the RBC Total Return U.S. Treasury (TRUST) Index,
a benchmark index for investors in U.S. Treasuries with bonds rebalanced on a daily basis, licensing PC-Bond to create and manage the index. Overall
in 2010, PC-Bond launched 174 new fixed income indices.

Key Statistics

• Overall, there was a 4% increase in the number of professional and equivalent real-time market data subscriptions to Toronto
Stock Exchange and TSX Venture Exchange products (159,572++ professional and equivalent real-time market data subscriptions at
December 31, 2010 compared with 153,119 at December 31, 2009).

• There was a 4% increase in the number of MX market data subscriptions (23,718+ MX market data subscriptions at December 31, 2010

compared with 22,876 at December 31, 2009).

Pricing

Subscribers to TMX Datalinx data generally pay fixed monthly rates for access to real-time streaming data, which differ depending on the number
of end users and the depth of information accessed. In addition to streaming data, many individual investors consume real-time quote data,
for which we charge on a per quote basis. Real-time data fees are primarily driven by the number of market data subscriptions and therefore are
partly related to industry employment. Unfavourable economic and market conditions in late 2008 and 2009 impacted employment levels in the
financial services sector. This caused a decline in the number of market data subscriptions in 2009, as there is a lag effect between the timing
of announced industry employment reductions and subscription cancellations. The economic and market recovery in 2010 was reflected in an
increase in the number of cash equities and MX market data subscriptions at the end of 2010 compared with the end of 2009. We charge market
data vendors and direct feed clients a fixed monthly fee for access to data feeds.

Generally, we sell historical data products for a fixed amount per product accessed. Fees vary depending on the type of end use. Data products to be
used for commercial purposes require an enterprise-wide license for internal and external redistribution. We produce two electronic reference data
publications for each equity exchange, a Daily Record and a Monthly Review, both of which are sold on a subscription and firm license basis.

In 2010, approximately 36% of our information services revenue was billed in U.S. dollars. We do not currently hedge this revenue and are therefore
subject to foreign exchange fluctuations.

We benchmark our market data fees against those of our peers in the global exchange industry.

Prior to becoming effective, changes to certain TMX Datalinx market data fees related to Toronto Stock Exchange and TSX Venture Exchange market
data are filed with the OSC, BCSC and ASC. Changes to MX market data fees are filed with the AMF.

2011 Pricing

To date, there have been no price changes announced for 2011.

Competition

With the advent of a multi-marketplace environment in Canada, we face competition in market data, from these trading venues. Market data is
generated from trading activity and the success of certain data products is contingent on maintaining order flow.

We have continued to diversify and target new data customers with recent initiatives such as the combination of our equities and derivatives data
centres and the expansion of our co-location services. We have also expanded our information services business internationally with our data
technology and distribution agreement with NYSE Technologies which has been in place since December 2009.

Includes a base number of subscriptions for customers that have entered into enterprise agreements.

Management’s Discussion and Analysis 31

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Technology Services (formerly Business Services) and Other Revenue

We provide technology solutions to exchanges and other industry participants in circumstances where there is a financial or strategic interest.
Our team of exchange technology professionals have extensive industry experience in installing and operating trading and related systems at our
exchanges as well as other global exchanges.

•

In 2010, technology services and other revenue represented $15.9 million, or 3% of our revenue.

In 2009, technology services and other revenue represented $30.6 million, or 5% of our revenue.

Cash Markets Technology Services

We currently provide technology and related services to IIROC for the purposes of its review and real-time monitoring of trading on equity
marketplaces. IIROC pays us fees for these services, negotiated on an arm’s length basis, in accordance with a five-year agreement dated
June 1, 2008, which also details service levels.

Derivatives Markets Technology Services

Technology services revenue for 2009 includes a one-time license fee of $13.5 million from the technology services arrangement with the London
Stock Exchange plc (LSE) to license a customized version of SOLA Trading for certain LSE affiliates and partners. SOLA technology is now being used
in markets across Europe, including EDX, which trades Scandinavian and Russian derivatives products, Oslo Børs and Borsa Italiana’s derivatives
market, IDEM. We continued to provide ongoing customization support through 2010.

In Q2/09 we took a 19.9% ownership stake in EDX at a cost of $7.7 million. In Q4/10, we recognized an unrealized loss of $1.7 million related
to a non-cash write-down of this interest in EDX to its estimated fair value, which included an unrealized foreign exchange loss of $0.9 million.

Year Ended December 31, 2010 Compared with Year Ended December 31, 2009

Net income was $196.5 million or $2.64 per common share for 2010 on a basic and diluted basis, compared with net income of $104.7 million
or $1.41 per common share on both a basic and diluted basis for 2009, representing an increase in net income of 88%. Net income for 2010 was
reduced by $1.7 million, or $0.02 per common share on a basic and diluted basis related to a non-cash write-down of our 19.9% interest in EDX to
its estimated fair value. Net income for 2009 was reduced by the non-cash goodwill impairment charge of $77.3 million, or $1.04 per common share
on a basic and diluted basis, related to BOX. Net income for 2009 was also reduced by a write-down in the value of future tax assets and liabilities
which related to a reduction in Ontario corporate income tax rates. The tax adjustment also had no impact on cash flows and resulted in a reduction
in net income for 2009 of $10.4 million, or 14 cents per common share on a basic and diluted basis.

The following is a reconciliation of net income to adjusted net income* prior to the adjustment related to the write-down of our 19.9% interest in
EDX to its estimated fair value in 2010, the non-cash goodwill impairment charge in 2009 related to BOX and income tax charges which reduced the
value of future tax assets and liabilities in 2009:

Net Income GAAP to non-GAAP Reconciliation for 2010 and 2009

(in millions of dollars)

Net Income
Adjustment related to non-cash impairment of goodwill pertaining to investment in BOX
Adjustment related to a reduction in the value of future tax assets and liabilities
Adjustment related to a write-down of our 19.9% interest in EDX to its estimated fair value
Adjusted net income

$
$

2010
196.5
–
–
1.7
198.2

$
$
$

2009
104.7
77.3
10.4
–
192.4

The following is a reconciliation of earnings per share to adjusted earnings per share* prior to the adjustment related to the write-down of our
19.9% interest in EDX to its estimated fair value in 2010, the non-cash goodwill impairment charge in 2009 related to BOX and income tax charges
which reduced the value of future tax assets and liabilities in 2009:

See discussion under the heading “Non-GAAP Financial Measures”.

32 TMX Group Annual Report | 2010

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Earnings per share GAAP to non-GAAP Reconciliation for 2010 and 2009

Earnings per share
Adjustment related to non-cash impairment of goodwill pertaining
to investment in BOX
Adjustment related to a reduction in the value of future tax assets
and liabilities
Adjustment related to a write-down of our 19.9% interest in EDX to

its estimated fair value
Adjusted earnings per share

2010

Basic
2.64

Diluted
2.64

–

$
$

0.02
2.66

$
$

–

0.02
2.66

2009

Basic
1.41

1.04

0.14

–
2.59

Diluted
1.41

1.04

0.14

–
2.59

Adjusted net income* for 2010 of $198.2 million, or adjusted EPS* of $2.66 per common share on a basic and diluted basis, was higher than adjusted
net income* of $192.4 million, or adjusted EPS* of $2.59 per common share on a basic and diluted basis for 2009. Revenue from issuer services,
fixed income trading, Canadian derivatives trading and clearing, as well as information services, all increased in 2010 over 2009, somewhat offset
by a decline in equities trading revenue and U.S. derivatives market trading revenue over the same period. The increase was somewhat offset by
higher operating expenses in 2010 compared with 2009, primarily due to higher costs related to technology initiatives, corporate development and
marketing as well as share-based compensation. Technology services revenue was lower in 2010 compared with 2009 due to recognizing a one-time
license fee of $13.5 million from the LSE in 2009.

Revenue

Revenue was $575.5 million in 2010, up $15.4 million, or 3% compared with $560.1 million in 2009, reflecting increased revenue from issuer
services, cash markets fixed income trading, Canadian derivatives markets trading and clearing, information services and energy markets trading
and clearing, partially offset by lower revenue from cash markets equity trading, U.S. derivatives markets trading and technology services. In 2009,
technology services revenue included a one-time license fee of $13.5 million from the LSE.

Issuer Services Revenue

The following is a summary of issuer services revenue reported based on initial and additional listing fee revenue reported, and issuer services
revenue based on initial and additional listing fees billed* (reconciled below in this section) in 2010 and 2009.

Reported

Billed*

(in millions of dollars)

Initial listing fees
Additional listing fees
Sustaining listing fees
Other issuer services
Total

2010
18.7
66.0
65.0
13.3
163.0

$
$
$
$
$

2009
16.9
57.6
55.1
13.4
143.0

$
$
$
$
$

$ increase /
(decrease)
1.8
8.4
9.9
(0.1)
20.0

$
$
$
$
$

% increase /
(decrease)

11% $
15% $
18% $
$
(1%)
14% $

2010
28.7
106.1
65.0
13.3
213.1

2009
12.8
92.0
55.1
13.4
173.3

$
$
$
$
$

$ increase /
(decrease)
15.9
14.1
9.9
(0.1)
39.8

$
$
$
$
$

% increase /
(decrease)
124%
15%
18%
(1%)
23%

Initial and additional listing fees are non-refundable fees paid by listed issuers for the listing or reserving of securities. These fees are recorded as
“Deferred revenue – initial and additional listing fees” and recognized on a straight-line basis over an estimated service period of ten years.

In the case of Toronto Stock Exchange, listed issuers are billed for initial and additional listing fees and there is a lag between the time when
securities are issued or reserved and the time when these listing fees are paid by Toronto Stock Exchange listed issuers. For TSX Venture Exchange
issuers, fees are paid either prior to, or at the time of, listing or reserving securities.

•

Initial and additional listing fees reported increased in 2010 compared with 2009, reflecting an increase in capital market activity during
the period from April 1, 2000 to December 31, 2010 compared with the period from April 1, 1999 to December 31, 2009.

Initial listing fees billed* in 2010 increased over 2009 due to an increase in the value of initial financings and the number of new issuers
listed on Toronto Stock Exchange and TSX Venture Exchange. Additional listing fees billed* in 2010 increased over 2009 due to an increase
in the value and number of additional financings on TSX Venture Exchange. While the value of additional financings on Toronto Stock
Exchange decreased in 2010 compared with 2009, there was an increase in additional listing fees billed* as a result of fee changes that were
effective January 1, 2010 and an increase in the number of financing transactions.

See discussion under the heading “Non-GAAP Financial Measures”.

Management’s Discussion and Analysis 33

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•

Issuers listed on Toronto Stock Exchange and TSX Venture Exchange pay annual sustaining listing fees primarily based on their market
capitalization at the end of the prior calendar year, subject to minimum and maximum fees. The increase in sustaining listing fees was due
to the overall higher market capitalization of listed issuers on both exchanges at the end of 2009 compared with the end of 2008.

Trading, Clearing and Related Revenue

(in millions of dollars)

Cash markets revenue
Derivatives markets revenue
Energy markets revenue
Total

Cash Markets

$
$
$
$

2010
113.1
83.7
45.4
242.2

$
$
$
$

2009
119.6
78.5
39.4
237.5

$
$
$
$

$ increase/
(decrease)
(6.5)
5.2
6.0
4.7

% increase/
(decrease)
(5%)
7%
15%
2%

• The decrease was partially the result of changes to our equity trading fee schedule on October 1, 2009 and March 1, 2010, which included
reductions in active trading fees on securities trading at less than $1.00 in the post-open continuous market and on April 1, 2010,
which included a reduction in trading fees for securities trading at $1.00 and higher. The fee reductions were somewhat offset by fee
changes under the ELP Program. Effective October 1, 2009, we moved to a single tier model which reduced the passive credit paid to ELP
Program participants.

•

In addition, cash markets equity trading revenue decreased due to a 12% decrease in the volume of securities traded on Toronto Stock
Exchange in 2010 over 2009 (104.56 billion securities in 2010 versus 118.53 billion securities in 2009).

• The decrease was somewhat offset by a 45% increase in the volume of securities traded on TSX Venture Exchange in 2010 over 2009

(67.89 billion securities in 2010 versus 46.83 billion securities in 2009).

•

In addition, we also had a favourable change in the mix of customer and product trading activity on Toronto Stock Exchange in 2010
compared with 2009.

• The decrease was also partially offset by an increase in fixed income trading revenue from Shorcan due to a more favourable product mix in

2010 compared with 2009.

Derivatives Markets

• The increase in derivatives markets revenue reflects an increase in trading and clearing revenue from MX and CDCC. MX volumes
increased by 27% (44.30 million contracts traded in 2010 versus 34.75 million contracts traded in 2009) reflecting increased trading
in the BAX and CGB contracts due to increased volatility in future interest rate expectations, as well as increased trading in equity and
ETF options. The increase in revenue was partially offset by fee changes that were effective May 1, 2010. Open interest was up 30% at
December 31, 2010 compared with December 31, 2009.

• The increase in derivatives markets revenue was somewhat offset by a decrease in BOX revenues due to a 33% decrease in BOX volumes
(91.75 million contracts traded in 2010 versus 137.78 million contracts traded in 2009). This was somewhat offset by revenue from option
regulatory fees charged in the U.S. in respect of BOX in 2010 and pricing changes that were effective August, 2010.

Energy Markets

• The increase in energy markets revenue reflects the inclusion of revenue from Shorcan Energy which launched inter-participant brokerage

in energy products in Q1/10.

• The higher revenue also reflected a 13% increase in total energy volume# over 2009 (16.72 million terajoules in 2010 compared to

14.84 million terajoules in 2009).

• The higher revenue was somewhat offset by the impact of the depreciation of the U.S. dollar against the Canadian dollar in 2010 compared

with 2009.

Information Services (formerly Market Data) Revenue

(in millions of dollars)

2010
154.4

2009
149.0

$ increase
5.4

% increase
4%

# NGX Total Energy Volume includes trading and clearing in natural gas, crude oil and electricity.

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• The increase was due to higher revenue from co-location services, fixed income indices, index data licensing, and higher usage-based

activity in 2010 compared with 2009.

• Overall, there was a 1% increase in the average number of professional and equivalent real-time market data subscriptions to Toronto
Stock Exchange and TSX Venture Exchange products (154,039+ professional and equivalent real-time market data subscriptions in 2010
compared with 152,069 in 2009). There was a 6% decrease in the average number of MX market data subscriptions (23,191+ MX market
data subscriptions in 2010 compared with 24,616 in 2009).

• The increase was partially offset by the impact of the depreciation of the U.S. dollar against the Canadian dollar in 2010 compared with 2009.

• The increase was also offset by lower revenue from BOX derivatives market data.

Technology Services (formerly Business Services) and Other Revenue

(in millions of dollars)

2010
15.9

2009
30.6

$ (decrease)
(14.7)

% (decrease)
(48%)

• Technology services revenue in 2009 was higher primarily due to a one-time license fee of $13.5 million received from the LSE.

• The decrease was also due to providing technology services to fewer customers in 2010 compared with 2009.

Operating Expenses

Operating expenses in 2010 were $286.5 million, up $9.6 million, or 3%, from $276.9 million in 2009 primarily due to higher costs related to
incentive based compensation, technology initiatives, corporate development and marketing.

Compensation and Benefits

(in millions of dollars)

2010

2009

$ increase

% increase

133.5

129.4

4.1

• Compensation and benefits costs increased primarily due to commission based compensation and higher costs associated with long-term
performance incentives that are tied to share price appreciation. The TMX Group share price increased 12% from December 31, 2009 to
December 31, 2010.

• There were 841 employees at December 31, 2010 versus 849 employees at December 31, 2009.

Information and Trading Systems

(in millions of dollars)

2010

47.8

2009

$ increase

% increase

46.1

1.7

•

Information and trading systems costs increased due to higher costs related to technology initiatives including enterprise expansion and
the inclusion of Shorcan Energy. This increase was partially offset by decreased costs following the decommissioning of legacy hardware
in Q2/10.

General and Administration

(in millions of dollars)

2010

73.0

2009

$ increase

% increase

69.3

3.7

• General and administration costs were higher due to a $2.8 million increase in corporate development costs and higher marketing expenses
as we continued to pursue new domestic and international expansion opportunities and launch new products across our businesses.

•

In addition, general and administration costs were higher in 2010 compared with 2009 due to lower lease costs in Q4/09 as a result of a
one-time lease liability adjustment of $1.3 million.

Includes a base number of subscriptions for customers that have entered into enterprise agreements.

Management’s Discussion and Analysis 35

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Amortization

(in millions of dollars)

2010

32.3

2009

$ increase

% increase

32.2

0.1

–

• The increase was due to higher amortization of the intangible assets related to the TSX Quantum Order Entry Gateway and the TMX Smart

Order Router.

• The increases were largely offset by reduced amortization relating to assets that were fully depreciated by 2010.

Unrealized Loss on Investment Carried at Cost

(in millions of dollars)

2010

1.7

2009

$ increase

–

1.7

•

In 2010, we recognized an unrealized loss of $1.7 million related to a non-cash write-down to the estimated fair value of our 19.9%
investment in EDX. The investment was made in EDX at a cost of $7.7 million in Q2/09. The loss includes an unrealized foreign exchange
loss of $0.9 million.

Investment Income

(in millions of dollars)

2010
5.2

2009
4.6

$ increase
0.6

% increase
13%

•

Investment income increased primarily due to an increase in the amount of cash available for investment in 2010 compared with 2009,
somewhat offset by lower returns.

Goodwill Impairment Charge

(in millions of dollars)

2010
–

2009
$ 77.3

$ (decrease)
($ 77.3)

•

In 2009, we recorded a non-cash goodwill impairment charge of $77.3 million related to our investment in BOX primarily due to
increased competition and a lower market share in the U.S. equity options trading market, which resulted in a decline in current and
forecasted revenues.

Interest Expense

(in millions of dollars)

2010

2009

$ increase

% increase

6.2

6.1

0.1

•

Interest expense increased slightly as a result of a higher average interest rate charged on the debt outstanding during 2010 compared with
2009. On April 30, 2008, we borrowed $430.0 million in Canadian funds related to financing the cash consideration of the purchase price
for MX (see Term Loan).

Income Taxes

(in millions of dollars)

2010

90.7

2009

97.0

Effective tax rate (%)

2010

32%

2009

35%16

•

In November 2009, the Ontario government substantively enacted legislation to reduce the general corporate income tax rate from 14%
in 2009 to 12% effective July 1, 2010, with further reductions to 10% by July 1, 2013. As a result of these changes to Ontario corporate

16 The goodwill impairment charge in Q4/09 of $77.3 million has been excluded from income before taxes in calculating the effective tax rate.

36 TMX Group Annual Report | 2010

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income tax rates, there was a reduction in the value of future tax assets and liabilities and a corresponding non-cash net increase in
income taxes of $10.4 million in 2009.

• The effective tax rate for 2010 was lower than that for 2009 due to a decrease in the federal and Ontario corporate income tax rates. The impact
of this decrease in tax rates was somewhat offset by larger adjustments in the value of future tax assets in 2010 compared with 2009. These
tax adjustments related to the higher initial and additional listing fees billed in 2010 compared with 2009. The adjustments reduced the value
of future tax assets and increased income taxes.

• Since October 1, 2000, MX and CDCC have benefited from certain income tax, capital tax and other exemptions which were intended to
support the financial sector in the province of Québec. This provincial tax holiday ended on December 31, 2010. The impact of this tax
holiday was a reduction in income taxes of $3.5 million and $3.4 million in 2010 and 2009, respectively.

Non-controlling Interests

(in millions of dollars)

2010

2009

$ (decrease)

% (decrease)

0.1

1.8

(1.7)

(94%)

• MX holds a 53.8% ownership interest in BOX. The results for BOX are consolidated into our statements of income. The non-controlling

interests represent the other BOX unitholders’ share of BOX’s income or loss, before income taxes in the period.

•

In 2009, the $1.8 million reflects the non-controlling interests’ share of BOX’s income before taxes for the year. In 2010, the $0.1 million
reflects the non-controlling interests’ share of BOX income before taxes during the year, a decrease of $1.7 million. This reflects lower
volumes on BOX, somewhat offset by revenue from option regulatory fees charged in the U.S. in respect of BOX.

Segment Analysis

Cash Markets –Equities and Fixed Income

(in millions of dollars)

Revenue
Net Income

$
$

2010
425.2
158.1

$
$

2009
406.9
133.5

$
$

$ increase
18.3
24.6

% increase
4%
18%

The increase in revenue primarily reflects higher issuer services revenue related to sustaining and additional listing fees as well as higher information
services and fixed income trading revenue partially offset by a decrease in equity trading revenue. The increase in net income reflected the higher
revenue and a lower amount of shared services allocations, partially offset by an increase in operating expenses. In 2009, net income reflected a
non-cash write-down of future income tax assets due to the change in Ontario corporate income tax rates.

(in millions of dollars)

Goodwill
Total Assets

December 31,
2010
116.9
643.5

$
$

December 31,
2009
116.9
522.1

$
$

$ increase/
(decrease)
–
121.4

Total assets increased primarily due to an increase in total cash and marketable securities at the end of 2010 compared with the end of 2009.

Derivative Markets – MX and BOX

(in millions of dollars)

Revenue
Net Income (loss)

$
$

2010
104.3
26.2

$
$

2009
113.9
(42.9)

$
$

$ increase /
(decrease)
(9.6)
69.1

% increase /
(decrease)
(8%)
161%

The decrease in revenue largely reflects the inclusion of a one-time license fee of $13.5 million from LSE in 2009, as well as lower revenue from BOX.
The decrease in BOX’s trading revenue was somewhat offset by revenue from option regulatory fees charged in the U.S. in respect of BOX in 2010.
In addition, there was a significant increase in trading and clearing revenue from MX and CDCC. Net income for 2010 increased over 2009 due to
the non-cash goodwill impairment charge of $77.3 million related to BOX, which was recorded in 2009, partially offset by the revenue decrease and
higher operating expenses.

Management’s Discussion and Analysis 37

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(in millions of dollars)

Goodwill
Total Assets

December 31,
2010
413.9
1,592.4

$
$

December 31,
2009
415.0
1,942.9

$
$

$ (decrease)
(1.1)
(350.5)

$
$

The amount of goodwill remained relatively constant in 2010 compared with 2009. Total Assets decreased primarily due to a reduction in Daily
Settlements and Cash Deposits of $372.3 million. MX also carried offsetting liabilities related to daily settlements and cash deposits which were
$372.3 million lower at December 31, 2010 compared with December 31, 2009. Total fund requirements have declined as a result of reduced equity
market volatility. In addition, there has been a trend towards clearing members pledging securities rather than cash as collateral.

Energy Markets – NGX and Shorcan Energy

(in millions of dollars)

Revenue
Net Income

$
$

2010
46.0
12.3

$
$

2009
39.3
14.1

$
$

$ increase/
(decrease)
6.7
(1.8)

$ increase/
(decrease)
17%
(13%)

The increase in revenue in 2010 compared with 2009 was partly due to an increase in natural gas volumes traded or cleared on NGX in 2010
compared with 2009 and the addition of revenue from Shorcan Energy. The higher revenue was somewhat offset by the impact of the depreciation
of the U.S. dollar against the Canadian dollar in 2010 compared with 2009. The decrease in net income reflected higher compensation related to
long term incentive plans, organizational transition costs and higher allocation of corporate costs. In addition, net income in 2009 reflected a
non-cash write-down in the value of future tax assets and liabilities which related to a reduction in Ontario corporate income tax rates.

(in millions of dollars)

Goodwill
Total Assets

December 31,
2010
51.9
1,045.9

$
$

December 31,
2009
51.9
1,059.5

$
$

$ increase/
(decrease)
–
(13.6)

The decrease in Total Assets was due to a $60.9 million reduction in the fair value of open energy contracts at the end of 2010 compared with
the end of 2009. NGX also carried offsetting liabilities related to the value of open energy contracts which were $60.9 million lower at the end of
2010 compared with the end of 2009. This decrease in Total Assets was largely offset by an increase in energy contracts receivable of $40.4 million
compared with the end of December 2009. As the clearing counterparty to every trade, NGX also carries offsetting liabilities in the form of energy
contracts payable which were also $40.4 million higher at the end of 2010 compared with the end of 2009.

Liquidity and Capital Resources

Cash, Cash Equivalents and Marketable Securities

(in millions of dollars)

December 31,
2010

December 31,
2009

$ increase

330.4

191.1

139.3

• The increase was largely due to cash generated from operating activities of $280.2 million, partially offset by dividend payments of

$114.3 million, capital expenditures of $12.8 million and additions to intangible assets of $9.7 million.

Total Assets

(in millions of dollars)

38 TMX Group Annual Report | 2010

December 31,
2010
3,281.9

December 31,
2009
3,524.5

$ (decrease)
(242.6)

TMX-0000-AR-Back-v13.indd 38

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• Total assets decreased largely due to lower MX daily settlements and cash deposits of $193.1 million as at December 31, 2010 related to
MX’s clearing operations, compared with $565.4 million at the end of 2009. MX also carried offsetting liabilities related to daily settlements
and cash deposits which were $193.1 million at December 31, 2010 compared with $565.4 million at the end of 2009. Daily settlements
due from/to clearing members consist of amounts due from/to clearing members as a result of marking open futures positions to market
and settling options transactions each day that are required to be collected from/paid to clearing members prior to the commencement
of the next trading day. Daily settlements and cash deposits also include cash margin deposits and clearing fund cash deposits of clearing
members held in the name of CDCC. Total fund requirements have declined as a result of reduced equity market volatility. In addition,
there has been a trend towards clearing members pledging securities rather than cash as collateral.

• The decrease was also due to a decrease in current assets related to the fair value of open energy contracts ($141.9 million as at
December 31, 2010, compared with $202.8 million at December 31, 2009). The reduced level of open energy contracts largely reflected
the impact of lower natural gas prices for the relevant measuring period during December 2010 compared with the corresponding period
in December 2009. NGX also carried offsetting liabilities related to the fair value of open energy contracts which were $141.9 million at
December 31, 2010 compared with $202.8 million at December 31, 2009.

• The decreases were somewhat offset by an increase in energy contracts receivable of $40.4 million compared with the end of
December 2009. As the clearing counterparty to every trade, NGX also carries offsetting liabilities in the form of energy contracts payable
which were also $40.4 million higher at the end of 2010 compared with the end of 2009 because of higher volumes delivered in December.

• The overall decrease was somewhat offset by an increase in cash and marketable securities of $139.3 million.

Credit Facilities and Guarantee

Term Loan17

(in millions of dollars)

December 31,
2010

December 31,
2009

$ increase

429.8

429.0

0.8

•

In connection with the combination with MX, we established a non-revolving three-year term unsecured credit facility of $430.0 million
(the Term Loan). In addition, we also established a revolving three-year unsecured credit facility of $50.0 million with the same syndicate.
We may draw on these facilities in Canadian dollars by way of prime rate loans and/or Bankers’ Acceptances or in U.S. dollars by way
of LIBOR loans and/or U.S. base rate loans. Currently, TMX Group’s acceptance fee or spread on the loan is 0.45%. On April 30, 2008,
we borrowed $430.0 million in Canadian funds under the Term Loan to satisfy the cash consideration of the purchase price for MX.
This amount is included in Current liabilities and is due on April 18, 2011. In addition, the revolving facility will expire on that date. Based
on current levels of cash flow from operations, we believe that the Term Loan could be repaid with a combination of existing cash, future
cash flow from operations and refinancing, as required. We expect that the Term Loan will be repaid or refinanced before the end of Q1/11.

• These credit facilities contain customary covenants, including a requirement that TMX Group maintain:

a maximum debt to adjusted EBITDA ratio of 3.5:1, where adjusted EBITDA means earnings on a consolidated basis before interest,
taxes, extraordinary, unusual or non-recurring items, depreciation and amortization, all determined in accordance with Canadian GAAP
but adjusted to include initial and additional listing fees billed and to exclude initial and additional listing fees reported as revenue;

a minimum consolidated net worth covenant based on a pre-determined formula; and

a debt incurrence test whereby debt to adjusted EBITDA must not exceed 3.0:1.

At December 31, 2010, all covenants were met.

• We entered into a series of interest rate swap agreements which took effect on August 28, 2008 in order to partially manage our exposure
to interest rate fluctuations on our $430.0 million non-revolving three-year term facility. The interest rate swap in place at December 31,
2010 is as follows:

Notional value
(in millions of dollars)
Swap #3 – $100.0

Interest rate we will pay under swap
(excludes 0.45% fee)
3.829%

Maturity date of swap
April 18, 2011

The “Term Loan” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion of risks and uncertainties
related to such statements.

Management’s Discussion and Analysis 39

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Other Credit Facilities and Guarantee

To backstop its clearing operations, NGX currently has a credit agreement in place with a Canadian chartered bank which includes a
US$100.0 million clearing backstop fund. We are NGX’s unsecured guarantor for this fund up to a maximum of US$100.0 million. This facility
had not been drawn upon at December 31, 2010.

NGX also has an Electronic Funds Transfer (EFT) Daylight facility of $300.0 million in place with a Canadian chartered bank.

CDCC has a $50.0 million revolving standby credit facility with a Canadian Schedule I bank to provide liquidity in the event of default by a clearing
member. This facility had not been drawn upon at December 31, 2010.

Shareholders’ Equity

(in millions of dollars)

December 31,
2010

December 31,
2009

$ increase

853.1

770.6

82.5

• We earned $196.5 million of net income during 2010 and paid $114.3 million in dividends.

• At December 31, 2010, there were 74,370,462 common shares issued and outstanding. In 2010, 63,421 common shares were issued on
the exercise of share options. At December 31, 2010, 4,064,226 common shares were reserved for issuance upon the exercise of options
granted under the share option plan. At December 31, 2010, there were 1,678,731 options outstanding.

• At February 7, 2011, there were 74,370,462 common shares issued and outstanding and 1,665,877 options outstanding under the share

option plan.

Cash Flows from Operating Activities

(in millions of dollars)

Cash Flows from Operating Activities

2010

2009

Increase in cash

280.2

204.9

75.3

Cash Flows from Operating Activities were $75.3 million higher in 2010 compared with 2009 due to:

(in millions of dollars)

Net income
Amortization
Non-cash goodwill impairment charge related to BOX
Unrealized loss on non-cash write-down of interest in EDX
Increase/(decrease) in future income tax liabilities, net of future income tax assets
Unrealized (gain) on interest rate swaps
(Increase)/decrease in accounts receivable and prepaid expenses
(Increase) in other assets
Net (decrease) in accounts payable, accrued liabilities and long-term liabilities
Increase in deferred revenue
(Increase)/decrease in income taxes recoverable, net of income taxes payable
Net increase in other items
Cash Flows from Operating Activities

$
$

$
$
$
$
$
$
$
$
$
$

2010
196.5
32.3
–
1.7
(9.0)
(5.0)
(11.1)
(2.0)
15.5
53.8
4.3
3.2
280.2

$
$
$

$
$
$
$
$
$
$
$
$

Increase/
(decrease)
in cash
91.8
0.1
(77.3)
1.7
(12.5)
1.8
1.4
7.2
23.4
20.6
19.3
(2.2)
75.3

2009
104.7
32.2
77.3
–
3.5
(6.8)
(12.5)
(9.2)
(7.9)
33.2
(15.0)
5.4
204.9

$
$
$
$
$
$
$
$
$
$
$
$
$

40 TMX Group Annual Report | 2010

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Cash Flows from (used in) Financing Activities

(in millions of dollars)

Cash Flows from (used in) Financing Activities

2010
(117.1)

2009
(151.4)

Increase in cash
34.3

Cash Flows (used in) Financing Activities were $34.3 million lower in 2010 compared with 2009 due to:

(in millions of dollars)

Dividends paid on common shares
Repurchase of common shares under NCIB
Dividends paid to BOX non-controlling interests
Net increase/(decrease) in other items
Cash Flows from (used in) Financing Activities

$
$

2010
(114.3)
–
–
(2.8)
(117.1)

$
$
$
$
$

2009
(113.0)
(30.4)
(6.4)
(1.6)
(151.4)

$
$
$
$
$

Increase/
(decrease)
in cash
(1.3)
30.4
6.4
(1.2)
34.3

Cash Flows from (used in) Investing Activities

(in millions of dollars)

Cash Flows from (used in) Investing Activities

2010
(181.6)

2009

(Decrease)
in cash

(65.3)

(116.3)

Cash Flows (used in) Investing Activities were $116.3 million higher in 2010 compared with 2009 due to:

(in millions of dollars)

Cost of acquisitions and investments, net of cash acquired
Capital expenditures primarily related to technology investments
and leasehold improvements
Additions to intangible assets including TSX Quantum Gateway (2009),

TMX Smart Order Router (2009), SOLA internal development costs (2010 and 2009),
TSX Quantum Feeds (2010) and on-book non-displayed order types (2010)

Net (purchases) of marketable securities
Cash Flows from (used in) Investing Activities

2010
–

2009
(37.9)

Increase/
(decrease)
in cash
37.9

(12.8)

(7.1)

(5.7)

$
$
$

(9.7)
(159.1)
(181.6)

$
$
$

(13.2)
(7.1)
(65.3)

$
$
$

3.5
(152.0)
(116.3)

Summary of Cash Position and Other Matters18

We had $330.4 million of cash and cash equivalents and marketable securities at December 31, 2010 and have a $50.0 million undrawn revolving
credit facility which expires April 18, 2011. Based on our current business operations and model, we believe that we have sufficient cash resources
to operate our business. During 2010, with revenues of $575.5 million, we incurred operating expenses of $286.5 million. We had $429.8 million
of debt outstanding under the Term Loan, which is due April 18, 2011. Based on current levels of cash flow from operations, we believe that the
Term Loan could be repaid with a combination of existing cash, future cash flow from operations and refinancing, as required. We expect that
the Term Loan will be repaid or refinanced before the end of Q1/11.

In June 2010, we filed a short form base shelf prospectus with securities regulators in each of the provinces of Canada. This will enable us to offer
and issue up to $1.0 billion of debt, equity or other securities over a 25-month period ending in July 2012. The net proceeds of any such offerings
will be used for general corporate purposes, including repaying outstanding indebtedness from time to time, and funding future acquisitions or
investments. We have no immediate intention to raise funds, other than potentially replacing, in whole or in part, the Term Loan.

Cash flows from operations were $280.2 million in 2010. We paid $114.3 million (38 cents per common share in each of the first three quarters,
40 cents per common share in Q4/10) in dividends in 2010.

The “Summary of Cash Position and Other Matters” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a
discussion of risks and uncertainties related to such statements.

Management’s Discussion and Analysis 41

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In Q3/09, we announced phases 3 and 4 of our major expansion of our co-location services and facilities in response to significant international
demand. The new facility has been designed to accommodate up to 200 co-location spaces, which will meet current and medium-term demand
for the services. Capital expenditures of approximately $7.2 million associated with the third phase of the expansion project were incurred in 2010.
We expect to incur approximately $2.3 million of additional capital expenditures associated with this phase. The new facility now provides space
for 100 cabinets. In June 2010, we announced that construction of the new co-location facility was complete and on June 30, 2010, clients began
installing their trading applications in the TMX data centre and receiving the benefits of direct high-speed access to the Toronto Stock Exchange,
TSX Venture Exchange and MX trading engines and market data feeds. We began to realize incremental revenue in Q3/10.

In keeping with our commitment to deliver state of the art levels of technology to our markets, we are continuing to invest in, and are implementing
a multi-phased initiative to expand the infrastructure across our trading and data enterprise. In order to increase throughput capability, we are
expanding our internal networks, storage and application servers. The first expansion phase was completed in Q1/10. The second phase is well
underway. We are incurring annual operating expenses, including amortization, of approximately $11.0 million to support these phases of this
initiative. However, we estimate these costs will be largely offset by the decommissioning of legacy hardware. Information and trading systems
costs were lower in 2H/10 following this decommissioning which was completed by the end of June 2010. The expansion of the trading and
data enterprise is designed to improve our overall market leading infrastructure to better serve our existing customers and to attract additional
customers and order flow to our marketplaces.

Future investment opportunities that may require debt financing could be limited by current and future economic conditions, the covenants on
TMX Group’s existing credit facilities and by our financial viability ratios imposed by securities regulators.

The recognition order of TSX Inc. by the OSC contains certain financial viability tests that must be met. If TSX Inc. fails to meet any of these tests
for a period of more than three months, TSX Inc. will not, without the prior approval of the Director of the OSC, pay dividends (among other things)
until the deficiencies have been eliminated for at least six months or a shorter period of time as agreed by OSC staff. TSX Venture Exchange is
required by various provincial securities commissions to maintain adequate financial resources for the performance of its functions in a manner
that is consistent with the public interest and the terms of its recognition orders. Under its recognition order, MX is also subject to certain financial
viability tests set by the Autorité des marchés financiers (AMF) that must be met. If MX fails to meet any of these tests for a period of more than
three months, MX will not, without the prior approval of the AMF, pay dividends (among other things) until the deficiencies have been eliminated
for at least six months. NGX is required by the Alberta Securities Commission to maintain adequate financial resources to operate its trading
system and support its trade execution functions (see Managing Capital for more information on the financial resources requirements imposed by
securities regulators).

As at December 31, 2010, we met all of the above requirements.

Defined Benefit Pension Plans19

Based on the most recent actuarial valuation for funding purposes as at December 31, 2009, we estimate a funding deficit of approximately
$5.0 million on a solvency basis, of which $4.9 million was funded in 2010 and reflected as an increase in Other assets.

Managing Capital

Our primary objectives in managing capital, which we define to include our share capital and various credit facilities, include:

• Maintaining sufficient capital for operations to ensure market confidence. Currently, we target to retain a minimum of $100.0 million in
cash and marketable securities. This amount is subject to change. We do this by managing our capital subject to capital maintenance
requirements imposed on our subsidiaries:

•

In respect of TSX Inc., as required by the OSC to maintain certain regulatory ratios as defined in the OSC recognition order, as follows:

a current ratio not less than 1.1:1;

a debt to cash flow ratio not greater than 4:1; and

a financial leverage ratio consisting of adjusted total assets to adjusted shareholders’ equity not greater than 4:1.

We have complied with these externally imposed capital requirements.

•

In respect of TSX Venture Exchange Inc., as required by various provincial securities commissions to maintain adequate financial resources.

We have complied with these externally imposed capital requirements.

•

In respect of NGX, to:

§ maintain adequate financial resources, as required by the ASC; and

The “Defined Benefit Pension Plans” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a discussion of risks
and uncertainties related to such statements.

42 TMX Group Annual Report | 2010

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§ maintain a current ratio of no less than 1:1 and a tangible net worth of not less than $9.0 million, as required by a major Canadian

chartered bank.

We have complied with these externally imposed capital requirements.

•

In respect of Shorcan, by IIROC which requires Shorcan to maintain a minimum level of shareholder’s equity of $0.5 million.

We have complied with this externally imposed capital requirement.

•

In respect of MX, as required by the AMF to maintain certain regulatory ratios as defined in the AMF recognition order, as follows:

a working capital ratio of not less than 1.5:1;

a cash flow to total debt ratio of more than 20%; and

a financial leverage ratio consisting of total assets to shareholders’ equity of less than 4:1.

We have complied with these externally imposed capital requirements.

• Maintaining sufficient capital to meet the covenants imposed in connection with our long-term debt (see Term Loan).

We have complied with these externally imposed capital requirements.

• Retaining sufficient capital to invest in, and continue to grow, our business both organically and through acquisitions.

•

Increasing total returns to shareholders through methods such as dividends and purchasing shares for cancellation pursuant to normal
course issuer bids.

Our objectives, policies and processes for managing capital have not changed in the current economic environment.

Financial Instruments

Cash, Cash Equivalents and Marketable Securities

Our financial instruments include cash, cash equivalents and investments in marketable securities which are held to earn investment income.
These instruments include units in a money market fund and a short-term bond and mortgage fund, managed by an external advisor. The primary
risks related to these marketable securities are variation in interest rates and credit risk. For a description of these risks, please refer to Credit Risk –
Marketable Securities and Interest Rate Risk – Marketable Securities.

These investments are recorded at fair value, which in the case of money market funds, bonds and bond funds are determined based on quoted
market prices. Unrealized losses of $0.6 million were recorded in investment income in 2010, compared with unrealized losses of $0.2 million in 2009.

Accounts Receivable

Our financial instruments include accounts receivable, which represents amounts that our customers owe us. The fair value is based on the actual
amounts owed by the customers, net of a provision for that portion which may not be collectible. The primary risk related to accounts receivable is
credit risk. For a description of these risks, please refer to Credit Risk – Accounts Receivable.

CDCC – Daily Settlements and Cash Deposits

As part of CDCC’s clearing operations, amounts due from and to clearing members as a result of marking to market open futures positions and
settling options transactions each day are required to be collected from or paid to clearing members prior to the commencement of trading the
next day. The amounts due from and due to clearing members are recognized in the consolidated assets and liabilities as daily settlements and cash
deposits. There is no impact on the consolidated statements of income. The primary risks associated with these financial instruments are credit risk
and market risk. For a description of these risks, please refer to Credit Risk – CDCC and Other Market Price Risk – CDCC.

Term Loan

We established the Term Loan in connection with the combination with MX. We entered into a series of interest rate swaps to partially manage our
exposure to interest rate fluctuations on the Term Loan (see Credit Facilities and Guarantee – Term Loan). The Term Loan is subject to interest rate
risk. For a description of this risk, please refer to Interest Rate Risk – Term Loan.

Total Return Swaps

We have entered into a series of total return swaps (TRSs) which synthetically replicate the economics of TSX Inc. purchasing our shares as a fair
value hedge to the share appreciation rights of deferred share units (DSUs) and non-performance based restricted share units (RSUs) that are
awarded to our directors and employees. We mark to market the fair value of the TRSs as an adjustment to income, and simultaneously mark to

Management’s Discussion and Analysis 43

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market the liability to holders of the share units as an adjustment to income. These TRSs are subject to credit risk and market risk. For a description
of these risks, please refer to Credit Risk – Total Return and Interest Rate Swaps and Market Risk – Total Return Swaps. The fair value of the TRSs is
based upon the excess or deficit of the volume weighted average price of our shares for the last five trading days of the reporting period compared
with our share price at the date of entering into the TRSs. The fair value of the TRSs and the obligation to unit holders are reflected on the balance
sheet. The contracts are settled in cash upon maturity.

The fair values of the TRSs were an asset of $4.5 million at December 31, 2010 and a liability of $0.5 million at December 31, 2009. During 2010,
unrealized gains of $5.0 million were reflected as a decrease in compensation and benefits costs. During 2009, unrealized gains of $5.3 million were
reflected as a decrease in compensation and benefits costs.

NGX – Energy Contracts

As part of its clearing operations, NGX becomes the central counterparty to each transaction (whether it relates to natural gas, electricity or crude
oil contracts) cleared through its clearing operations. We record NGX’s energy contract receivables and offsetting payables for all contracts where
physical delivery has occurred or financial settlement amounts have been determined prior to the period end but payments have not been made.
There is no impact on the consolidated statements of income.

The fair value at the balance sheet date of the undelivered physically settled trading contracts and the forward financially settled trading contracts
is recognized in the consolidated assets and liabilities as open energy contracts. There is no impact on the consolidated statement of income.

The primary risks related to these financial instruments are credit risk and market risk. For a description of these risks, please refer to Credit Risk –
NGX and Other Market Price Risk – NGX.

Interest Rate Swaps

We have entered into a series of interest rate swap agreements to partially manage our exposure to interest rate fluctuations on the Term Loan,
effective August 28, 2008 (see Term Loan). Interest rate swaps are subject to credit risk. For a description of this risk, please refer to “Credit
Risk – Total Return and Interest Rate Swaps”. We mark to market the fair value of the remaining interest rate swap, which is determined by
using observable market information. At December 31, 2010, the fair value of the remaining interest rate swap was a liability of $0.7 million.
During 2010, unrealized gains of $5.0 million and realized losses of $5.2 million have been reflected in the income statement in net mark to
market on interest rate swaps, compared with unrealized gains of $6.8 million and realized losses of $8.2 million in 2009.

Risks Associated with Financial Instruments

Credit Risk

Credit risk is the risk of financial loss associated with a counterparty’s failure to fulfill its financial obligations and arises principally from
investments in marketable securities, total return swaps, interest rate swaps, accounts receivable and the clearing and/or brokerage operations of
Shorcan, Shorcan Energy, NGX and CDCC.

Credit Risk – Marketable Securities

TMX Group manages exposure to credit risk arising from investments in marketable securities by holding investment funds that actively manage
credit risk. Our investment policy will only allow excess cash to be invested within a specific money market fund and a specific short term bond and
mortgage fund. The money market fund manages credit risk by limiting its investments to government or government-guaranteed treasury bills,
and high-grade corporate notes. The short term bond and mortgage fund manages credit risk by limiting its investments to high-quality Canadian
corporate bonds, government bonds and up to 40% of the fund’s net assets in conventional first mortgages and mortgages guaranteed under the
National Housing Act (Canada). Corporate bonds held must have a minimum credit rating of BBB by DBRS Limited. Mortgages may not comprise
more than 40% of the portfolio and must be either multi-residential conventional first mortgages or multi-residential government guaranteed
mortgages. TMX Group does not have any investments in non-bank, asset-backed commercial paper.

At December 31, 2010, the investment portfolio was comprised of 43% in short-term bond and mortgage funds and 57% in money market funds.

Credit Risk – Total Return and Interest Rate Swaps

We have entered into TRS which synthetically replicate the economics of TSX Inc. purchasing our shares as a partial economic hedge to the
share appreciation rights of DSUs and RSUs that are awarded to our directors and employees. The contracts are settled in cash upon maturity.
The obligation to unit holders is reflected on the balance sheet. In addition, we entered into interest rate swaps, which took effect on
August 28, 2008, in order to partially manage our exposure to interest rate fluctuations on our Term Loan (see Term Loan). To manage credit risk,
we entered into these TRS and interest rate swaps with major Canadian chartered banks.

44 TMX Group Annual Report | 2010

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Credit Risk – Clearing and / or Brokerage Operations

We are exposed to credit risk in the event that customers, in the case of Shorcan and Shorcan Energy, contracting parties, in the case of NGX,
or clearing members, in the case of CDCC, fail to settle on the contracted settlement date.

Credit Risk – Shorcan and Shorcan Energy

Shorcan and Shorcan Energy’s risk is limited by its status as an agent, in that it does not purchase or sell securities for its own account. As agent,
in the event of a failed trade, Shorcan or Shorcan Energy has the right to withdraw its normal policy of anonymity and advise the two counterparties
to settle directly.

Credit Risk – NGX

NGX requires each contracting party to provide sufficient collateral, in the form of cash or letters of credit, to exceed its outstanding credit exposure
as determined by NGX in accordance with its margining methodology. The cash collateral deposits and letters of credit are held by a major Canadian
chartered bank. This collateral may be accessed by NGX in the event of default by a contracting party. NGX measures total potential exposure for
both credit and market risk for each contracting party on a real-time basis as the aggregate of:

• outstanding energy contracts receivable;

• “Variation Margin”, comprised of the aggregate “mark to market” exposure for all forward purchase and sale contracts with an adverse

value from the perspective of the customer; and

• “Initial Margin”, an amount that estimates the worst expected loss that a contract might incur under normal market conditions during a

liquidation period.

As a result of these calculations of contracting party exposure, at December 31, 2010, NGX held cash collateral deposits of $835.7 million
and letters of credit of $1,941.4 million, compared with cash collateral deposits of $1,040.3 million and letters of credit of $1,963.7 million at
December 31, 2009. These amounts are not included in our consolidated balance sheets.

NGX also maintains an unsecured clearing backstop fund of U.S. $100.0 million. TMX Group is the unsecured guarantor of this fund. This facility has
not been drawn upon at December 31, 2010.

Credit Risk – CDCC

CDCC is exposed to the risk of default of its clearing members. CDCC is the central counterparty and guarantor of all transactions carried out on
MX’s markets and on the OTC market when the transaction is cleared through CDCC. It primarily supports the risk of one or more counterparties,
meeting strict financial and regulatory criteria, defaulting on their obligations, in which case the obligations of that counterparty would become
the responsibility of CDCC. This risk is greater if market conditions are unfavourable at the time of the default.

CDCC’s principal risk management practice is the collection of risk-based margin deposits in the form of cash, equities and liquid government
securities. Should a clearing member fail to meet a daily margin call or otherwise not honour its obligations under open futures and options
contracts, margin deposits would be available to apply against the costs incurred to liquidate the clearing member’s positions.

CDCC’s margining system is complemented by a Daily Capital Margin Monitoring (DCMM) process that permits it to evaluate the ability of a clearing
member to meet its margining requirements. On a daily basis, CDCC monitors the margin requirement of a clearing member as a percentage of its
capital (net allowable assets). CDCC will make additional margin calls when the ratio of margin requirement/net allowable assets exceeds 100%.
The additional margin is equal to the excess of the ratio over 100%.

CDCC also maintains a clearing fund through deposits of cash and highly liquid securities from all clearing members. The aggregate level of clearing
funds required from all clearing members must cover the worst loss that CDCC could face if one counterparty is failing under various extreme but
plausible market conditions. Each clearing member contributes to the clearing fund in proportion to its margin requirements. If, by a clearing
member’s default, further funding is necessary to complete a liquidation, CDCC has the right to require other clearing members to contribute
additional amounts equal to their previous contribution to the clearing fund.

CDCC’s margin collateral deposits and clearing fund deposits are held by approved depositories under irrevocable agreements. This collateral
may be accessed by CDCC in the event of default by a clearing member. As a result of these calculations of clearing member exposure at
December 31, 2010, CDCC held margin collateral deposits of $2,911.2 million and clearing fund deposits of $264.1 million, compared with
$3,101.8 and $205.1 respectively at December 31, 2009, primarily in collateral securities. These amounts are not included in our consolidated
balance sheets.

CDCC maintains $50.0 million in revolving standby credit facilities in the event of default by a clearing member. This facility has not been drawn
upon at December 31, 2010.

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Management’s Discussion and Analysis 45

Credit Risk – Accounts Receivable

Our exposure to credit risk resulting from uncollectable accounts is influenced by the individual characteristics of our customers, many of whom
are banks and financial institutions. There is no concentration of credit risk arising from accounts receivable from a single customer. In addition,
customers that fail to maintain their account in good standing risk loss of listing, trading or data access privileges.

Market Risk

Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates, commodity prices and equity prices will affect our
income or the value of our holdings of financial instruments.

Market Risk – Total Return Swaps (TRS)

We are exposed to market risk when we grant DSUs and RSUs to our directors and employees. We utilize total return swaps to partially hedge this
exposure. The fair value of the TRS is based upon the excess or deficit of the volume weighted average price of our shares for the last five trading
days of the reporting period compared with our share price at the date of entering into the total return swaps. The change in the fair value of the
total return swaps is generally offset by the change in the obligation to DSU and RSU holders. As at December 31, 2010, a 25% increase in the share
price of the Company would result in a net $2.8 million decrease in net income. A 25% decrease in the share price of the Company would result in a
net $3.7 million increase in net income.

Interest Rate Risk – Marketable Securities

We are exposed to interest rate risk on our marketable securities. We have engaged external investment fund managers to manage the asset mix
and the risks associated with these investments. At December 31, 2010, we held $261.6 million in these funds, compared with $103.2 million at
December 31, 2009. The approximate impact of a 1% rise in interest rates is a decrease of $2.8 million on the carrying value of these investments
and the approximate impact of a 1% fall in interest rates is an increase of $2.8 million on the carrying value of these investments.

Interest Rate Risk – Term Loan and Interest Rates Swaps

We are exposed to interest rate risk on our Term Loan. The approximate impact on net income of a 1% rise and a 1% fall in interest rates with
respect to this facility is a decrease of $1.3 million and an increase of $1.3 million respectively.

In order to partially manage our exposure to interest rate fluctuations, we entered into a series of interest rate swap agreements that took effect
on August 28, 2008, which fixed the interest rate relating to $300.0 million of the principal amount. On August 31, 2009, swap agreements with a
notional value of $100.0 million, representing one third of the total notional value of the swaps, matured. At December 31, 2010, the fair value of
the remaining interest rate swaps was a liability of $0.7 million. The approximate impact of a 1% rise in interest rates is a $0.3 million decrease in
the liability and the approximate impact of a 1% fall in interest rates on the fair value of the swaps is a $0.3 million increase in the liability.

Foreign Currency Risk

(See Risks and Uncertainties – Currency Risk)

Other Market Price Risk – NGX, Shorcan, Shorcan Energy and CDCC

We are exposed to other market price risk from the activities of Shorcan, Shorcan Energy, NGX and CDCC if a customer, contracting party or clearing
member, as the case may be, fails to take or deliver either securities, energy products or derivatives products on the contracted settlement date
where the contracted price is less favourable than the current market price.

Shorcan and Shorcan Energy’s risk is limited by their status as agents, in that they do not purchase or sell securities or commodities for their own
account, the short period of time between trade date and settlement date and the defaulting customer’s liability for any difference between the
amounts received upon sale and the amount paid to acquire the securities or commodities.

Both NGX’s and CDCC’s measure of total potential exposure, as described previously, includes measures of market risk which are factored into the
collateral required from each contracting party or clearing member.

We are also exposed to other market price risk on a portion of our sustaining listing fee revenue, which is based on the quoted market values of
listed issuers as at December 31 of the previous year.

Liquidity Risk

Liquidity risk is the risk that we will not be able to meet our financial obligations as they become due.

We manage liquidity risk through the management of our Cash and Marketable securities, all of which are held in short term instruments, the
management of our revolving and non revolving credit facilities (see Term Loan) and capital (see Managing Capital).

46 TMX Group Annual Report | 2010

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Total
7,413
70,328
431,984
509,725

Less than 1 year
3,516
14,927
430,134
448,577

1–3 years
3,897
20,712
–
24,609

4–5 years
–
15,131
–
15,131

5+ years
–
19,558
1,850
21,408

Contractual Obligations

(in thousands of dollars)

Capital Leases
Operating Leases
Other Obligations

Selected Annual Information

(in thousands of dollars, except per share amounts)

Revenue
Net income
Adjusted net income*
Total assets
Long-term liabilities****
Earnings per share:
Basic
Diluted
Adjusted earnings per share*:
Basic
Diluted
Cash dividends declared per common share

2010
575,463
196,535
198,197
3,281,919
721,986

$
$
$
$
$

2009
560,132
104,701
192,312
3,524,475
1,113,433

$
$
$
$
$

2008
532,614
181,952
197,104
3,688,645
1,090,423

2.64
2.64

$
$

2.66
2.66
1.54

$
$
$

1.41
1.41

$
$

2.59
2.59
1.52

$
$
$

$
$
$
$
$

$
$

$
$
$

2.48
2.47

2.69
2.68
1.52

2008
182.0
–
–
15.2
–
197.2

Net Income GAAP to Non-GAAP Reconciliation for 2010, 2009 and 2008

(in millions of dollars)

Net Income
Adjustment related to non-cash impairment of goodwill pertaining to investment in BOX
Adjustment related to a reduction in the value of future tax assets and liabilities
Adjustment related to loss on termination of joint venture
Adjustment related to a write-down of our 19.9% interest in EDX to its estimated fair value
Adjusted net income

$
$

2010
196.5
–
–
–
1.7
198.2

$
$
$

2009
104.7
77.3
10.4
–
–
192.4

Earnings per Share GAAP to Non-GAAP Reconciliation for 2010, 2009 and 2008

Earnings per share
Adjustment related to non-cash impairment of
goodwill pertaining to BOX
Adjustment related to a reduction in the value
of future tax assets and liabilities
Adjustment related to loss on termination
of joint venture
Adjustment related to a write-down of our 19.9%

interest in EDX to its estimated fair value

Adjusted earnings per share

2010

2009

2008

Basic
2.64

Diluted
2.64

Basic
1.41

Diluted
1.41

Basic
2.48

Diluted
2.47

–

1.04

0.14

$
$

0.02
2.66

$
$

0.02
2.66

–

–
2.59

–

–
2.59

–

0.21

–
2.69

–

0.21

–
2.68

See discussion under the heading Non-GAAP Financial Measures.

**** Includes deferred revenue.

Management’s Discussion and Analysis 47

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Revenue, Net Income and Earnings per Share

2010

2009

•

(See Year Ended December 31, 2010 Compared with Year Ended December 31, 2009)

• Net income was $104.7 million or $1.41 per common share for 2009 on a basic and diluted basis, compared with net income of
$182.0 million or $2.48 per common share ($2.47 on a diluted basis) for 2008, representing a decrease in net income of 42%. Net income
for 2009 was reduced by a non-cash goodwill impairment charge of $77.3 million, or $1.04 per common share, on a basic and diluted basis
related to BOX. Net income for 2009 was also reduced by a write-down in the value of future tax assets and liabilities which related to a
reduction in Ontario corporate income tax rates. The tax adjustment also had no impact on cash flows and resulted in a reduction in net
income for 2009 of $10.4 million, or 14 cents per common share on both a basic and diluted basis. In 2008, net income was reduced by
$15.2 million, or 21 cents per common share on a basic and diluted basis due to a payment to ISE Ventures with respect to the termination
of our derivatives joint venture.

• Adjusted net income* for 2009 of $192.4 million, or adjusted EPS* of $2.59 per common share on a basic and diluted basis, was lower than
adjusted net income* of $197.2 million, or adjusted EPS* of $2.69 per common share ($2.68 on a diluted basis) for 2008, due to lower cash
markets equity trading revenue, lower issuer services revenue, increased expenses, partially related to new technology initiatives, and
lower investment income. The decreases were partially offset by higher energy trading, cash markets fixed income trading and information
services revenue and higher technology services revenue which included the license fee of $13.5 million (or 14 cents per common share
on a basic an diluted basis) from the LSE. In addition, our 2009 financial statements reflect a full year of MX results compared with eight
months of results in 2008. BOX’s results were consolidated in our 2009 financial statements (with an adjustment made for non-controlling
interests) and were only consolidated in our 2008 financial statements from August 29, 2008. From May 1, 2008, to August 28, 2008, 31.4%
of earnings from BOX were included as Income from investments in affiliates.20

Total Assets

2010

2009

•

(See Year Ended December 31, 2010 Compared with Year Ended December 31, 2009)

• Total assets decreased due to lower energy contracts receivable of $714.5 million at December 31, 2009 related to the clearing operations
of NGX, compared with $976.4 million at the end of 2008. The lower level of receivables reflected lower natural gas prices at the end of
December 2009 compared with the end of December 2008. Total assets also decreased due to the reduction in goodwill related to the non-
cash impairment charge of $77.3 million related to BOX. The overall decrease was partially offset by higher MX daily settlements and cash
deposits of $565.4 million as at December 31, 2009 related to MX’s clearing operations, compared with $497.3 million at the end of 2008.
The decrease was also partially offset by an increase in current assets related to the fair value of open energy contracts ($202.8 million as
at December 31, 2009, compared with $155.3 million at December 31, 2008). In addition, the overall decrease in Total assets was partially
offset due to recording $49.6 million in intangible assets and $30.6 million in goodwill related to the purchase of NTP on May 1, 2009, less
cash paid of $24.2 million for the acquisition.

Long-term Liabilities

2010

2009

• Long-term liabilities decreased in 2010 over 2009 primarily due to a reclassification of the Term Loan of $429. 8 million (as of

December 31, 2010), as short-term debt rather than long-term debt.

• Long-term liabilities increased in 2009 over 2008 primarily due to an increase in deferred revenue and obligations under capital leases,

somewhat offset by a reduction in the fair value of interest rate swaps.

See discussion under the heading Non-GAAP Financial Measures.

20 Based on MX’s ownership interest in BOX, prior to acquisition of control.

48 TMX Group Annual Report | 2010

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Quarterly Information

(in thousands of dollars except per share amounts)

Revenue

Dec. 31/10
$ 151,493

Sept. 30/10
$ 141,590

June 30/10
$ 142,674

Mar. 31/10
$ 139,706

Dec. 31/09
$ 153,555+

Sept. 30/09
$ 131,627+

June 30/09
$ 138,132+

Mar. 31/09
$ 136,818+

Net Income/(loss)

49,057

50,798

47,598

49,082

(26,837)

41,749

46,871

42,918

Earnings per share:
Basic
Diluted

2010

0.66
0.66

0.68
0.68

0.64
0.64

0.66
0.66

(0.36)
(0.36)

0.56
0.56

0.63
0.63

0.58
0.58

• Revenue in Q1/10 decreased over revenue in Q4/09 primarily due to the higher technology services revenue in Q4/09 from the one-
time license fee of $13.5 million from the LSE, as well as lower revenue from cash markets equity trading and energy trading. This was
somewhat offset by increased revenue from issuer services, cash markets fixed income trading and information services. Net income for
Q1/10 increased over the net loss reported in Q4/09 largely as a result of the non-cash goodwill impairment charge of $77.3 million related
to BOX and the write-down in the value of future tax assets and liabilities of $10.4 million.

• Revenue in Q2/10 increased over revenue in Q1/10 due to higher revenue from information services, issuer services, energy trading and
Canadian derivatives trading, somewhat offset by lower revenue from cash equities trading and U.S. derivatives trading. Net income for
Q2/10 decreased over net income in Q1/10 largely due to higher expenses as we continue to invest in technology initiatives, corporate
development and marketing. The increased expenses were partially offset by the higher revenue.

• Revenue in Q3/10 decreased over revenue in Q2/10 primarily due to lower cash markets trading revenue and technology services revenue,
partially offset by higher energy trading revenue. Net income for Q3/10 increased over Q2/10 due to lower expenses related to our
technology initiatives and lower general and administration costs.

• Revenue in Q4/10 increased over revenue in Q3/10 primarily due to significantly higher cash markets trading revenue as well as higher
derivatives trading and clearing revenue, partially offset by lower technology services revenue. Net income was slightly lower in Q4/10
compared with Q3/10. The increase in revenue was largely offset by higher compensation and benefits costs, information and trading
systems costs and general and administration costs and lower investment income. In addition, there was a write-down to estimated fair
value of $1.7 million on our 19.9% interest in EDX in Q4/10.

2009

• Revenue in Q1/09 decreased over revenue in Q4/08 primarily due to lower cash equity trading and issuer services revenue. Net income for

Q1/09 decreased over Q4/08 primarily due to the reduced revenue and an increase in compensation and benefits expenses.

• Revenue in Q2/09 increased over revenue in Q1/09 largely due to higher revenue from TSX Venture Exchange cash equities trading and
energy trading, including revenue from NTP, effective May 1, 2009. Net income for Q2/09 increased over Q1/09 primarily due to the
increased revenue and a decrease in compensation and benefits expenses.

• Revenue in Q3/09 decreased over revenue from Q2/09 largely due to lower revenue from Toronto Stock Exchange cash equities trading and
information services. Net income for Q3/09 decreased over Q2/09 primarily due to the decreased revenue and an increase in compensation
and benefits costs, information and trading systems expenses as well as amortization.

• Revenue in Q4/09 increased over revenue from Q3/09 primarily due to increased technology services revenue, which included a one-time
license fee of $13.5 million from the LSE, as well as higher revenue from issuer services, cash markets trading and information services.
This was partially offset by lower revenue from derivatives and energy trading. There was a net loss in Q4/09 largely due to the non-cash
goodwill impairment charge of $77.3 million related to BOX and an increase in income taxes due to a write-down in the value of future tax
assets and liabilities of $10.4 million, partially offset by the increased revenue and lower overall expenses compared with Q3/09.

For 2010, provisions for doubtful accounts receivable are included in General and Administration expense whereas in 2009 and 2008, these provisions were reflected as a reduction in
various sources of revenue. The comparative figures for both revenue and expenses in 2009 and 2008 have been reclassified to conform with the financial presentation adopted in 2010.

Management’s Discussion and Analysis 49

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Review of Fourth Quarter Results

Compared with Q4/09

• Revenue in Q4/10 decreased over revenue from Q4/09 primarily due to reduced technology services revenue. In Q4/09, we recognized
a one-time license fee of $13.5 million from the LSE. In addition, revenue from cash markets equity trading was lower in Q4/10 when
compared with Q4/09. This decrease was partially offset by higher revenue from issuer services, information services, cash markets fixed
income trading, derivatives and energy markets trading and clearing. There was a net loss in Q4/09 largely due to the non-cash goodwill
impairment charge of $77.3 million related to BOX and an increase in income taxes due to a write-down in the value of future tax assets
and liabilities of $10.4 million.

•

Issuer services revenue was higher partially as a result of an increase in sustaining listing fees due to the overall higher market
capitalization of listed issuers at the end of 2009 compared with the end of 2008.

• The increase in energy trading revenue was due to increased volumes traded or cleared on NGX over Q4/08, pricing changes and the

inclusion of revenue from crude oil trading following the acquisition of NTP on May 1, 2009.

• There was a decrease in cash markets equities trading revenue due to the impact of changes to our equity trading fee schedule in 2010,

partially offset by an increase in the volume of securities traded on Toronto Stock Exchange and TSX Venture Exchange in Q4/09.

• There was an increase in Shorcan cash markets fixed income trading revenue primarily due to a more favourable product mix in Q4/10

compared with Q4/09.

• Derivatives markets revenue from MX increased primarily due to higher volumes of contracts traded.

• Derivatives markets revenue from BOX also increased primarily due to higher volumes of contracts traded in Q4/10 compared with Q4/09.

•

Information services revenue increased due to higher revenue from co-location services, fixed income indices and index data licensing and
an increase in subscriptions.

• Operating expenses increased in Q4/10 over Q4/09 primarily due to higher compensation and benefits and general and administration

costs, somewhat offset by lower amortization costs.

• Cash flows from operating activities in Q4/10 of $76.5 million increased by $20.0 million compared with $56.5 million in Q4/09 largely due
to an increase in deferred revenue. Cash flows used in financing activities in Q4/10 of $29.6 million decreased by $1.2 million compared
with $30.8 million in Q4/09. Cash flows used in investing activities in Q4/10 of $29.8 million increased by $5.0 million compared with
$24.8 million of cash flows from investing activities in Q4/09, primarily due to increased purchases of marketable securities.

Compared with Q3/10

• Revenue in Q4/10 increased over revenue in Q3/10 primarily due to significantly higher equities trading revenue as well as higher
derivatives and energy trading and clearing revenue, partially offset by lower technology services revenue. Net income was slightly lower
in Q4/10 compared with Q3/10. The increase in revenue was largely offset by higher operating expenses and lower investment income.
In addition, there was a write-down to estimated fair value of $1.7 million on our 19.9% interest in EDX in Q4/10.

• Cash flows from operating activities in Q4/10 of $76.5 million increased by $18.2 million compared with $58.3 million in Q3/10 largely due
to an increase in deferred revenue. Cash flows used in financing activities in Q4/10 of $29.6 million increased by $0.3 million compared
with $29.3 million in Q3/10 primarily due to increased dividends. Cash flows used in investing activities in Q4/10 of $29.8 million
decreased by $2.0 million compared with $31.8 million in Q3/10, primarily due to decreased purchases of marketable securities.

Accounting and Control Matters

Critical Accounting Estimates

Revenue from Initial and Additional listing fees

In the Cash Markets segment, we recognize revenue generated from initial and additional listing fees on a straight line basis over an estimated
service period of ten years. The estimated service period of ten years was determined by conducting an historical review of listing activity.
We determined that the average period of time that an issuer remained listed on Toronto Stock Exchange was approximately ten years. In addition,
turnover rates were calculated for a Toronto Stock Exchange listed issuer and for a TSX Venture Exchange listed issuer and were determined to be in
the range of ten to twelve years. Examining historical data allowed us to consider the impact of economic cycles and other trends in capital markets
over time which impact the life of an issuer. The service period selected affects the rate at which deferred revenue is recognized, as well as the value
of future tax assets related to these fees. With the adoption of IFRS effective January 1, 2011, we will recognize revenue from initial and additional
listing fees in the period when the listings occur. (See Future Changes in Accounting Policies – Transition to IFRS.)

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Long-term Incentive Plan

We have a long-term incentive plan under which we may grant RSUs. RSUs vest on December 31 of the second calendar year following the year
in which the RSUs were granted and the cash award payable is determined by the total shareholder return (appreciation in share price plus
dividends paid or TSR) at the end of that period. In each of our business segments, we accrue our obligations and include them in accounts
payable and accrued liabilities and other liabilities. The maximum amount to be paid is not known until the RSUs have vested and will be based
on TSR at the time of payout. The amount to be paid is uncertain because it is largely dependent on the future share price and dividend rate,
which can fluctuate over time. Our estimate of TSR affects the amount of compensation and benefits expense recognized during the period.
Our accrual is based on actual dividends paid, continuation of the most recent quarterly dividend and the closing share price of our common
shares for the period. Having monitored fluctuations in our share price, we concluded that accruing our obligations in this manner provided a
better estimate of the payout compared with an estimate based on a target. We have purchased derivative financial instruments that partially
hedge the impact of our share price appreciation.

Identifiable Intangible Assets and Goodwill21

We account for our business acquisitions using the purchase method of accounting. In each of our business segments, we allocate the total cost
of an acquisition to the underlying net assets based on their respective estimated fair values. As part of this allocation process, we must identify
and attribute values and estimated lives to the intangible assets acquired. These determinations involve significant estimates and assumptions,
including those with respect to future cash inflows and outflows, discount rates and asset lives, and therefore require considerable judgment. These
determinations, if any, will affect the amount of amortization and impairment charges recorded in future periods.

As the valuation of identifiable intangible assets and goodwill requires significant estimates and judgment about future performance and fair
values, our future results could be affected if our current estimates of future performance and fair values change. We review the carrying values
of identifiable intangible assets with indefinite lives and goodwill at least annually to assess impairment because these assets are not amortized.
Additionally, we review the carrying value of any intangible asset or goodwill whenever events or changes in circumstances indicate that its carrying
amount may not be recoverable. Examples of such events or changes in circumstances include significant negative exchange industry or economic
trends, a significant decrease in the market value of the asset, or a significant change in regulatory or competitive factors or in the business climate
that could affect the value of the asset.

We test for impairment as follows:

Goodwill

We test goodwill for impairment on a “reporting unit” level. A reporting unit is a business for which: (a) discrete financial information is available;
and (b) segment management regularly reviews the operating results of that business.

We test goodwill for impairment using the following two-step approach:

•

In the first step, we determine the fair value of each reporting unit. If the fair value of a reporting unit is less than its carrying value, this is
an indicator that the goodwill assigned to that reporting unit might be impaired, which requires performance of the second step.

In the second step, we allocate the fair value of the reporting unit to the assets and liabilities of the reporting unit as if it had just been
acquired in a business combination, and as if the purchase price was equivalent to the fair value of the reporting unit. The excess of the
fair value of the reporting unit over the amounts assigned to its assets and liabilities is referred to as the implied fair value of goodwill.
We then compare that implied fair value of the reporting unit’s goodwill to the carrying value of that goodwill. If the implied fair value is
less than the carrying value, we recognize an impairment loss for that excess on the income statement.

In the first step of the test, the fair values of our reporting units were determined using the income approach and confirmed by benchmarking
against market comparatives. Under the income approach, we estimated fair values for each reporting unit based on the present value of expected
future cash flows and a terminal value. Using a discounted cash flow (DCF) approach, we estimate the discounted future cash flows for five to eight
years, depending on the reporting unit, along with a terminal value. The expected cash flows are derived from our internal plans and adjusted for
the probability of various scenarios that considered the market environment in which the reporting unit operates and general economic conditions.
The terminal values incorporated a perpetual growth rate that varied by reporting unit based upon markets, trends and growth prospects.
The discount rates used for each reporting unit were based upon our weighted average cost of capital and certain risk premiums. We performed our
annual goodwill impairment analysis during the fourth quarter of 2010 and determined that the fair values of each of our reporting units exceeded
their carrying values. Therefore, the second step of the impairment test was not required. There was no write-down of goodwill for the year ended
December 31, 2010.

The “Identifiable Intangible Assets and Goodwill” section above contains certain forward looking statements. Please refer to “Caution Regarding Forward-Looking Information” for a
discussion of risks and uncertainties related to such statements.

Management’s Discussion and Analysis 51

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Identifiable Intangible Assets with Definite Life

We compare the expected undiscounted future operating cash flows associated with the asset to its carrying value to determine if the asset is
recoverable. If the expected future operating cash flows are not sufficient to recover the carrying value, we estimate the fair value of the asset.
Impairment is recognized when the carrying amount of the asset is not recoverable and when the carrying value exceeds fair value.

Identifiable Intangible Assets with Indefinite Life

Identifiable intangible assets with indefinite lives include those related to derivative products, trade names, regulatory designation, crude
oil products, electricity products and index licenses. We determine the fair values of our intangible assets with indefinite lives using an income
approach based on a DCF model. Impairment is recognized when the carrying amount exceeds fair value.

We assessed the possible impairment of our identifiable intangible assets by comparing their carrying values to fair values. The determination of
fair value involves significant management judgment. Our most significant acquisitions include MX and BOX, both of which operate derivatives
markets, and a derivatives clearing house in the case of MX, as well as NTP, which trades and clears crude oil using NGX’s trading system and
clearing facility.

BOX

In addition to the existing competition, there have been new entrants into the U.S. options market offering various incentives to attract liquidity
to their marketplaces. The various pricing, technology and ownership models have affected BOX’s ability to maintain market share and the growth
rates that it had previously been achieving. The effect of this increased competitive environment, as reflected in an increased discount rate, and
the reduction of the growth rates from historical levels, were the prime factors that resulted in an impairment of goodwill in 2009. The value of the
goodwill and intangibles prior to impairment was approximately $119.0 million. The estimate of the impairment ranged from $0 to approximately
$119.0 million and a goodwill write down of $77.3 million was recorded in 2009 based on the estimated fair value of BOX (see Impairment of
Goodwill). Management at BOX developed new services in 2009 and introduced new pricing to reverse the reduction in market share; however,
it is premature to conclude whether these or other initiatives to incent liquidity will be successful over time. Based on current assumptions, the fair
value of BOX intangible assets remains above carrying value.

MX activity and growth was affected by the credit crisis and the follow on economic conditions. Specifically, the deleveraging of balance sheets
and historically low and stable interest rates reduced fixed income and overall derivatives activity. However, the view of management is that
this reduction was temporary and that the fundamental growth opportunities that were included in the original valuation of MX are still valid.
As the economic recovery began, interest rate forecasts reflected a rising yield curve. The speculation and uncertainty with respect to future
growth rates should continue to lead to greater hedging and trading activity. In 2010, MX had a record year for contracts traded. In addition,
the size of the Canadian derivatives market relative to the size of the underlying cash market is still substantially below that of global peers,
thus leaving much room for growth if new technology, products and participants are added to the marketplace. Lastly, the global push from
regulators and market participants to move over the counter derivatives products to exchange traded and/or centrally cleared models suggests
further upside potential. It is the combination of the foregoing that resulted in management maintaining the growth projections and discount
rates at levels that were in line with the original assumptions, such that MX goodwill is not impaired. Changes in these assumptions, which
could occur if these growth opportunities are not achieved, could result in a material reduction in goodwill and intangible assets. This would
be a non-cash charge in the derivatives segment that would impact net income and shareholder equity. If a write-down was to occur and it was
greater than $412.0 million, it is possible that the financial covenants in our Term Loan would not be met and this debt would need to be repaid
prior to expiry on April 18, 2011. Based on current assumptions, the fair value of MX intangible assets remains above carrying value.

NTP Intangible Assets

The intangible assets related to the acquisition of NTP are largely related to the cash flows and customer base of NTP. As we have converted NTP to
NGX’s fully backstopped clearing model, a number of customers have not maintained their level of activity in these crude oil products. NGX has a
number of initiatives to encourage these customers to grow their level of activity, however if NGX is unsuccessful in these efforts, it is possible that
$47.0 million of intangible assets would need to be reduced. NTP was converted to the NGX clearing model in May 2009. In addition, in January 2011,
we announced an agreement to add Canadian and U.S. physical and Canadian financial crude oil products to NGX’s existing clearing and technology
alliance with ICE. Based on current assumptions, the fair value of NTP intangible assets remains above carrying value.

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Changes in Accounting Policies

Future Changes in Accounting Policies

Transition to International Financial Reporting Standards (IFRS)22

The Canadian Accounting Standards Board requires publicly accountable enterprises such as us to adopt IFRS for fiscal years beginning on or after January 1,
2011. Accordingly, the 2010 TMX Group audited annual financial statements will be the last prepared under pre-conversion Canadian GAAP, and the conversion
to IFRS will be applicable to our reporting for the quarter ending March 31, 2011, for which current and comparative information will be prepared under IFRS.

In 2011, we will also prepare comparative information for 2010, both for interim and annual financial statements, as applicable, on an IFRS basis.
Our consolidated financial statements for the year ending December 31, 2011, will be our first annual financial statements that comply with IFRS.
As this will be our first year of reporting under IFRS, IFRS 1, First-time Adoption of IFRS (“IFRS1”), will be applicable.

In accordance with IFRS1, we will apply IFRS retrospectively as of January 1, 2010, for comparative purposes as if IFRS had always been in effect,
subject to certain mandatory exceptions and optional exemptions applicable to us, discussed below.

Senior management and the Finance & Audit Committee have approved our IFRS accounting policies. The International Accounting Standards Board
(IASB) has several projects underway that could affect the differences currently identified between Canadian GAAP and IFRS including the Exposure
Draft on Revenue from Contracts from Customers, discussed below.

The expected impact from the transition on our financial position and financial performance is discussed below.

Initial Adoption – Impacts of the Conversion to IFRS

Based on our assessments to date and our interpretation of IFRS currently in effect, the areas expected to be affected by our conversion from current
Canadian GAAP to IFRS are set out below in order of significance. For each affected area identified, any applicable IFRS1 exemptions and accounting
policy differences between current Canadian GAAP and IFRS standards are discussed. The expected dollar impacts of adoption on TMX Group’s
financial position and financial performance outlined below are unaudited financial information. We believe revenue recognition of initial and
additional listing fees and the resulting tax effect will have the most significant impact on our financial statements upon transition to IFRS.

Revenue Recognition

The most significant area of impact will be in the recognition of Issuer Services Revenue related to initial and additional listing fees, along with the
associated impact on future income tax assets. Initial and additional listing fees for both Toronto Stock Exchange and TSX Venture Exchange will be
impacted. No other sources of revenue will be impacted by the conversion to IFRS.

• Accounting policy difference between Canadian GAAP and IFRS:

Canadian GAAP

IFRS

Initial and additional listing fees are recorded as deferred revenue – initial and
additional listing fees, and recognized on a straight-line basis over an estimated
service period of ten years in accordance with EIC 141, Revenue Recognition.

Initial and additional listing fees are recognized in full in the period when
the listings occur.

•

Impact of Adoption on TMX Group:

On the Transition Date, short-term deferred revenue – initial and additional listing fees and long-term deferred revenue – initial and additional
listing fees will be reduced by $78.0 million and $405.1 million respectively, with the offset to retained earnings. The tax effect on the above
transition adjustment will be a reduction of $128.4 million in future income tax assets with the offset to retained earnings.

The following is a six-year history of total issuer services revenue reported under Canadian GAAP and total issuer services revenue billed to Toronto
Stock Exchange and TSX Venture Exchange issuers, which shows the impact this accounting policy change would have had on historical issuer
services revenue, had IFRS been in effect during the periods identified.

(in millions of dollars)

Total issuer services revenue under IFRS+
Total issuer services revenue under current
Canadian GAAP+
Incremental revenue that would have been
reported under IFRS

2005
146.3

2006
175.9

2007
212.5

2008
181.2

2009
173.3

2010
213.1

87.7

108.5

133.9

153.0

143.0

163.0

58.6

67.4

78.6

28.2

30.3

50.1

The “Transition to International Financial Reporting Standards” section above contains certain forward looking statements. Please refer to “Caution Regarding Forward-Looking
Information” for a discussion of risks and uncertainties related to such statements.

For 2008, 2009 and 2010, provisions for doubtful accounts receivable are included in General and Administration expense whereas in previous years, these provisions were reflected as a
reduction in various sources of revenue. Unaudited.

Management’s Discussion and Analysis 53

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In June 2010, the IASB issued an Exposure Draft on Revenue from Contracts from Customers (“ED”) and requested comments by October 22, 2010.
The ED does not specify an effective date for the new standard; however, it proposes that the amendments be applied retrospectively. We are
currently considering the impact that this ED will have on Issuer Services Revenue. It is possible that it could result in a deferral of initial and
additional listing fees.

Business Combinations

•

IFRS 1 Exemption:

This exemption allows first-time adopters to elect to apply IFRS 3 (revised) – Business Combinations (“IFRS 3”), prospectively from the Transition
Date or retrospectively only to acquisitions after a chosen date that is prior to the Transition Date. Not taking this exemption would require
retrospective restatement of all business combinations occurring before the Transition Date.

Election – We have elected not to apply IFRS 3 retrospectively to business combinations that occurred before 2008, the year of our most significant
acquisition (MX). The acquisitions of MX, BOX and NTP will therefore be restated to reflect the requirements of IFRS 3 upon adoption of IFRS.

• Accounting policy differences between Canadian GAAP and IFRS:

• Measurement of purchase price:

Canadian GAAP

IFRS

Shares issued as consideration are measured at their estimated fair value
on the date the parties to the business combination reach an agreement
on the purchase price and the proposed transaction is announced.

Shares issued as consideration are measured at their fair value on the
acquisition date.

• Acquisition costs:

Canadian GAAP

IFRS

Direct and incremental costs of business combinations are recognized as
part of the purchase cost.

Acquisition related costs are accounted for separately from the business
combination and they are expensed as incurred.

• Restructuring provisions:

Canadian GAAP

If certain conditions are met, the costs of restructuring activities are
included as part of the purchase price even if a present obligation does not
exist as of the date of acquisition.

• Non-controlling interests:

IFRS
Restructuring provisions are included as part of the business combination
only if they represent a present obligation as of the date of acquisition.

Canadian GAAP

IFRS

Non-controlling interests are recorded at their share of the existing
carrying values of the net assets acquired.

Non-controlling interests are recorded at either their fair value or their
proportionate share of the fair value of the acquiree’s net assets. TMX
Group plans to adopt the latter method.

•

Increase in ownership of a subsidiary:

Canadian GAAP
Increase in ownership interests of a subsidiary are accounted for using the
purchase method.

IFRS

When an entity increases its ownership in an investment that results
in the acquisition of control, the previously held equity interests are re-
measured to fair value through net earnings. When an entity increases its
ownership in a previously controlled subsidiary, the carrying amounts of
the controlling and non-controlling interests are adjusted to reflect the
changes in their relative interests in the subsidiary.

• Contingent liabilities:

Canadian GAAP

Contingent liabilities assumed in a business combination are recognized
when it is probable that a liability has been incurred on the date of
acquisition and when the amount can be reasonably estimated.

IFRS
A contingent liability is recognized at fair value on the date of acquisition if
it is a present obligation that arises from past events and its fair value can
be measured reliably.

•

Impact of Adoption on TMX Group:

The acquisitions of MX, BOX and NTP will be restated under IFRS 3 on transition, and as a result of this, the acquisition accounting will be amended.
The goodwill associated with the MX acquisition will decrease by $155.5 million, share capital will decrease by $141.1 million, and retained
earnings will decrease by $14.4 million. Intangible assets related to the acquisition of BOX will increase by $14.3 million, non-controlling interests
will increase by $16.0 million, and will be reclassified to equity, and retained earnings will decrease by $1.7 million. The goodwill related to the
acquisition of NTP will decrease by $5.3 million, share capital will decrease by $3.6 million, and retained earnings will decrease by $1.7 million.
The tax effect on the above transition adjustments will be a reduction of $0.5 million in goodwill with the offset to retained earnings.

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Impairment of Assets:

• Accounting policy differences between Canadian GAAP and IFRS:

Canadian GAAP

IFRS

An impairment loss is recognized when a long lived asset’s carrying
amount exceeds its recoverable amount, which is estimated, by TMX
Group, as the sum of the undiscounted cash flows expected to result from
the use of the asset and its eventual disposition. An impairment loss is
measured as the excess of the asset’s carrying value over its fair value.

•

Impact of Adoption on TMX Group:

An impairment loss is recognized when the carrying amount of an asset
exceeds its recoverable amount, which is the higher of the fair value less
costs to sell and its value-in-use.

An impairment charge of $14.8 million will be recognized on the Transition Date in respect of the BOX trading participants intangible asset,
$6.8 million of which relates to the non-controlling interests share, with the remaining $8.0 million relating to our share and therefore will be
charged to retained earnings on transition.

Employee Benefits:

•

IFRS 1 Exemption:

This exemption allows first-time adopters to recognize all cumulative unamortized actuarial gains and losses directly to retained earnings on the
Transition Date, thus resetting unamortized actuarial gains and losses to zero. Not taking this exemption would require retrospective application of
IAS 19 – Employee Benefits (“IAS 19”), from the inception of all benefit plans.

Election – We have elected to apply this exemption, and recognize all unamortized actuarial gains and losses under previous Canadian GAAP to
retained earnings on the Transition Date. In taking this exemption, we will be applying IAS 19 retrospectively from the Transition Date.

• Accounting policy differences between Canadian GAAP and IFRS:

• Actuarial gains and losses:

Canadian GAAP

We amortize actuarial gains (losses) arising from employee benefit plans
over the expected average remaining service period of active employees
when the net accumulated actuarial gain (loss) is in excess of 10% of the
greater of the accrued benefit obligations and the fair value of plan assets
at the beginning of the fiscal year.

• Measurement date:

IFRS
As permitted under IAS 19, we will recognize all actuarial gains and losses
immediately in other comprehensive income without flowing through to
the income statement in subsequent periods.

Canadian GAAP

IFRS

We measure the defined benefit obligation and plan assets for certain
plans as of September 30.

We are required to determine the present value of the defined benefit
obligation and the fair value of plan assets at the date of the statement of
financial position. As a result, on the Transition Date, we will change the
measurement date of our plans to December 31.

• Recognition of past service costs:

Canadian GAAP

IFRS

Past service costs arising from plan amendments or initiation are
amortized on a straight-line basis over the expected average remaining
service period of employees active at the time of the amendment.

Past service costs arising from plan amendments or initiation are
amortized on a straight-line basis over the expected average period
remaining to vest. Any benefits already vested are recognized immediately
in earnings.

• Limit on accrued benefit asset:

Canadian GAAP

When a defined benefit plan gives rise to an accrued benefit asset, a
valuation allowance is recognized for any excess of the accrued benefit
asset over the expected future benefit, and the accrued benefit asset is
presented net of any valuation allowance in the balance sheet. Any change
in the valuation allowance is recognized in net earnings.

•

Impact of Adoption on TMX Group:

IFRS
IFRS also sets a limit on the accrued benefit asset that can be recognized in
the statement of financial position, although this is calculated differently
than under current Canadian GAAP. Any change in the recoverable amount
will be recognized immediately in other comprehensive income.

Pension benefit assets and accrued employee benefits payable will be reduced by $8.2 million and $0.1 million respectively, with the offset of
$8.1 million to retained earnings. The tax effect on the above transition adjustment will be a net decrease of $2.0 million in future income tax
liabilities, with the offset to retained earnings.

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Management’s Discussion and Analysis 55

Leases:

•

IFRS 1 Exemption:

This exemption allows first-time adopters to elect to apply IFRIC 4 – Determining whether an Arrangement contains a Lease (“IFRIC 4”), only to
arrangements existing at the Transition Date. An additional exemption also exists, allowing a first-time adopter to opt out of reassessing its
arrangements under IFRIC 4 if it has already assessed whether an arrangement contains a lease in accordance with current Canadian GAAP EIC-150 –
Determining Whether an Arrangement Contains a Lease (“EIC 150”).

Election – We have elected to apply both exemptions thus limiting our reassessment under IFRIC 4 to arrangements in place at the Transition Date
that were not subject to the scope of EIC 150 under previous Canadian GAAP.

• Accounting policy differences between Canadian GAAP and IFRS:

• Classification:

Canadian GAAP

IFRS

The criteria used to determine whether a lease is to be classified as an
operating or a capital lease includes “bright-line” thresholds such as
whether the lease term is greater than 75% of the economic life of the
leased asset, or the present value of the minimum lease payments is
above 90% of the fair value of the lease.

• Present value of minimum lease payments:

The criteria for lease classification rely heavily on the substance of the
agreement and do not include any “bright-line” thresholds.

Canadian GAAP

IFRS

The present value of minimum lease payments is calculated using the
lower of (i) the interest rate implicit in the lease; and (ii) the lessee’s
incremental borrowing rate.

The present value of minimum lease payments should be determined
using the interest rate implicit in the lease. The lessee’s incremental
borrowing rate should only be used when the interest rate implicit in the
lease cannot be determined.

•

Impact of Adoption on TMX Group:

A number of leases will be reclassified on the Transition Date from capital leases to operating leases. As a result, obligations under finance leases,
and the associated equipment assets, will decrease by $7.1 million on the statement of financial position.

Share Based Payments:

•

IFRS 1 Exemption:

IFRS 1 encourages, but does not require, first-time adopters to apply IFRS 2 – Share-based Payments (“IFRS 2”), to equity instruments granted on or
before November 7, 2002, or to equity instruments granted after that date but which have vested by the Transition Date. In addition, it encourages,
but again does not require, first-time adopters to apply IFRS 2 to liabilities arising from share-based payment transactions that were settled before
the Transition Date.

Election – We have elected to only apply IFRS 2 to equity instruments granted after November 7, 2002, and remaining unvested at the Transition
Date as well as to liabilities remaining unsettled as at the Transition Date.

• Accounting policy differences between Canadian GAAP and IFRS:

• Recognition of expense:

Canadian GAAP

IFRS

For share-based awards with graded vesting we recognize the total fair
value of the award on a straight-line basis over the vesting period.

Each tranche of an award with graded vesting is considered a separate
grant with a different vesting date and fair value. Each tranche is
accounted for on that basis.

•

Forfeitures:

Forfeitures of awards are recognized as they occur.

Canadian GAAP

• Cash-settled share based payments:

IFRS

Compensation cost is recognized based on an estimate of the number of
awards expected to vest and is revised if subsequent information indicates
that actual forfeitures differ from the estimate.

Canadian GAAP

IFRS

A liability for Restricted Share Units and Deferred Share Units is accrued
based on the intrinsic value of the award with changes in the intrinsic
values at each reporting period recognized in the income statement.

We are required to measure the liability at fair value on the date of grant
and at each subsequent reporting date by applying an option pricing
model. Changes in fair value are recognized in the income statement.

56 TMX Group Annual Report | 2010

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•

Impact of Adoption on TMX Group:

The share option plan component of equity will increase by $0.9 million as a result of the changes in the accounting treatment of share options,
and accounts payable and other liabilities will decrease by $0.6 million in respect of the cash-settled share based payments, the offset to which will
decrease retained earnings by $0.3 million. The tax effect on the above transition adjustment will be a decrease of $0.1 million in future income tax
assets with the offset to retained earnings.

Cumulative translation differences:

•

IFRS 1 Exemption:

This exemption allows first-time adopters to recognize all cumulative translation differences relating to foreign operations directly to retained
earnings on the Transition Date, thus resetting the cumulative translation adjustment account to zero. Not taking this election would require
retrospective application of IAS 21 – The Effect of Changes in Foreign Exchange Rates (“IAS 21”), from the date the foreign operations were formed
or acquired.

Election – We have elected to apply this exemption, and reset all of our cumulative translation differences to zero through retained earnings on the
Transition Date.

•

Impact of Adoption on TMX Group:

The Cumulative Translation Adjustment (CTA) balance of $3.2 million as at the Transition Date will be recognized as an adjustment to retained
earnings on transition to IFRS. The application of the exemption will have no impact on net equity.

Decommissioning liabilities included in the cost of property, plant & equipment:

•

IFRS 1 Exemption:

This exemption allows first-time adopters to elect to apply the guidance in IFRIC 1 – Changes in Existing Decommissioning, Restoration and Similar
Liabilities (“IFRIC 1”), prospectively from the Transition Date, as opposed to retrospectively. IFRIC 1 requires that changes in these liability estimates
be added to, or deducted from, the cost of the asset to which it relates, and the adjusted depreciable amount of the asset is then depreciated
prospectively over its remaining useful life.

Election – We have elected to apply this exemption, therefore applying the requirements of IFRIC 1 prospectively to decommissioning liabilities that
existed as at the Transition Date.

Income Taxes:

• Accounting policy differences between Canadian GAAP and IFRS:

Canadian GAAP

The recognition of future income taxes relating to temporary differences
arising from intercompany transactions is prohibited.

IFRS
There is no such prohibition under IFRS.

•

Impact of Adoption on TMX Group:

Future income tax assets will be reduced by $0.2 million on transition, with the offset to retained earnings.

Reconciliation of Shareholders’ Equity on transition

The following summarizes the impact (net of tax) of the above mentioned changes on shareholders’ equity as of January 1, 2010 on transition to IFRS.

(in millions of dollars) (Unaudited)

Shareholders’ Equity under Canadian GAAP
IFRS adjustments increasing (decreasing) reported equity:
Revenue recognition
Business combinations
Other items
Total Shareholders’ Equity under IFRS

January 1, 2010
770.6

354.7
(163.0)
(13.8)
948.5

Management’s Discussion and Analysis 57

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Reconciliation of net income for Q1/10

The following is a reconciliation of the impact of the differences discussed above on our net income for Q1/10.

(Unaudited and preliminary estimates, in millions of dollars)

Canadian GAAP
Three Months Ended
March 31, 2010

Revenue Recognition
(initial & additional
listing fees)

Other impacts°

IFRS
Three Months Ended
March 31, 2010

Revenue:
Issuer services
Trading, clearing and related
Information services
Technology services and other

Expenses:
Compensation and benefits
Information and trading systems
General and administration
Amortization

Income from operations
Income from investment in affiliates
Investment income
Interest expense
Mark to market on interest rate swaps
Income before income taxes
Income taxes
Net income before non-controlling interests
Non-controlling interests
Net income

Transition plan update

39.7
59.0
37.4
3.6
139.7

32.2
12.1
16.9
8.4
69.6
70.1
0.2
0.8
(1.2)
(0.1)

69.8
21.1
48.7
(0.4)
49.1

9.7

–

9.7

9.7
1.6
8.1

8.1

0.1
0.8

(0.8)
0.1
(0.1)

(0.1)
0.1
(0.2)
(0.1)
(0.1)

49.4
59.0
37.4
3.6
149.4

32.3
12.9
16.9
7.6
69.7
79.7
0.2
0.8
(1.2)
(0.1)

79.4
22.8
56.6
(0.5)
57.1

TMX Group commenced its IFRS conversion project in 2008. The IFRS project consists of three phases – (i) scoping, (ii) evaluation and design, and
(iii) implementation and review. We have completed the first two phases of the project and are in the final stages of the implementation and review
phase of the conversion plan.

The following outlines the key activities in our IFRS conversion plan and provides an update on the status of the various milestones achieved as part
of our transition to IFRS.

Includes IFRS impacts on Pension and Other Post Employment Benefits, Impairment of Intangible Assets, Reclassification of Leases (from Capital to Operating), Share Based Payments and
Income Taxes.

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Key Activity
Financial statement preparation:
• Identify accounting differences between

Canadian GAAP and IFRS accounting policies,
and any associated accounting policy
choices available

• Select TMX Group’s ongoing IFRS policies

• Select TMX Group’s IFRS 1 policy choices

• Develop IFRS-compliant financial statement

format

• Quantify the effects of these changes on the

financial statements

Training:
Define and introduce the appropriate level of
IFRS expertise for the following:

• Core IFRS team

• Other affected finance staff

• Senior executives and the Board of Directors,
including Finance & Audit Committee and
Disclosure Committee members

Milestones

Status

Key differences identified and tentative
accounting policy decisions made and presented
to the Finance & Audit Committee by the end
of 2009.

Final senior management sign-off and Finance &
Audit Committee review of all items in advance
of transition (by Q3/10)

Appropriate level of expertise in place
throughout TMX Group by mid 2010.

Completed analysis and quantification of the
differences identified and an assessment of the
accounting policy choices available during 2010.

Accounting policy choices, including IFRS 1
elections, were approved by the Finance & Audit
Committee in October 2010.

Opening statement of financial position
reconciliation is complete. Development of
financial statement format and the initial IFRS 1
disclosure is substantially complete.

Training plan completed.

Finance & Audit Committee receives quarterly
IFRS updates.

A detailed training session for members of the
Board of Directors and senior executives took
place in Q3/10.

Detailed training underway for core team since
2008, and ongoing throughout conversion.

Training of other affected finance staff has
taken place. Refresher took place in Q4/10
for both finance staff and other TMX Group
management.

IT infrastructure:
Confirm that business processes and systems
are IFRS compliant, including:

• IT system upgrades and changes

• Gathering data for additional disclosure

purposes

• Budget and forecasting under IFRS

Control environment:
• For all accounting policy changes identified,
assess the control design and effectiveness
implications (both ICFR and DC&P)

• Implement changes to ICFR and DC&P

as required

Confirm that systems can support dual
reporting requirements by Q4/09.

Business processes and systems required for
additional disclosure and for budgeting to be
in place by transition.

Review of dual reporting options is complete
and relevant changes to the accounting and
reporting systems completed in Q1/10 to enable
dual reporting, which is largely complete.

IT and business processes impact analysis
included as part of the evaluation and design
work. No major IT issues identified to date.

Key controls and design effectiveness
implications to be assessed as part of the
evaluation and design phase.

Internal Audit has assessed the key control
design and effectiveness implications for ICFR
and DC&P relating to the transition to IFRS
and reviewed the adequacy of ICFR and DC&P
changes proposed to date.

External reporting:
Assess the effects of key IFRS-related accounting
policy and financial statement changes on
external reporting, including:

Publish regular updates on the status of the
IFRS transition in the 2009 and 2010 annual and
quarterly MD&A.

• Identify the impact on financial covenants

and regulatory capital adequacy requirements,
and complete any required renegotiations/
discussions

Publish 2011 quarterly and annual financial
statements and MD&A in accordance with IFRS,
including 2010 comparatives and IFRS 1 required
disclosures.

• Consider expected MD&A communications up

to and following transition

• Consider the investor relations process
for responding to IFRS-related queries,
and confirm that 2011 investor relations
communications are IFRS compliant

Complete review, and address covenants and
regulatory requirements as necessary by the end
of Q3/10.

IFRS disclosure in the MD&A has been updated
throughout the project.

Identification of covenants and regulatory
ratios that may be affected by the transition
is complete. We have analyzed the impact
on the various covenants under agreements
as well as on ratios for regulatory purposes
and have determined that the conversion to
IFRS will not have a material impact on our
recognition orders, financial viability ratios,
or debt covenants.

Investor communication plan prepared during
Q4/09 and has been implemented.

We have addressed the impact of transferring to
IFRS in our communications with shareholders
and potential investors.

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Management’s Discussion and Analysis 59

Disclosure Controls and Procedures and Internal Control over Financial Reporting

Disclosure Controls and Procedures

The Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are responsible for establishing and maintaining adequate disclosure controls
and procedures, as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109). Disclosure
controls and procedures are designed to provide reasonable assurance that information required to be disclosed in our filings under securities
legislation is filings is recorded, processed, summarized and reported within the time periods specified in securities legislation. They are also
designed to provide reasonable assurance that all information required to be disclosed in these filings is accumulated and communicated to
management, including the CEO and CFO as appropriate, to allow timely decisions regarding public disclosure. We regularly review our disclosure
controls and procedures; however, they cannot provide an absolute level of assurance because of the inherent limitations in control systems to
prevent or detect all misstatements due to error or fraud.

Our management, including the CEO and CFO, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of
December 31, 2010. Based on this evaluation, the CEO and CFO have concluded that our disclosure controls and procedures were effective as
of December 31, 2010.

Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in NI 52-109. Internal
control over financial reporting means a process designed by or under the supervision of the CEO and CFO, and effected by our board of directors,
management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP, and includes those policies and procedures that: (1) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of TMX Group; (2) are designed to
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
GAAP, and that receipts and expenditures of TMX Group are being made only in accordance with authorizations of management and directors of
TMX Group; and (3) are designed to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of TMX Group’s assets that could have a material effect on the financial statements.

All internal control systems have inherent limitations and therefore our internal control over financial reporting can only provide reasonable
assurance and may not prevent or detect misstatements due to error or fraud.

Our management, including the CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting as of
December 31, 2010 using the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework. Based on this evaluation,
the CEO and CFO have concluded that our internal control over financial reporting was effective as of December 31, 2010.

Changes in Internal Control over Financial Reporting

There were no changes to internal control over financial reporting during the quarter beginning October 1, 2010 and ended December 31, 2010 that
materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Risks and Uncertainties

We have in place an integrated risk management process in which the Board assumes overall stewardship responsibility for risk; the Finance & Audit
Committee of the Board assesses the adequacy of risk management policies and procedures; and the Risk Management Committee (comprised of
senior management) oversees the implementation of risk management policies and processes. The management framework supporting the risk
management objectives includes regular assessments of principal risks, and implementation of risk management tactics, which are monitored and
adjusted as required.

We have identified the most significant risks to which we are exposed to be the following:

• Competition
• Economic
• Regulatory
• Product/Service Relevance
• Human Resources
• Execution/Strategic
• Technology
•

Interface/Dependency

60 TMX Group Annual Report | 2010

• Currency
• Credit
• Litigation
•
Integration
• Business Continuity/Geopolitical
•
Intellectual Property
• Corporate Structure

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These risks are taken into account when developing and implementing TMX Group strategies, tactics, policies, operating procedures and
governance processes.

The risks and uncertainties described below are not the only ones facing TMX Group. Additional risks and uncertainties not presently known to us or
that we currently believe are immaterial may also adversely affect our business. If any of the following risks actually occur, our reputation, business,
financial condition, or operating results could be materially adversely affected.

Competition Risk

We Face Competition from Other Exchanges, ATSs, OTC Markets and Other Sources

Our listing and trading cash equities, derivatives, energy and fixed income markets face competition from other exchanges as well as from other
marketplaces, the OTC markets and other sources. Technological advances have lowered barriers to entry and have facilitated the establishment of
new marketplaces and trading mechanisms, such as ATSs and electronic communication networks (ECNs as they are known in the United States),
to electronically trade cash equities, derivatives and other financial instruments outside traditional exchanges. This competition has intensified
domestically in our cash equities markets and may continue to intensify in the future, especially as these technological advances create pressure
to develop more efficient and less costly trading in both global and regional domestic markets. If we cannot maintain and enhance our ability to
compete or respond to competitive threats, this will have an adverse impact on our business, financial condition and operating results.

Our Equity Exchanges Face Increased Competition from Other Exchanges, New Marketplaces and Trading Mechanisms

We face increased competition for business from other exchanges, especially those in the United States as they consolidate and investing becomes
more global. We face competition from foreign exchanges for listings of Canadian-based issuers and trading in their securities. If we are unable to
continue to provide competitive trade execution, the volume traded in Canadian-based interlisted issuers on our equity exchanges could decrease in
the future and adversely affect our operating results.

ATSs have a framework to operate in Canada under the ATS Rules. The ATS formed by a group of Canada’s banks and investment dealers to trade
Toronto Stock Exchange and TSX Venture Exchange listed securities has become a significant competitor in our cash equities markets and could,
in the future, become a competitor for our listing business. In April 2010, this ATS submitted an application with the OSC for recognition as an
exchange, which if granted, would give them the ability to list securities. There are also a number of other ATSs, both dark and visible trading
venues, including mechanisms to internalize order flow within a PO, which trade or intend to trade Toronto Stock Exchange and TSX Venture
Exchange listed securities. Some ATSs appear to operate without apparent profit motives.

These ATSs may, among other things, respond more quickly to competitive pressures, especially if they are not subject to the same degree of regulatory
oversight as we are, develop similar products to those Toronto Stock Exchange and TSX Venture Exchange offer that are preferred by customers, or
they may develop alternative competitive products, or they may price their trading and data products more competitively in order to gain market
share, develop and expand their network infrastructures and offerings more efficiently, adapt more swiftly to new or emerging technologies and
changes in customer requirements and use better, more user friendly and reliable technology. If these ATSs attract significant order flow, or other
structural changes occur in the marketplace, our trading and information services revenue could be materially adversely affected.

There is intense price competition in the cash equities markets. While we have developed a pricing mix to attract greater liquidity to our markets,
the competitive environment in which we operate places significant pricing pressures on our trading and market data offerings. Some competitors
may seek to increase their share of trading by reducing their transaction fees, by offering larger liquidity payments, by offering inverted pricing or
by offering other forms of financial or other incentives. We have in the past lowered our equity trading fees and we may, in the future, be required to
adjust our pricing to respond to competitive pricing pressure. If we are unable to compete successfully with respect to the pricing of our offerings,
our business, financial condition and results of operations could be materially adversely affected.

Our Derivatives Markets Face Competition from Other Marketplaces

MX and BOX are in direct competition with, among others, securities, options and other derivatives exchanges as well as ATSs or ECNs and other
trading and crossing venues, some of our clearing member firms and interdealer brokerage firms. This competition exists particularly in the
United States, but also in Europe and Asia. In Canada, MX’s competition in derivatives trading is the OTC market. In the United States, BOX will
continue to face increased competition in the U.S. equity options market. These competitors may, among other things, respond more quickly
to competitive pressures, develop similar products to those MX and BOX offer that are preferred by customers or they may develop alternative
competitive products, they may price their products more competitively, develop and expand their network infrastructures and offerings more
efficiently, adapt more swiftly to new or emerging technologies and changes in customer requirements and use better, more user friendly and
reliable technology. Increased competition could lead to reduced interest in MX’s and BOX’s products which could materially adversely affect
our business and operating results.

The derivatives trading industry is characterized by intense price competition. While our derivatives markets have developed a pricing mix to
attract greater liquidity to these markets while maintaining our average price per contract, market conditions may result in increased competition
which, in turn, may place significant pricing pressures in the future. Some competitors may seek to increase their share of trading by reducing their

Management’s Discussion and Analysis 61

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transaction fees, by offering larger liquidity payments or by offering other forms of financial or other incentives. Our business, financial condition
and results of operations could be materially adversely affected as a result of these developments.

Our Energy Markets Face Competition from OTC Markets and Other Sources

NGX’s business of trading and clearing natural gas, electricity and crude oil contracts faces primary competition in Canada and the United States
from other exchanges, electronic trading and clearing platforms and from the OTC or bilateral markets (with support from voice brokers). Voice
brokers continue to provide efficient contract matching services for both standardized and structured products and are expanding their service
offerings to include access to clearing facilities for trading parties who may have credit constraints. If NGX is unable to compete with these
platforms and markets including voice brokers, NGX may not be able to maintain or expand its business, which could materially affect its business
and operating results.

Shorcan Energy faces competition primarily from other brokerage firms, including Net Energy Inc.

Our Fixed Income Markets Face Competition from OTC Markets and Other Sources

Shorcan has several competitors in the fixed income IDB market. If Shorcan fails to attract institutional dealer order flow from this market, it would
adversely affect its operating results.

CanDeal faces competition primarily from the telephonic OTC market. If CanDeal fails to attract institutional order flow from this market, it would
adversely affect its operating results.

New Technologies Make It Easier to Disseminate Our Information

Technological advances, and in particular the Internet, have made it easier to download and disseminate electronic information. As a result,
third parties may be able to copy, infringe or otherwise profit from our proprietary rights without authorization. This may cause the value of our
information to deteriorate since it is difficult to enforce restrictions on the use of information that is transmitted electronically. We may not be able
to maintain or increase information services revenue if we cannot enforce our proprietary rights in the future.

Economic Risk

We Depend on the Economy of Canada

Our financial results are affected by the Canadian economy. If the profit growth of Canadian-based companies is generally lower than the profit
growth of companies based in other countries, the markets on which those other issuers are listed may be more attractive to investors than
our equity exchanges. The threat of a prolonged economic downturn may also have a negative impact on investment performance, which could
materially adversely affect the number of new listed issuers, the market capitalization of our listed issuers, additional securities being listed or
reserved, trading volumes across our markets and market data sales.

Our Operating Results May be Adversely Impacted by Global Economic Uncertainties

The economic and market conditions in Canada and the rest of the world impact the different aspects of our business and our revenue drivers.
Because listing, financing and trading activities are significantly affected by economic, political and market conditions and the overall level of
investor confidence, the extent of economic and market recovery will impact the level of listing activity (including IPOs), the market capitalization
of our issuers, trading volumes and sales of data across our markets. In addition, customers on our energy markets that rely on the banks for credit
facilities are now facing higher credit costs associated with complying with NGX’s margining regime which could result in lower volumes on NGX.

We Depend on Market Activity that is Outside of Our Control

Our revenue is highly dependent upon the level of activity on our exchanges, including: the volume of securities traded on our cash markets;
the number of transactions, volume of contracts or products traded and cleared on our derivatives and energy markets; the number and market
capitalization of listed issuers; the number of new listings; the number of active traders and brokerage firms; and the number of subscribers to
market data.

We do not have direct control over these variables. Among other things, these variables depend upon the relative attractiveness of securities traded
on our exchanges and the relative attractiveness of our exchanges as a place to trade those securities as compared to other exchanges and other
trading mechanisms. Those variables are in turn influenced by:

• the overall economic conditions in Canada and the United States in particular, and in the world in general (especially growth levels and

political stability);

• broad trends in business and corporate finance, including capital market trends and the mergers and acquisitions environment;

• the condition of the resource sector;

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• the interest rate environment and resulting attractiveness of alternative asset classes;

• the regulatory environment for investment in securities, including the regulation of marketplaces and other market participants;

• the relative activity and performance of global capital markets;

•

investor confidence in the prospects and integrity of our listed issuers, and the prospects of Canadian-based listed issuers in general;

• pricing volatility of global commodities and energy markets; and

• changes in tax legislation that would impact the relative attractiveness of certain types of securities.

We may be able to indirectly influence the volume and value of trading by providing efficient, reliable and low-cost trading; maximizing the
availability of timely, reliable information upon which research, advice and investment decisions can be based; and maximizing the ease of access
to trading facilities. However, those activities may not have a positive effect on or effectively counteract the factors that are outside of our control.

Our Cost Structure is Largely Fixed

Most of our expenses are fixed and cannot be easily lowered in the short-term if our revenue decreases, which could have an adverse effect on our
operating results and financial condition.

Regulatory Risk

We Are Subject to Significant Regulatory Constraints

We operate in a highly regulated industry and are subject to extensive government regulation and we could be subject to increased regulatory
scrutiny in the future. The provincial securities regulators regulate us and our exchanges and in the case of CDCC and NGX, our clearing operations,
and regulators in other jurisdictions may regulate our future operations. MX and CDCC are regulated as SROs in Québec. In addition, MX carries
on activities in accordance with the regulations of securities regulators in the United States as a foreign board of trade (FBOT) and in France and
the U.K. CDCC is also subject to regulatory requirements of the SEC and various U.S. state securities regulators. NGX also operates as an exempt
commercial market (ECM) under the jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC) and is registered as a derivative clearing
organization (DCO) by the CFTC. BOX is an electronic equity options market and is regulated by the SEC.

BOX is also a party to a regulatory services agreement with NASDAQ OMX Group, Inc., NASDAQ OMX BX, Inc. (“BX”), formerly BSE, and Boston
Options Exchange Regulation LLC (“BOXR”), a wholly-owned subsidiary of BX. The initial term of the agreement expires August 29, 2011 with
automatic renewal terms thereafter. There are no rights to terminate the agreement during the initial term, except for breach. In the renewal term,
either party can terminate the agreement with six months notice. BX has informed BOX it intends to terminate the regulatory services agreement.
If BOX is required to seek another regulatory services provider, this could have an adverse effect on BOX’s operations.

The Canadian securities regulators, regulating our cash equities, derivatives and energy exchanges and clearing operations, the SEC which regulates
BOX and the CFTC which regulates NGX’s clearing have broad powers to audit, investigate and enforce compliance with their regulations and impose
sanctions for non-compliance.

Those Canadian and United States regulators are vested with broad enforcement powers to prohibit us from engaging in some of our business
activities or suspend or revoke approval as a recognized exchange or clearing agency, as the case may be, and, in the case of MX, as an SRO. In the
case of actual or alleged non-compliance with legal or regulatory requirements, our exchanges or clearing agencies could be subject to investigations
and administrative or judicial proceedings that may result in substantial penalties, including revocation of our approval as a recognized exchange,
clearing agency and SRO, as applicable. Any such investigation or proceeding, whether successful or not, would result in substantial costs and
diversions of resources and might also harm our reputation, any of which may have a material adverse effect on our business, financial condition
and results of operations.

In addition, there may be a conflict between our self-regulatory responsibilities and some of our market participants. Although we have
implemented stringent governance measures to avoid such conflicts, any failure to diligently and fairly regulate approved participants or to
otherwise fulfill these regulatory obligations could significantly harm our reputation, prompt regulatory scrutiny and materially adversely affect
our business, financial condition and results of operations.

This regulation may impose barriers or constraints which limit our ability to build an efficient, competitive organization and may also limit our
ability to expand foreign and global access. Securities regulators also impose financial and corporate governance restrictions on us and our equity,
derivatives and energy exchanges and clearing operations. Some of the securities regulators must approve or review our exchanges’ listing rules,
trading rules, fee structures and features and operations of, or changes to, our systems. These approvals or reviews may increase our costs and
delay our plans for implementation. In Canada, ATSs operate under different rules than exchanges and we are subject to regulatory constraints or
obligations that do not apply to all of our competitors. There could also be regulatory changes that impact our customers and that could materially
adversely affect our business and results of operations.

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Management’s Discussion and Analysis 63

Regulatory trends are not always predictable. The multi-market environment in Canada and the global economic crisis could lead to more aggressive
regulation of our businesses by securities and other regulatory agencies both in Canada and the U.S. and could extend to areas of our businesses
that to date have not been regulated. Expanding U.S. regulation and proposed initiatives, in particular, the Dodd-Frank Consumer Protection
Act impacting OTC derivatives markets, ECMs, DCOs and FBOTs, among others, could increase the regulation of and cost of compliance for our
markets whose business is impacted by U.S. regulatory developments. In Canada, the provincial securities regulators have released a proposal paper
regarding the regulation of the Canadian OTC derivatives markets which could lead to expanded regulation and increase the cost of compliance for
our markets whose business is impacted by these developments. Unexpected and new regulatory requirements could materially adversely affect
our organization, customers, market position and results of operations.

Product/Service Relevance Risk

Our Exchanges Depend on the Development and Acceptance of New Products and Services

We are dependent to a great extent on developing and introducing new investment trading and clearing products and services and their acceptance
by the investment community. While we continue to review and develop new products and services that respond to the needs of the marketplace,
we may not continue to develop successful new products and services. Our current offerings may become outdated or lose market favour before
we can develop adequate enhancements or replacements. Other exchanges, ATSs or ECNs may introduce new products or services or enhancements
that make our offerings less attractive. Even if we develop an attractive new product, we could lose trading activity to another marketplace that
introduces a similar or identical offering which offers greater liquidity or lower cost. We also may not receive regulatory approval (in a timely manner
or at all) for our new offerings. Any of these events could materially adversely affect our business, financial condition and operating results.

Human Resources Risk

We Need to Retain and Attract Qualified Personnel

Our success depends to a significant extent upon the continued employment and performance of a number of key management personnel whose
compensation is partially tied to vested share options and long-term incentive plans that mature over time. The value of this compensation is
dependent upon total shareholder return performance factors, which includes appreciation in our share price. The loss of the services of key
personnel could materially adversely affect our business and operating results. We also believe that our future success will depend in large part on
our ability to attract and retain highly skilled technical, managerial and marketing personnel. There can be no assurance that we will be successful
in retaining and attracting the personnel we require.

Execution/Strategic Risk

We May Not Be Successful in Implementing Our Strategy

We invest significant resources in the development and execution of our corporate strategy to grow profitability and maximize shareholder returns.
We may not succeed in implementing our strategies. We have limited experience pursuing new business opportunities or growth opportunities in
new geographic markets. We may have difficulty executing our strategies because of, among other things, increased global competition, difficulty
developing and introducing products, or introducing new products on a timely basis, barriers to entry in other geographic markets, and changes in
regulatory requirements. Any of these factors could materially adversely affect the success of our strategies.

New Business Activities May Adversely Affect Income

We may enter new business activities that could have an adverse effect on our existing profitability. While we would expect to realize new revenue
from these new activities, there is a risk that this new revenue would not be greater than the associated costs or any related decline in existing
revenue sources.

Expansion of Our Operations Internationally Involves Special Challenges that We May Not Be Able to Meet

We plan to continue our efforts to expand our operations internationally, including by opening offices in foreign jurisdictions, obtaining regulatory
authorizations or exemptions to allow remote access to our markets by approved participants outside Canada and by relying on distribution systems
established by strategic alliance partners. We expect that the expansion of access to our electronic markets will continue to increase the portion of
our business that is generated from outside Canada. We face certain risks inherent in doing business in international markets, particularly in the
regulated exchange and clearing business. These risks include:

•

restrictions on the use of trading terminals or the contracts that may be traded;

reduced protection for intellectual property rights;

• difficulties in staffing and managing foreign operations;

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• potentially adverse tax consequences;

• enforcing agreements and collecting receivables through certain foreign legal systems; and

•

foreign currency fluctuations for international business.

We would be required to comply with the laws and regulations of foreign governmental and regulatory authorities of each country in which
we obtain authorizations or exemptions for remote access to our markets. These may include laws, rules and regulations relating to any aspect
of the business.

Any of these factors could have a material adverse effect on the success of our plans to grow our international presence and market products and
services and consequently on our business, financial condition and results of operations.

Technology Risk

We Depend Heavily on Information Technology, Which Could Fail or Malfunction

We are extremely dependent on our information technology systems. Trading and data on our cash equities markets and trading and clearing on
our derivatives and energy markets are conducted exclusively on an electronic basis. SOLA, the MX proprietary trading system, is currently in use at
BOX and other venues. In addition, MX provides the technical operations services related to BOX’s trading and surveillance platform.

We have incident and disaster recovery and contingency plans as well as back-up procedures to manage, mitigate and minimize the risk of an
interruption or failure of the critical information technology of Toronto Stock Exchange, TSX Venture Exchange, TMX Datalinx, NGX, MX, CDCC
and BOX. We also test and exercise our disaster recovery plans for trading on Toronto Stock Exchange, TSX Venture Exchange, MX and CDCC, and,
in the case of our cash equities markets, include customers in that process. However, depending on an actual failure, those plans may not be
adequate as it is difficult to foresee every possible scenario and therefore we cannot entirely eliminate the risk of a system failure or interruption.
We have experienced occasional information technology failures and delays in the past, and we could experience future information technology
failures and delays.

The current technological architecture for our cash equities, energy, derivatives trading and clearing and market data information technology
systems may not effectively or efficiently support our changing business requirements. Over the past several years, we have made hardware and
software upgrades in response to increases in order message and quote message volumes and transactions and to reduce overall average response
time and optimize execution speeds to our cash equities, derivatives, energy and market data platforms.

We are continually improving our information technology systems so that we can handle increases and changes in our trading and clearing
activities and market data volumes to respond to customer demand for improved performance. This requires ongoing expenditures which may
require us to expend significant amounts in the future.

If the TSX Quantum trading enterprise, the SOLA derivatives trading enterprise or the SOLA Clearing platform fails to perform in accordance with
expectations, our business, financial condition and operating results may be materially adversely affected.

If our systems are significantly compromised or disrupted or if we suffer repeated failures, this could interrupt our cash equities trading services,
MX’s trading and CDCC’s and NGX’s clearing services, as well as the services MX provides to BOX; cause delays in settlement; cause us to lose data;
corrupt our trading and clearing operations, data and records; or disrupt our business operations, including BOX’s operations. This could undermine
confidence in our exchanges and materially adversely affect our reputation or operating results, and may lead to customer claims, litigation and
regulatory sanctions.

Our Networks and Those of Our Third Party Service Providers May be Vulnerable to Security Risks

We expect the secure transmission of confidential information over public networks to continue to be a critical element of our operations. Our
networks and those of our third party service providers, our POs and approved participants and our customers may be vulnerable to unauthorized
access, computer viruses and other security problems. Persons who circumvent security measures could wrongfully use our information or cause
interruptions or malfunctions in our operations, any of which could have a material adverse effect on our business, financial condition and results of
operations. We may be required to expend significant resources to protect against the threat of security breaches or to alleviate problems, including
reputational harm and litigation, caused by any breaches. Although we intend to continue to implement industry-standard security measures,
these measures may prove to be inadequate and result in system failures and delays that could lower trading volume and have a material adverse
effect on our business, financial condition and results of operations.

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Management’s Discussion and Analysis 65

Interface/Dependency Risk

We Depend on Adequate Numbers of Customers

If we determine that there is not a fair market, the markets will be shut down. There will not be a fair market if too few POs, or approved participants
are able to access our cash equity or derivatives exchanges, including market data information generated from these exchanges, or if too few
contracting parties are able to access NGX’s market. If trading on our exchanges is interrupted or ceases, it could materially adversely affect our
equity, derivatives or energy operations, our financial condition and our operating results.

Our Trading Operations Depend Primarily on a Small Number of Clients

During 2010, approximately 34% of our trading revenue on Toronto Stock Exchange and approximately 62% of our trading revenue on TSX Venture
Exchange were accounted for by the top ten POs on each exchange. Our business, financial condition or operating results could be materially
adversely affected if any one of these POs significantly reduced or stopped trading on our exchanges, or if two or more POs consolidated.

NGX currently has over 200 customers but is heavily reliant on large participants with approximately 43% of transaction fee revenue coming from
its top 10 customers.

We Depend on Third Party Suppliers

We depend on a number of third parties, such as CDS, IIROC, data processors, software and hardware suppliers, communication and network
suppliers and suppliers of electricity for elements of our trading, data and other systems. These providers may not be able to provide these services
without interruption and in an efficient, cost-effective manner. They also may not be able to adequately expand their services to meet our needs.
If a service provider suffers an interruption in or stops providing services and we cannot make suitable alternative arrangements, it could materially
adversely affect our business, financial condition and operating results.

We Depend on and Are Restricted by Our License Agreements and Other Arrangements

Some of our products and systems depend on license agreements with third parties, that have various terms. We may not be able to renew these
agreements on favourable terms or at all. Any future license agreement may provide opportunities for us, but it may also impose restrictions on us.
If we fail to renew certain of our license agreements on favourable terms or at all, it may materially adversely affect our business.

Currency Risk

We Are Subject to Fluctuations in Exchange Rates

We are exposed to foreign currency risk on revenue, cash and cash equivalents, marketable securities, accounts receivable and accounts payable
principally denominated in U.S. dollars. In 2010, we recognized U.S. dollar denominated revenue of approximately U.S. $105.0 million, including
BOX, less various U.S. dollar expenses. The approximate impact of a 10% rise and a 10% decline in the Canadian dollar compared to the US dollar on
these transactions as at December 31, 2010 is a $5.3 million decrease or increase in net income respectively. At December 31, 2010, cash and cash
equivalents and accounts receivable, excluding BOX, and current liabilities, excluding those of BOX, include US $13.4 million and US $0.8 million
respectively, which are exposed to changes in the U.S. – Canadian dollar exchange rate. The approximate impact of a 10% rise in the Canadian dollar
compared to the US dollar on these exposed balances at December 31, 2010 is a $1.3 million decrease in net income. The approximate impact of
a 10% decline in the Canadian dollar compared to the US dollar on these exposed balances at December 31, 2010 is a $1.3 million increase in net
income. In addition, net assets related to BOX are denominated in US dollars, and the effect of exchange rate movements on our share of these
net assets is included in other comprehensive income. The approximate impact of a 10% rise in the Canadian dollar compared to the US dollar on
the translation of the net assets related to BOX at December 31, 2010 is a $5.2 million decrease in other comprehensive income. The approximate
impact of a 10% decline in the Canadian dollar compared to the US dollar on the translation of the net assets related to BOX at December 31, 2010
is a $5.2 million increase in other comprehensive income.

We do not employ hedging strategies and therefore significant moves in exchange rates, specifically a strengthening of the Canadian dollar against
the US dollar can have an adverse affect on the value of our revenue, expenses, or assets in Canadian dollars.

Credit Risk

We Could Suffer Losses as a Result of NGX’s Clearing Activities

NGX is the central counterparty to each transaction (whether it relates to natural gas, electricity or crude oil contracts) cleared through its clearing
operations. By providing a clearing and settlement facility, NGX is subject to the risk of a counterparty defaulting simultaneously with an extreme
market price movement. NGX manages this risk by applying standard rules and regulations, and using a conservative margining regime based
on globally-accepted margin concepts. This margining regime involves valuing the market stress of client portfolios in real-time and requiring
participants to deposit liquid collateral in excess of those valuations. NGX conducts market stress scenarios regularly to test the ongoing integrity

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of its clearing operation. NGX also relies on established policies, instructions, rules and regulations as well as procedures specifically designed to
actively manage and mitigate risks. There is no assurance that these measures will be sufficient to protect us from a default or that our business,
financial condition and results of operations will not be materially adversely affected in the event of a significant default.

To backstop its clearing operations, NGX has a credit agreement in place with a Canadian chartered bank which includes a US$100 million clearing
backstop fund. We are NGX’s unsecured guarantor for this fund up to a maximum of US$100 million. In addition, NGX has covenanted under the
agreement to maintain a minimum of $9 million of tangible net assets. If NGX suffers a loss on its clearing operations, it could lose its entire net
worth. The bank could also realize up to a maximum of US$100 million on our unsecured guarantee, to the extent required to cover the loss.

NGX faces operational and other risks associated with the clearing business, which, if realized, could materially affect its business and operating results.

We cannot assure that these measures will be sufficient to protect us from a default or that our business, financial condition and results of
operations will not be materially adversely affected in the event of a significant default.

We Could Suffer Losses as a Result of CDCC’s Clearing Activities

CDCC acts as the central counterparty and guarantor of all transactions executed on MX’s markets and on some OTC products. As a result, CDCC is
exposed to the risk of default of its clearing members. CDCC primarily supports the risk of one or more counterparties, meeting strict financial and
regulatory criteria, defaulting on their obligations, in which case the obligations of that counterparty would become the responsibility of CDCC.
This risk is greater if market conditions are unfavourable at the time of the default.

In order to manage the risks associated with the default of its clearing members, CDCC’s principal technique is the collection of risk-based margin
deposits in the form of cash, equities and liquid government securities. Should a clearing member fail to meet a daily margin call or otherwise
not honour its obligations under open futures and options contracts, margin deposits would be available to apply against the costs incurred to
liquidate or transfer the clearing member’s positions.

CDCC also maintains a clearing fund through deposits of cash and highly liquid securities from all clearing members. The aggregate level of clearing
funds required from all clearing members must cover the worst loss that CDCC could face if one counterparty was failing under various extreme
but plausible market conditions. Each clearing member contributes to the clearing fund in proportion to its margin requirements. If, by a clearing
member’s default, further funding is necessary to complete a liquidation, CDCC has the right to require other clearing members to contribute
additional amounts equal to their previous contribution to the clearing fund.

Our Derivatives Business Could be Harmed by a Systemic Market Event

In case of sudden, large price movements, such market participants may not be able to meet their obligations to brokers who, in turn, may not
be able to meet their obligations to their counterparties. The impact of such an event could have a material adverse effect on our business.
In such cases, it could be possible that clearing members default with CDCC. As referred to in the Credit Risk – CDCC section CDCC would use
its risk management mechanisms to manage such a default. In extreme situations such as large scale market price moves or multiple defaults
occurring at the same time, all these mechanisms may prove insufficient to cover losses and this would result in a loss.

Litigation Risk

We Are Subject to Litigation Risks

Some aspects of our business involve risks of litigation. Dissatisfied customers, among others, may make claims with respect to the manner in
which we operate or they may challenge our regulatory actions, decisions or jurisdiction. Although we benefit from certain contractual indemnities
and limitations on liabilities, these rights may not be sufficient. In addition, with the introduction of civil liability for misrepresentations in our
continuous disclosure documents and statements and the failure to make timely disclosures of material changes in Ontario and certain other
jurisdictions, dissatisfied shareholders can more easily make claims against us. We could incur significant legal expenses defending claims, even
those without merit. If a lawsuit or claim is resolved against us, it could materially adversely affect our reputation, business, financial condition and
operating results.

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Management’s Discussion and Analysis 67

Integration Risk

We Face Risks Associated with Integrating the Operations, Systems and Personnel of New Acquisitions

As part of our strategy to sustain growth, we have and expect to continue to pursue appropriate acquisitions of other companies and technologies.
An acquisition will only be successful if we can integrate the acquired businesses’ operations, products and personnel; retain key personnel; and
expand our financial and management controls and our reporting systems and procedures to accommodate the acquired businesses. It is possible
that integrating an acquisition could result in less management time being devoted to other parts of our core business. If an investment, acquisition
or other transaction does not fulfill expectations, we may have to write down its value in the future or sell at a loss.

Business Continuity/Geopolitical Risk

Geopolitical and Other Factors Could Interrupt Our Critical Business Functions

The continuity of our critical business functions could be interrupted by geopolitical upheaval, including terrorist, criminal, political and cyber, or by
other types of external disruptions, including human error, natural disasters, power loss, telecommunication failures, sabotage and vandalism.

We have a series of integrated disaster recovery and business continuity plans for critical business functions to mitigate the risk of an interruption.
We currently maintain duplicate facilities to provide redundancy and back-up to reduce the risk and recovery time of system disruptions for key
systems at Toronto Stock Exchange, TSX Venture Exchange, MX, CDCC and BOX. However, not all systems are duplicated, and any major disruption
may affect our existing and back-up facilities. Any interruption in our services could impair our reputation, damage our brand name, and negatively
impact our financial condition and operating results.

Intellectual Property Risk

We May Be Unable to Protect Our Intellectual Property

To protect our intellectual property rights, we rely on a combination of trade-mark laws, copyright laws, patent laws, trade secret protection,
confidentiality agreements, and other contractual arrangements with our affiliates, customers, strategic partners, and others. This protection may
not be adequate to deter others from misappropriating our proprietary information. We may not be able to detect the unauthorized use of, or take
adequate steps to enforce, our intellectual property rights. We have registered, or applied to register, our trade-marks in Canada and in some other
jurisdictions. If we fail to protect our intellectual property adequately, it could harm our brand and affect our ability to compete effectively. It could
also take significant time and money to defend our intellectual property rights, which could adversely affect our business, financial condition, and
operating results.

We license a variety of intellectual property from third parties. Others may bring infringement claims against us or our customers in the future
because of an alleged breach of such a license. If someone successfully asserts an infringement claim, we may be required to spend significant
time and money to develop or license intellectual property that does not infringe upon the rights of that other person or to obtain a license for
the intellectual property from the owner. We may not succeed in developing or obtaining a license on commercially acceptable terms, if at all.
In addition, any litigation could be lengthy and costly and could adversely affect us even if it is successful.

Corporate Structure Risk

We May Not be Able to Meet Cash Requirements Because of Our Holding Company Structure and Restrictions on
Paying Dividends

As a holding company, our ability to meet our cash requirements and pay dividends on our shares depends in large part upon our subsidiaries
paying dividends and other amounts to us. Our subsidiaries must comply with corporate and securities laws and with their agreements before they
can pay dividends to us. In particular, the recognition order of TSX Inc. provides that if TSX Inc. fails to maintain any of its financial viability tests
for more than three months, TSX Inc. will not, without the prior approval of the Director of the OSC, pay dividends (among other things) until the
deficiencies have been eliminated for at least six months or a shorter period of time as agreed by OSC staff. In addition, the recognition order of MX
imposes similar restrictions on the payment of dividends. If MX fails to meet the financial viability ratios for more than three months, MX will not,
without the prior approval of Quebec’s AMF, pay dividends (among other things) until the deficiencies have been eliminated for at least six months.

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Restrictions on Ownership of TMX Group Shares May Restrict Trading and Transactions

Under the Securities Act (Ontario) and related regulations and orders, and pursuant to an undertaking we provided to the AMF as a condition to
obtaining approval of the combination with MX, no person or company may own or exercise control or direction over more than 10% of any class or
series of our voting shares, without obtaining the prior approval of the OSC and the AMF. Each of the OSC and the AMF will have complete discretion
to grant its approval and may also change the 10% threshold in the future. A shareholder (or shareholders acting together) who contravenes these
provisions may have its shares redeemed and have dividend and voting entitlements on its shares suspended. These restrictions may discourage
trading in and may limit the market for our shares, may discourage potential acquisition and strategic alliance proposals, and may prevent
transactions in which our shareholders could receive a premium for their shares.

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Management’s Discussion and Analysis 69

Management Statement

Management is responsible for the preparation, integrity and fair presentation of the consolidated financial statements, management’s discussion
and analysis, and other information in this annual report. The consolidated financial statements were prepared in accordance with Canadian
generally accepted accounting principles and, in the opinion of management, fairly reflect the financial position, results of operations and changes
in the financial position of TMX Group Inc. Financial information contained throughout this annual report is consistent with the consolidated
financial statements.

Acting through the Finance and Audit Committee, comprised of non-management directors, all of whom are independent directors within the
meaning of Multilateral Instrument 52-110-Audit Committees, the Board of Directors oversees management’s responsibility for financial
reporting and internal control systems. The Finance and Audit Committee is responsible for reviewing the consolidated financial statements and
management’s discussion and analysis and recommending them to the Board of Directors for approval. To discharge its duties the Committee
meets with management and external auditors to discuss audit plans, internal controls over accounting and financial reporting processes, auditing
matters and financial reporting issues.

TMX Group’s external auditors appointed by the shareholders, KPMG LLP, are responsible for auditing the consolidated financial statements and
expressing an opinion thereon. The external auditors have full and free access to, and meet periodically with, management and the Finance and
Audit Committee to discuss the audit.

Thomas A. Kloet
Chief Executive Officer
TMX Group Inc.
February 9, 2011

Michael Ptasznik
Senior Vice President and Chief Financial Officer
TMX Group Inc.

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Independent Auditors' Report

To the Shareholders of TMX Group Inc.

We have audited the accompanying consolidated financial statements of TMX Group Inc. ("the Company"), which comprise the consolidated balance
sheets as at December 31, 2010 and 2009 and the consolidated statements of income, comprehensive income, changes in shareholders’ equity, and
cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Canadian
generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance
with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform an
audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of
the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of TMX Group Inc. as at December
31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in accordance with Canadian generally accepted
accounting principles.

Chartered Accountants, Licensed Public Accountants
Toronto, Canada
February 9, 2011

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Management Statement & Auditors’ Report to Shareholders 71

Consolidated Balance Sheets

(In thousands of Canadian dollars)
Assets
Current assets:
Cash and cash equivalents (note 4)
Marketable securities (note 4)
Restricted cash
Accounts receivable
Energy contracts receivable (note 21)
Fair value of open energy contracts (note 21)
Daily settlements and cash deposits (note 21)
Prepaid expenses

Income taxes recoverable

Future income tax assets (note 20)

Premises and equipment (note 5)
Future income tax assets (note 20)
Other assets (note 6)
Investment in affiliate, at equity (note 7)
Intangible assets (note 8)
Goodwill (note 8)
Total Assets
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities
Energy contracts payable (note 21)
Fair value of open energy contracts (note 21)
Daily settlements and cash deposits (note 21)
Deferred revenue
Deferred revenue – initial and additional listing fees (note 14)
Fair value of interest rate swaps (note 11)
Future income tax liabilities (note 20)
Obligations under capital leases (note 12)

Income taxes payable

Term loan (note 10)

Accrued employee benefits payable (note 9)
Obligations under capital leases (note 12)
Future income tax liabilities (note 20)
Other liabilities (note 13)
Deferred revenue
Deferred revenue – initial and additional listing fees (note 14)
Fair value of interest rate swaps (note 11)
Term loan (note 10)
Total Liabilities
Non-controlling Interests
Shareholders’ Equity:
Share capital (note 15)
Share option plan (note 17)
Deficit
Accumulated other comprehensive (loss) income
Total Shareholders’ Equity
Commitments and contingent liabilities (notes 12 and 25)
Total Liabilities and Shareholders’ Equity
See accompanying notes to consolidated financial statements.

On behalf of the Board:

Wayne Fox
Chair

J. Spencer Lanthier
Director

72 TMX Group Annual Report | 2010

December 31, 2010

December 31, 2009

68,797
261,605
1,105
89,680
754,933
141,894
193,065
6,699
3,116
29,651
1,550,545
33,570
152,500
28,043
14,152
920,482
582,627
3,281,919

59,093
754,933
141,894
193,065
18,651
88,887
697
10
3,326
6,090
429,754
1,696,400
12,843
3,799
236,736
23,259
1,011
444,338
–
–
2,418,386
10,422

1,104,131
11,220
(261,727)
(513)
853,111

87,978
103,169
911
79,427
714,545
202,760
565,408
6,032
4,619
26,675
1,791,524
31,556
144,551
27,745
12,845
932,443
583,811
3,524,475

44,883
714,545
202,760
565,408
15,074
78,001
2,117
118
3,413
3,232
–
1,629,551
12,787
5,512
234,697
21,832
882
405,123
3,584
429,016
2,742,984
10,915

1,102,619
8,708
(343,975)
3,224
770,576

3,281,919

3,524,475

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Consolidated Statements of Income

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)
Revenue:

2010

2009

Issuer services

Trading, clearing and related

Information services

Technology services and other

Total revenue

Expenses:
Compensation and benefits

Information and trading systems

General and administration
Amortization
Total operating expenses

Income from operations

Income from investment in affiliate
Unrealized loss on investment carried at cost (note 21)
Investment income
Goodwill impairment charge
Interest expense (note 10)
Net mark to market on interest rate swaps (note 11)

Income before income taxes

Income taxes (note 20)

Net income before non-controlling interests

Non-controlling interests

Net income

Earnings per share (note 19):
Basic
Diluted

See accompanying notes to consolidated financial statements.

162,955
242,165
154,415
15,928
575,463

133,478
47,773
72,967
32,307
286,525

142,962
237,535
149,004
30,631
560,132

129,369
46,120
69,266
32,194
276,949

288,938

283,183

1,307
(1,662)
5,212
–
(6,205)
(223)

420
–
4,623
(77,255)
(6,071)
(1,414)

287,367

203,486

90,741

96,952

196,626

106,534

1,833

196,535

104,701

$
$

2.64
2.64

$
$

1.41
1.41

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Consolidated Financial Statements 73

Consolidated Statements of Comprehensive Income

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars)

2010

2009

Net income

Other comprehensive loss:

196,535

104,701

Unrealized loss on translating financial statements of self-sustaining foreign operations (net of tax – $nil)

(3,737)

(20,880)

Comprehensive income

192,798

83,821

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Changes
in Shareholders’ Equity

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars)

2010

2009

Common shares:
Balance, beginning of period
Issuance of common shares
Proceeds from options exercised
Cost of exercised options
Purchased under normal course issuer bid
Balance, end of period

Share option plan:
Balance, beginning of period
Cost of exercised options
Cost of share option plan
Balance, end of period

Deficit:
Balance, beginning of period
Net income
Dividends on common shares
Shares purchased under normal course issuer bid
Balance, end of period

Accumulated other comprehensive (loss) income:
Balance, beginning of period
Unrealized loss on translating financial statements of self-sustaining foreign operations
Balance, end of period

1,102,619
–
1,226
286
–
1,104,131

1,084,399
32,052
573
170
(14,575)
1,102,619

8,708
(286)
2,798
11,220

(343,975)
196,535
(114,287)
–
(261,727)

3,224
(3,737)
(513)

5,969
(170)
2,909
8,708

(319,843)
104,701
(112,973)
(15,860)
(343,975)

24,104
(20,880)
3,224

Shareholders’ equity, end of period

853,111

770,576

See accompanying notes to consolidated financial statements.

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Consolidated Financial Statements 75

Consolidated Statements of Cash Flows

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars)
Cash flows from (used in) operating activities:
Net income
Adjustments to determine net cash flows:

2010

2009

196,535

104,701

Amortization
Unrealized loss on marketable securities
Income from investment in affiliate, at equity
Unrealized loss on investment carried at cost (note 21)
Cost of share option plan
Amortized financing fees
Non-controlling interests
Goodwill impairment charge
Unrealized gain on interest rate swaps (note 11)
Unrealized foreign exchange loss
Future income taxes
Accounts receivable and prepaid expenses
Other assets
Accounts payable and accrued liabilities
Long-term accrued and other liabilities
Deferred revenue
Income taxes

Cash flows from (used in) financing activities:
Reduction in obligation under capital lease
Restricted cash
Proceeds from exercised options
Dividends on common shares
Shares purchased under normal course issuer bid
Dividends paid to non-controlling interests

Cash flows from (used in) investing activities:

Additions to premises and equipment
Additions to intangible assets
Marketable securities
Acquisitions, net of cash acquired (note 2)

Unrealized foreign exchange loss on cash and cash equivalents held in foreign subsidiaries

Decrease in cash and cash equivalents

Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period

Supplemental cash flow information:

Interest paid
Interest received
Income taxes paid

See accompanying notes to consolidated financial statements.

32,307
635
(1,307)
1,662
2,798
738
91
–
(5,004)
141
(8,994)
(11,124)
(1,960)
14,529
1,018
53,807
4,325
280,197

(3,850)
(194)
1,226
(114,287)
–
–
(117,105)

(12,813)
(9,684)
(159,071)
–
(181,568)
(705)

32,194
153
(420)
–
2,909
738
1,833
77,255
(6,776)
343
3,476
(12,524)
(9,226)
(10,409)
2,506
33,154
(15,030)
204,877

(2,754)
543
573
(112,973)
(30,435)
(6,353)
(151,399)

(7,136)
(13,152)
(7,071)
(37,932)
(65,291)
(2,651)

(19,181)

(14,464)

87,978
68,797

102,442
87,978

5,748
5,419
95,385

4,619
3,962
110,350

76 TMX Group Annual Report | 2010

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Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

TMX Group Inc. owns and operates two national stock exchanges, Toronto Stock Exchange, serving the senior equity market and TSX Venture
Exchange, serving the public venture equity market, Montréal Exchange Inc. (“MX”), Canada’s national derivatives exchange, Natural Gas Exchange
Inc. (“NGX”), an exchange providing a platform for the trading and clearing of natural gas, electricity, and crude oil contracts in North America,
Shorcan Brokers Limited (“Shorcan”), an inter-dealer broker, and The Equicom Group Inc. (“Equicom”), providing investor relations and related
corporate communications services.

1. Significant Accounting Policies:

(a) Basis of presentation:

The consolidated financial statements (the “financial statements”) have been prepared by management in accordance with Canadian generally
accepted accounting principles (“GAAP”), and they include the accounts of TMX Group Inc. and its wholly owned subsidiaries, including
TSX Inc. (“TSX”), MX, NGX, Shorcan, Equicom, CDEX Inc. to September 8, 2010, NetThruPut Inc. (“NTP”) from May 1, 2009, TMX Exchange
Services Limited from October 26, 2010, TMX Select Inc. from August 3, 2010 and the wholly-owned or controlled subsidiaries of TSX, MX, NGX
and Shorcan, collectively referred to as the “Company”.

The preparation of the financial statements in conformity with Canadian GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets, liabilities, contingent assets and contingent liabilities as at the date of the financial statements,
and the reported amounts of revenue and expenses during the year, along with related disclosures. Areas where management has applied
significant judgement include deferred revenue – initial and additional listing fees, the carrying values of goodwill and intangible assets,
pensions and other post-employment benefits, long term incentive plan liabilities, income taxes, bad debt provisions, sales return provisions,
obligations under capital leases and the fair value of financial instruments including open energy contracts. Actual results could differ from
those estimates.

(b) Basis of consolidation:

Subsidiaries are entities controlled by the Company, and they are consolidated from the date on which control is transferred to the Company
until the date that control ceases.

Equity accounted investees are entities in which the Company has significant influence, but not control, over the financial and operating
policies. Investments in these entities are recognized initially at cost and subsequently accounted for using the equity method of accounting.

Intercompany balances and transactions have been eliminated in full on consolidation.

Premises and equipment are recorded at cost less accumulated amortization, and any impairment in value.

Amortization is provided over the following useful lives of the assets:

Asset

Basis

Rate

Computers and electronic trading equipment
Computers and electronic trading equipment under capital leases
Furniture, fixtures and other equipment
Leasehold improvements

Straight line
Straight line
Straight line
Straight line

3–5 Years
Over the term of the leases
5 Years
Over terms of various leases to a maximum of 15 Years

Legal obligations associated with the restoration costs on the retirement of premises and equipment are recognized as incurred.
The obligations are initially measured at an estimated fair value of the future cost discounted to present value, and a corresponding
amount is capitalized with the related assets and depreciated in line with the above useful lives.

Premises and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted
future cash flows, the Company will then determine the fair value of the asset, and will recognize an impairment charge equal to the excess of
the carrying value over the fair value.

Notes to Consolidated Financial Statements 77

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Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

(d) Revenue recognition:

Revenue for goods and services is recognized when the services are provided or the goods are sold.

Issuer services revenues are derived primarily from recurring annual sustaining fees and transaction-based fees for initial and additional
listings. Sustaining fees for existing issuers are billed during the first quarter of the year and the amount is recorded as deferred revenue and
amortized over the year on a straight-line basis. Initial and additional listing fees are recorded as deferred revenue – initial and additional
listing fees and are recognized on a straight-line basis over an estimated service period of ten years.

Trading and related revenues for cash markets and derivatives trading are recorded and recognized as revenue in the month in which the trades
are executed or when the related services are provided.

Clearing revenue related to derivatives clearing is recognized in the month in which the settlement of the related transaction occurs.

Trading, clearing, settlement and related revenues relating to NGX trading and clearing are recognized over the period the services are
provided. Revenues and expenses related to the value of energy products traded or swap differential payments made during the year, and
unrealized gains and losses on open energy contracts, are not recognized in these consolidated financial statements as NGX does not function
as principal in these trading activities.

Information services revenue is derived primarily from real time market data revenue which is recognized based on usage as reported by
customers and vendors, less a provision for sales returns from the same customers. The Company conducts periodic audits of the information
provided and records additional revenues, if any, at the time that collectability of the revenues is reasonably assured. Fixed income indices
revenue is recognized over the period the service is provided. Boston Options Exchange Group, LLC’s (“BOX”) revenue from the Options Price
Reporting Authority (“OPRA”) is received quarterly based on its pro-rata share of industry trade (not contract) volume. Estimates of OPRA’s
quarterly revenue are made and accrued each month. Other information services revenue is recorded and recognized as revenue in the month
in which the services are provided.

Technology services and other revenue includes revenue from technology license fees which is recognized in the month of transfer of the license to
the customer. Other technology services and other revenue is recorded and recognized as revenue in the month in which the services are provided.

(e) Income taxes:

Future income taxes are provided in recognition of temporary differences between: (i) the carrying amount of assets and liabilities and their
respective tax bases, (ii) operating losses, and (iii) tax credit carry forwards made for financial reporting and income tax purposes. Future
income tax assets and liabilities are measured using enacted or substantively enacted tax rates expected to apply to taxable income in the
periods in which those temporary differences are expected to be recovered or settled. The effect on future income tax assets and liabilities of
a change in tax rates is recognized in income in the period in which the enactments or substantive enactments occur. Where realization of a
future tax asset is not considered “more likely than not”, a valuation allowance is provided against that asset.

(f) Employee future benefits:

TSX, TSX Venture Exchange Inc. and NGX have registered pension plans with a defined benefits tier and a defined contributions tier covering
substantially all of their employees, as well as a retirement compensation arrangement (“RCA”) for senior management, and MX has a defined
benefit registered pension plan for certain former officers. Benefits are based on years of service and the employee’s compensation. The costs
of these programs are being funded currently, except for MX, where a portion is guaranteed by a letter of credit. In addition, the Company
provides other employee future benefits, such as supplementary medical and dental coverage, to defined eligible employees (“other benefit
plans”). The cost of the other benefit plans is not being funded, however, a provision for this has been made in the accounts.

The Company accrues its obligations under employee defined benefit plans as the employees render the services necessary to earn pension
and other employee future benefits.

The Company has adopted the following policies for its defined benefit plans:

(i)

The cost of defined benefit pensions and other retirement benefits earned by employees is actuarially determined using the projected
benefit method prorated on service and management’s best estimate of salary escalation, retirement ages and expected health care cost.

(ii)

For the purpose of calculating expected return on plan assets, those assets are valued at fair value.

(iii)

Past service costs from plan amendments or initiation are amortized on a straight-line basis over the expected average remaining service
period of employees active at the time of the amendment.

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(iv)

Actuarial gains (losses) on plan assets arise from the difference between the actual return on plan assets for a period and the expected
return on plan assets for that period. Actuarial gains (losses) on the accrued benefit obligation arise from differences between actual
and expected experience and from changes in the actuarial assumptions used to determine the accrued benefit obligation. The excess of
the net accumulated actuarial gain (loss) over 10% of the greater of the accrued benefit obligations and the fair value of plan assets is
amortized over the expected average remaining service period of active employees.

(v)

When a restructuring of a benefit plan gives rise to both a curtailment and a settlement of obligations, the curtailment is accounted for
prior to the settlement.

For defined contribution plans, the expense is charged to the income statement as incurred.

(g) Intangible assets:

Intangible assets are recorded at cost less accumulated amortization, where applicable, and any impairment in value.

Amortization, where applicable, is provided over the following useful lives of the intangible assets:

Asset
Indefinite life intangibles
Derivative products
Trade names
Regulatory designation
Crude oil products
Index licenses

Definite life intangibles
Customer bases
Customer bases
Data license
Capitalized software and software development

Basis

n/a
n/a
n/a
n/a
n/a

Declining balance
Straight line
Straight line
Straight line

Rate

n/a
n/a
n/a
n/a
n/a

2–7%
3–30 Years
10 Years
5 Years

Indefinite life intangible assets are reviewed for impairment at least annually. When the carrying amount of the intangible asset exceeds
the fair value of the intangible asset, an impairment loss is recognized as an amount equal to the excess and is identified separately on the
statement of income.

Definite life intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to estimated
undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted
cash flows, the Company will then determine the fair value of the asset, and will recognize an impairment charge equal to the excess of the
carrying value over the fair value.

(h) Goodwill:

Goodwill is recognized at cost less any subsequent impairment in value. Goodwill is the residual amount that results when the purchase price
of an acquired business exceeds the sum of the amounts allocated to the assets acquired, less liabilities assumed, based on their fair values.
Goodwill is allocated as of the effective date of the transaction.

Goodwill is not amortized and is tested for impairment annually or more frequently if events or changes in circumstances indicate that
the asset might be impaired. The impairment test is carried out in two steps. In the first step, the carrying amount of the reporting unit is
compared with its fair value. When the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered
not to be impaired and the second step of the impairment test is unnecessary.

The second step is carried out when the carrying amount of a reporting unit exceeds its fair value, in which case the implied fair value of the
reporting unit’s goodwill is compared with its carrying amount to measure the amount of the impairment loss, if any. The implied fair value of
goodwill is determined in the same manner as the value of goodwill is initially determined as described in the preceding paragraph, using the fair
value of the reporting unit as if it were the purchase price. When the carrying amount of the reporting unit goodwill exceeds the implied fair value
of the goodwill, an impairment loss is recognized in an amount equal to the excess and is identified separately on the statement of income.

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Notes to Consolidated Financial Statements 79

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

(i) Earnings per share:

Basic earnings per share are computed by dividing net income by the weighted average number of shares outstanding during the reporting period.

Diluted earnings per share are computed similar to basic earnings per share except that the weighted average shares outstanding are increased
to include additional shares from the assumed exercise of share options, if dilutive. The number of additional shares is calculated using the
treasury stock method which assumes that outstanding share options were exercised and that the proceeds from such exercises were used to
acquire common shares at the average market price during the reporting period.

(j) Share-based compensation:

The Company has both equity-settled and cash-settled share-based compensation plans, which are described in notes 17 and 18. The Company
accounts for all share-based payments to eligible employees that call for settlement by the issuance of equity instruments, granted on or after
January 1, 2003, using the fair value based method. Under the fair value based method, compensation cost attributable to options to employees
is measured at fair value at the grant date, using a recognized option pricing model, and amortized over the vesting period. Compensation cost
attributable to awards to employees that call for settlement in cash is measured at intrinsic value and amortized over the vesting period. Changes
in intrinsic value between the grant date and the measurement date result in a change in the measure of compensation cost.

No compensation cost is recognized for options or cash-settled awards that employees forfeit if they fail to satisfy the service requirement
for vesting.

(k) Cash and cash equivalents:

Cash and cash equivalents consist of cash and liquid investments having an original maturity of three months or less and are carried at their
estimated fair values, with changes in their fair values being recorded in net income in the period in which they occur. Estimated fair values of
the investments are determined based on quoted market values.

(l) Restricted cash:

MX operates a separate regulatory division, responsible for the approval of participants and market regulation, which operates on a cost
recovery basis. Restricted cash represents the surplus of this regulatory division. An equivalent and off-setting amount is included in accounts
payable and accrued liabilities.

(m) Financial Instruments:

The company classifies its financial assets and liabilities according to their characteristics and the purpose for which they were acquired,
as follows:

Held for trading:

Held for trading includes classified derivatives and financial assets or liabilities designated by the Company as held for trading on initial
recognition. These are measured at fair value with changes in fair value recognized through net income.

Loans and receivables:

Loans and receivables includes non-derivative financial assets and liabilities with fixed or determinable payments that are not quoted on an
active market. These are recorded initially at fair value, then at amortized cost using the effective interest method.

Held to maturity:

Held to maturity includes non-derivative financial assets with fixed or determinable payments and a fixed maturity, and the Company intends
and is able to hold to maturity. These are initially recorded at fair value and subsequently measured at amortized cost using the effective
interest method.

Available-for-sale:

Available-for-sale includes non-derivative financial assets that are designated as available-for-sale and that are not classified in any of the
previous categories. These are measured at fair value with unrealized gains and losses recorded in other comprehensive income (loss) until the
asset is sold or if an unrealized loss is considered other than temporary. Investments in equity instruments that do not have a quoted market
price are measured at cost.

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(n) Daily settlements and cash deposits:

The amounts due from and to Clearing Members of the Canadian Derivatives Clearing Corporation (“CDCC”) as a result of marking open
futures positions to market and settling option transactions each day are required to be collected from or paid to Clearing Members prior to
the commencement of trading the next day. Daily settlements and cash deposits also include cash margin deposits and clearing fund cash
deposits of Clearing Members held in the name of CDCC. The amounts due from Clearing Members are presented as an asset in the balance
sheet and are not offset against the amounts due to other Clearing Members, which are presented as a liability. There is no impact on the
consolidated statements of income.

(o) Energy contracts:

NGX energy contracts receivable and payable positions are recognized for all contracts where physical delivery has occurred or financial
settlement amounts have been determined prior to the period end but payments have not yet been made. There is no impact on the
consolidated statements of income.

The fair value at the balance sheet date of the undelivered physically settled trading contracts and the forward financially settled trading
contracts is recognized in the consolidated assets and liabilities as open energy contracts. There is no impact on the consolidated statements
of income.

(p) Foreign currency translation:

The assets and liabilities of the Company’s self-sustaining foreign operations, which include BOX, are translated at the rate of exchange in
effect at the balance sheet date. Revenue and expenses are translated at the relevant average monthly exchange rates. The resulting unrealized
exchange gain or loss is included in accumulated other comprehensive (loss) income within shareholders’ equity.

The Company’s integrated foreign operations are translated using the temporal method. Under this method, monetary assets and liabilities
are translated at the rate of exchange in effect at the balance sheet date, and revenue and expenses are translated at the relevant average
monthly exchange rates. Non-monetary assets, and any associated amortization charges, are translated at historical exchange rates. Resulting
foreign exchange gains and losses are included in Technology services and other revenue for the period.

Revenues earned, expenses incurred and capital assets purchased in foreign currencies are translated at the prevailing exchange rate on the
transaction date. Monetary assets and liabilities denominated in foreign currencies are translated at the period end rate. Resulting foreign
exchange gains and losses are included in Technology services and other revenue for the period.

(q) Future accounting changes:

International Financial Reporting Standards (“IFRS”):

In March 2009, the Canadian Accounting Standards Board reconfirmed in its second omnibus Exposure Draft that Canadian GAAP for publicly
accountable enterprises will be replaced by IFRS for interim and annual financial statements relating to fiscal years beginning on or after
January 1, 2011. Accordingly, these financial statements will be the last prepared by the Company under pre-conversion Canadian GAAP,
and the conversion to IFRS will be applicable to the Company’s reporting for the first quarter of 2011, for which current and comparative
information will be prepared under IFRS. The Company will also present an opening IFRS statement of financial position, or balance sheet, as at
January 1, 2010, the Company’s date of transition, as part of the Company’s 2011 interim and annual financial statements.

2. Business acquisition:

On May 1, 2009, the Company acquired 100% of the outstanding common shares of NTP. The principal business activity of NTP is to provide an
electronic trading platform and clearing facility for physical crude oil products. The aggregate purchase price consisted of:

Common shares of TMX Group (878,059 shares issued)
Cash
Book value of the option to acquire NTP
Direct transaction costs
Restructuring costs
Aggregate purchase price

32,052
23,680
9,500
1,242
401
66,875

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Notes to Consolidated Financial Statements 81

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

The acquisition was accounted for under the purchase method and the results of operations have been included in the consolidated
statements of income from the date of acquisition.

The restructuring costs primarily relate to the costs of consolidating NGX and NTP’s technology services and offices.

The Company’s common shares issued as part of the transaction were valued at $36.50 per share. The $36.50 per share represents the
volume weighted average market price of the Company’s common shares over a reasonable period before and after April 1, 2009, the day
the Company exercised its option to acquire NTP. The purchase price has been allocated to the fair values of the assets acquired and
liabilities assumed as follows:

Cash and cash equivalents
Energy contracts receivable
Fair value of open energy contracts
Other current assets
Premises and equipment
Future income tax asset
Intangible assets
Goodwill
Net tangible and intangible assets acquired
Less liabilities assumed:
Current liabilities
Energy contracts payable
Fair value of open energy contracts
Other liabilities
Future income tax liability
Total net assets acquired

Net assets acquired
643
$
363,140
4,297
4,012
25
901
49,620
30,581
453,219

4,395
363,140
4,297
8
14,504
66,875

The Company recognized $80,201 of goodwill and intangible assets as part of the acquisition. The details of these assets are as follows:

Description

Goodwill

Indefinite life intangible assets:
Product list
Index licenses

Definite life intangible assets:
Customer base
Capitalized software
Total goodwill and intangible assets

* 22 years on acquisition

Amortization
Period

Amount

n/a

30,581

Not amortized
Not amortized

21 years*
1 year

14,863
1,854

32,828
75
80,201

The goodwill acquired is not deductible for tax purposes.

Crude oil contracts entered into on or after May 1, 2009, transact through NGX and follow NGX’s collateral model, where each contracting
party is required to provide collateral, in the form of cash or letters of credit, which exceeds its outstanding credit exposure as determined by
NGX in accordance with its margining methodology.

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3. Segmented information:

The Company operates in three reportable segments: the Cash Markets (“Cash”) segment, the Derivatives Markets (“Derivatives”) segment,
and the Energy Markets (“Energy”) segment. In the Cash segment, the Company owns and operates Canada’s two national stock exchanges,
Toronto Stock Exchange and TSX Venture Exchange, Shorcan, a fixed income inter-dealer broker, and Equicom, an investor relations and
corporate communications services provider. The Derivatives segment provides markets for trading derivatives, clearing options and futures
contracts and certain over-the-counter (“OTC”) products through MX and its subsidiaries, CDCC, Montréal Climate Exchange Inc. (“MCeX”),
and BOX. In the year ended December 31, 2009, the Derivatives segment included a $77,255 goodwill impairment charge relating to BOX. The
Energy segment provides a platform for the trading and clearing of natural gas, electricity and crude oil contracts through NGX, and includes
the brokering of crude oil through Shorcan Energy Brokers Inc. (“Shorcan Energy”), a wholly owned subsidiary of Shorcan.

Cash

Derivatives

Energy

Total

Year ended December 31*

2010
Issuer services
Trading, clearing and related
Information services
Technology services and other
Total revenue

Net income
Goodwill
Total assets

2009

Issuer services

Trading, clearing and related

Information services

Technology services and other
Total revenue

Net income
Goodwill
Total assets
* Includes results from dates of acquisitions in the year

162,955
113,131
138,514
10,575
425,175

158,055
116,912
643,546

142,962
119,575
132,589
11,805
406,931

133,518
116,913
522,090

–
83,679
15,318
5,331
104,328

26,157
413,856
1,592,438

–
78,533
16,220
19,193
113,946

(42,905)
415,039
1,942,921

4. Cash and cash equivalents and marketable securities:

Cash and cash equivalents and marketable securities are comprised of:

Cash
Overnight money market
Treasury bills
Cash and cash equivalents

Money market funds
Bonds and bond funds
Marketable securities

The Company’s exposure to interest rate risk on its marketable securities is discussed in note 22.

–
45,355
583
22
45,960

12,323
51,859
1,045,935

–
39,427
195
(367)
39,255

14,088
51,859
1,059,464

162,955
242,165
154,415
15,928
575,463

196,535
582,627
3,281,919

142,962
237,535
149,004
30,631
560,132

104,701
583,811
3,524,475

2010
24,272
43,779
746
68,797

148,402
113,203
261,605

2009
49,888
36,062
2,028
87,978

30,619
72,550
103,169

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Notes to Consolidated Financial Statements 83

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

5. Premises and equipment:

Premises and equipment are comprised of:

As at December 31, 2010

Computers and electronic trading equipment
Computers and electronic trading equipment under capital leases
Furniture, fixtures and other equipment
Leasehold improvements

As at December 31, 2009

Computers and electronic trading equipment
Computers and electronic trading equipment under capital leases
Furniture, fixtures and other equipment
Leasehold improvements

Cost

63,759
12,574
16,712
53,556
146,601

Cost

58,515
11,608
16,411
48,630
135,164

Accumulated
amortization

Net book value

51,112
5,634
15,649
40,636
113,031

12,647
6,940
1,063
12,920
33,570

Accumulated
amortization

Net book value

47,517
2,762
15,268
38,061
103,608

10,998
8,846
1,143
10,569
31,556

The gross carrying amounts and accumulated amortization above include the effects of foreign exchange translation for the US dollar (“USD”)
denominated assets where applicable.

Amortization charged for the year was $12,957 (2009 – $14,191).

6. Other assets:

As at December 31

Accrued benefit assets (note 9)
Investments carried at cost (note 21)
Other

7. Investment in affiliate:

2010

21,252
6,617
174
28,043

2009

19,259
8,280
206
27,745

The Company owns a 47% equity interest in CanDeal.ca Inc. (“CanDeal”), an electronic trading system for the institutional debt market.
The investment is accounted for using the equity method. As part of the investment, the Company and CanDeal entered into an agreement
under which the Company would provide technological services in support of CanDeal’s electronic trading system. This agreement was
terminated during 2009. In 2010, the Company charged CanDeal $nil (2009 – $135) for technology services and remitted to CanDeal $563
(2009 – $1,548) as part of a revenue sharing arrangement.

8. Goodwill and intangible assets:

(a) Impairment:

(i) Goodwill:

The Company performed its annual goodwill impairment analysis during the fourth quarter of 2010 and determined that the fair values of
each of its reporting units exceeded their carrying values. Therefore, the second step of the impairment test was not required.

In assessing whether or not there is an impairment, the Company uses an income approach, based on a discounted cash flow (“DCF”) model,
to determine the fair value of its reporting units. If there is indication of impairment, the Company uses the DCF model to estimate the
amount of impairment. Under the DCF approach, the Company estimates the discounted future cash flows for five to eight years, depending

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on the reporting unit, along with a terminal value. The future cash flows are based on the Company’s estimates of expected future operating
results, economic conditions and a general outlook for the industry in which the reporting unit operates. The discount rates used by the
Company consider the weighted average cost of capital of the Company and certain risk premiums. The terminal value is the value attributed
to the reporting unit’s operations beyond the projected time period using a perpetuity rate based on expected economic conditions and a
general outlook for the industry. A market comparative approach is also used to assess the reasonableness of the fair value determined under
the DCF model.

The tests referred to above require the Company to make various assumptions regarding projected cash flows, including long-term growth
rates, and discount rates for the various reporting units. These assumptions are subjective judgments based on the Company’s experience,
knowledge of operations and knowledge of the economic environment in which it operates. It is possible that, if future cash flow projections,
long-term projections or discount rates are significantly different to those used, the outcome of future impairment tests could result in a
different outcome with reporting units and their associated goodwill being impaired.

(ii) Intangible assets:

During the fourth quarter of 2010, the Company performed impairment analyses on its indefinite life intangibles and on its definite life
intangibles where circumstances indicated that the asset may be impaired. The Company determined that the carrying values of its intangible
assets were not impaired.

Recoverability of definite life intangible assets is measured by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. The fair values of the indefinite life intangibles were determined using a DCF model,
based on various assumptions regarding projected cash flows, including long term growth rates and discount rates. These assumptions are
subjective judgments based on the Company’s experience, knowledge of operations and knowledge of the economic environment in which it
operates. It is possible that, if future cash flow projections or discount rates are significantly different to those used, the outcome of future
impairment tests could result in an impairment of one or more of the Company’s intangible assets.

(b) Goodwill:

A summary of the changes in goodwill is as follows:

Balance, beginning of year
Purchase price adjustment related to BOX
Acquisition of NTP (note 2)
Other acquisitions and adjustments
Foreign exchange movement
Impairment charge
Balance, end of year

A summary of the Company’s intangible assets is as follows:

2010
583,811
–
–
–
(1,184)
–
582,627

2009
650,554
(7,778)
30,581
3,065
(15,356)
(77,255)
583,811

Indefinite life
Derivative products
Trade names
Regulatory designation
Crude oil products
Index licenses

Definite life
Capitalized software and
software development
Customer bases
Data licenses

Gross carrying
amount

2010
Accumulated
amortization

Net book
value

Gross carrying
amount

2009
Accumulated
amortization

Net book
value

630,926
28,214
2,000
14,863
1,855
677,858

47,327
249,574
6,500
303,401

–
–
–
–
–
–

15,776
42,293
2,708
60,777

630,926
28,214
2,000
14,863
1,855
677,858

31,551
207,281
3,792
242,624

630,926
28,214
2,000
14,863
1,855
677,858

40,441
250,731
6,500
297,672

–
–
–
–
–
–

8,321
32,708
2,058
43,087

630,926
28,214
2,000
14,863
1,855
677,858

32,120
218,023
4,442
254,585

981,259

60,777

920,482

975,530

43,087

932,443

Notes to Consolidated Financial Statements 85

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Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

The gross carrying amounts and accumulated amortization above include the effects of foreign exchange translation for the USD denominated
assets where applicable.

During 2010, the Company capitalized $9,684 of software and software development costs (2009 – $13,152).

During 2010, the Company recognized amortization expense of $19,350 (2009 – $18,003).

9. Employee future benefits:

Information about the Company’s benefit plans is as follows:

Total cash amounts recognized as paid or payable for employee future benefits in 2010, consisting of employer contributions to the defined
benefit pension plans, employer contributions to the other benefit plans, and employer contributions to the defined contribution plans, was
$8,438 (2009 – $15,200).

Defined benefit plans:

The Company, excluding MX, measures its accrued benefit obligations and the fair value of plan assets for accounting purposes as at
September 30 of each year. The measurement date for MX plan assets and accrued benefit obligations is December 31 of each year. For the
Company, excluding MX, the most recent actuarial valuation of the registered pension plan for funding purposes was as at December 31, 2009,
and the next required valuation is as at December 31, 2012 (as at December 31, 2010 for NGX plan). For the RCA plan, the most recent actuarial
valuation for funding purposes was as at December 31, 2009, and the next required valuation is as at December 31, 2010. For the MX plan,
the most recent actuarial valuation for funding purposes was as at January 1, 2009 and the next required valuation will be no later than
December 31, 2011, or at the date of a plan amendment, if earlier.

Accrued benefit assets and accrued benefit obligations related to the Company’s defined benefit plans are included in the consolidated
balance sheet as follows:

As at December 31

2010

2009

2010

2009

Pension and RCA plans

Other benefit plans

Other assets
Accrued employee benefits payable
Total

21,252
–
21,252

19,259
–
19,259

–
(12,843)
(12,843)

–
(12,787)
(12,787)

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Further details on the changes in these balances over the year are as follows:

Pension and RCA plans

Other benefit plans

As at December 31
Accrued benefit obligation:
Balance, beginning of year
Adjustment for inclusion of subsidiary employees
Current service cost
Interest cost
Benefits paid
Employee contributions
Actuarial losses (gains)
Reduction in obligation due to settlement
Curtailment gain
Special termination benefits
Plan amendments
Balance, end of year
Plan assets:
Fair value, beginning of year
Actual return on plan assets
Employer contributions
Employee contributions
Benefits paid
Net transfers out
Fair value, end of year
Funded status-plan surplus (deficit)
Unamortized net actuarial loss
Employer contributions after measurement date
Unamortized past service costs
Accrued benefit asset (liability)

Plan assets consist of:

Asset category

Equity securities
Debt securities
Canada Revenue Agency refundable tax account

2010

51,956
–
1,687
3,580
(2,905)
218
10,731
–
–
–
–
65,267

63,587
4,729
4,948
218
(2,905)
–
70,577
5,310
15,733
205
4
21,252

$
$

2009

51,293
–
1,699
3,505
(3,851)
239
700
(1,902)
–
228
45
51,956

54,058
2,789
12,254
239
(3,851)
(1,902)
63,587
11,631
6,523
1,010
95
19,259

$
$

2010

7,481
–
341
514
(239)
–
2,712
–
(16)
–
–
10,793

–
–
239
–
(239)
–
–
(10,793)
2,864
58
(4,972)
(12,843)

$
$

Percentage of plan assets

2010
49%
38%
13%
100%

The elements of the Company’s defined benefit plan costs recognized in the year are as follows:

As at December 31

Current service cost
Interest cost
Actual return on plan assets
Plan amendments
Adjustment for inclusion of subsidiary employees
Special termination benefits
Curtailment gain
Actuarial losses (gains)

Pension and RCA plans

Other benefit plans

2010

1,687
3,580
(4,729)
–
–
–
–
10,731
11,269

2009

1,699
3,505
(2,789)
45
–
228
–
700
3,388

2010

341
514
–
–
–
–
(3)
2,712
3,564

2009

8,829
1,098
269
430
(202)
–
(34)
–
–
–
(2,909)
7,481

–
–
202
–
(202)
–
–
(7,481)
153
58
(5,517)
(12,787)

2009
50%
36%
14%
100%

2009

269
430
–
(2,909)
1,098
–
–
(34)
(1,146)

TMX-0000-AR-Back-v13.indd 87

29/03/11 3:55 PM

Notes to Consolidated Financial Statements 87

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

Elements of employee future benefit costs before adjustments to recognize the long- term nature of employee future benefit costs:

Difference between expected return and actual return
on plan assets for the year (a)
Difference between actuarial (gains) losses recognized

for the year and actual actuarial (gains) losses on accrued
benefit obligations for the year (b)

Difference between amortization of past service costs for
the year and actual plan amendments for the year (c)
Difference between costs arising in the period and costs

recognized in the year in respect of transitional
obligation (asset)

1,326

(10,537)

–

(465)

(413)

447

–

(2,712)

(559)

–

Net benefit plan expense

2,149

2,970

293

–

1,199

–

(a) Expected return on plan assets of $(3,403) (2009 – $(3,254)) less the actual return on plan assets of $(4,729) (2009 – $(2,789)).

(b) Actuarial (gain) loss recognized for the year of $194 (2009 – $287) less the actual actuarial (gain) loss on accrued benefit obligation

of $10,731 (2009 – $700).

(c) Amortization of past service costs for the year of $91 (2009 – $492) less the actual plan amendments for the year of $nil (2009 – $45).

The significant actuarial assumptions adopted in measuring the obligation are as follows (weighted average):

As at December 31

Pension and RCA plans

Other benefit plans

2010

2009

2010

2009

Discount rate
Rate of compensation increase
Expected long-term rate of return on plan assets

5.50%
3.75%
6.00%

6.70%
3.75%
6.40%

5.50%
3.75%
n/a

6.70%
3.75%
n/a

The assumed health care cost trend rate at December 31, 2010 was 7.2% (2009 – 7.3%), decreasing to 4.5% (2009 – 4.5%) over 19 years
(20 years in 2009).

Increasing or decreasing the assumed health care cost trend rates by one percentage point would have the following effects for 2010:

Total of service and interest cost
Accrued benefit obligation

Increase
30
681

$
$

Decrease
(26)
(579)

$
$

The average remaining service period of the active employees covered by the pension plans is between 5 and 15 years, depending on the plan
(2009 – between 10 and 15 years). The average remaining service period of the active employees covered by the other retirement benefits plans
is 18 years (2009 – 18 years).

MX has provided a letter of guarantee in the amount of $720 to the benefit of the trustee of the MX employee future benefit plan, using a part
of the operating line of credit in place with its bank (note 10).

Defined contribution plans:

In 2010, the Company contributed and expensed $4,058 (2009 – $2,378) to the defined contribution tier, which amounts are not included in
the recognized defined benefit costs above.

88 TMX Group Annual Report | 2010

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29/03/11 3:55 PM

10. Credit facilities:

The Company has the following credit facilities:

TMX Group Inc. non-revolving three
year term facility
TMX Group Inc. revolving three year
term facility
MX operating line of credit
CDCC revolving standby
credit facility
NGX letter of credit
NGX overdraft facility
NGX EFT daylight facility
Total credit facilities

Interest rate

Year of maturity

Authorized

Amount drawn
at December 31,
2010

Amount drawn
at December 31,
2009

30 day B.A. + 45 bps

2011

430,000

–
–

–
–
–
–

2011
N/A

N/A
N/A
N/A
N/A

50,000
3,000

50,000
USD 100,000
20,000
300,000

–
–

–
–
–
–
430,000

–
–

–
–
–
–
430,000

In connection with the acquisition of MX, the Company established a non-revolving three-year term credit facility of $430,000 and a revolving
three-year credit facility of $50,000. The Company may draw on these facilities in Canadian dollars by way of prime rate loans and/or Bankers’
Acceptances (“B.A.”) or in USD by way of LIBOR loans and/or US base rate loans. On April 30, 2008, the Company drew $430,000, which becomes
due for repayment on April 18, 2011, when the revolving three-year facility of $50,000 also expires. The Company is currently assessing its
options with regards to the repayment and/or refinancing of the loan. As at December 31, 2010, the Company has prepaid $246 of financing
fees, which leaves a net credit facility liability of $429,754. These financing fees will be amortized over the remaining term of the loan.

MX has an outstanding letter of credit for $720 issued against the MX operating line of credit. This letter of credit has been issued as a
guarantee to the trustee under the MX employee future benefit plan in respect of accrued future employee benefits.

The credit facilities are unsecured and include certain covenants that the Company must maintain (note 23). The Company was in compliance
with these covenants at December 31, 2010.

During 2010, the Company recognized interest expense on the facilities of $5,884 (2009 – $5,828) which included $738 (2009 – $738) of
amortized financing fees.

11. Interest rate swaps:

Effective August 28, 2008, the Company entered into a series of interest rate swap agreements to partially manage its exposure to interest rate
fluctuations on its $430,000 non-revolving three year term facility. The interest rate swaps in place during 2010 are as follows:

Swap number
#2
#3
Total

Notional value
100,000
100,000
200,000

Maturity date
August 31, 2010
April 18, 2011

Interest rate the
Company will
receive
30 day B.A.
30 day B.A.

Interest rate the
Company will pay

3.749% $
3.829%

Fair value
unrealized
gain/(loss) at
December 31,
2010
expired
(697)
(697)

Fair value
unrealized
gain/(loss) at
December 31,
2009
(2,117)
(3,584)
(5,701)

The Company marks to market the fair value of these interest rate swaps as an adjustment to income. During 2010, unrealized gains of $5,004
(2009 – unrealized gains of $6,776) and realized losses of $5,227 (2009 – realized losses of $8,190) have been reflected in net income. Both
amounts have been included within mark to market on interest rate swaps.

TMX-0000-AR-Back-v13.indd 89

29/03/11 3:55 PM

Notes to Consolidated Financial Statements 89

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

12. Commitments and capital lease obligations:

The Company is committed under long-term leases and licenses as follows:

(a)

The rental of office space, under various long-term operating leases with remaining terms of up to eleven years, including certain asset
retirement obligations with regards to these leases.

(b) The rental of computer hardware and software for terms of one to three years under operating leases.

(c)

The rental of computer hardware and software for terms of one to three years under capital leases.

(d) Certain data licenses for remaining terms of up to 6 years.

Current lease and license obligations over the remaining terms are as follows:

Years ending December 31:

2011
2012
2013
2014
2015
Thereafter

Interest amount (at an average rate of 3.9%)

Less: Obligation under capital leases – current
Obligation under capital leases – long-term

Capital lease
obligations
3,516
2,878
1,019
–
–
–
7,413
(288)
7,125
(3,326)
3,799

Other
non-capital
commitments
15,061
11,911
8,801
7,771
7,360
21,408
72,312
–
–
–
–

In addition, the Company is responsible for additional taxes, maintenance and other direct charges with respect to its leases. The additional
amount will be approximately $9,483 for 2011.

13. Other liabilities:

Other liabilities include amounts payable under the long-term incentive plan (note 18), amounts related to acquisitions made in previous
years and asset retirement obligations.

14. Deferred revenue – initial and additional listing fees:

Deferred revenue – initial and additional listing fees represents non-refundable fees received from listed issuers. This deferred revenue is
recognized on a straight-line basis over an estimated service period of ten years.

15. Share capital:

The authorized capital of the Company consists of an unlimited number of common shares and an unlimited number of preference shares,
issuable in series. No preference shares have been issued.

Each common share of the Company entitles its holder to one vote at all meetings of shareholders subject to certain restrictions with respect
to the voting rights and the transferability of the shares. No person or combination of persons acting jointly or in concert is permitted to
beneficially own or exercise control or direction over more than 10% of any class or series of voting shares of the Company without the prior
approval of the Ontario Securities Commission (“OSC”) and Quebec’s Autorité des marchés financiers (“AMF”).

Each common share of the Company is also entitled to receive dividends if, as and when declared by the Board of Directors of the Company.
All dividends that the Board of Directors of the Company may declare and pay will be declared and paid in equal amounts per share on all
common shares, subject to the rights of holders of the preference shares. Holders of common shares will participate in any distribution of the
net assets of the Company upon liquidation, dissolution or winding-up on an equal basis per share, but subject to the rights of the holders of
the preference shares.

90 TMX Group Annual Report | 2010

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29/03/11 3:55 PM

There are no pre-emptive, redemption, purchase or conversion rights attaching to the common shares, except for the compulsory sale of
shares or redemption provision described in connection with enforcing the restriction on ownership of voting shares of the Company.

The following transactions occurred with respect to the Company’s common shares:

Balance, beginning of the period
Issued (note 2)
Repurchased and cancelled
Options exercised
Balance, end of the period

Number of common shares

2010
74,307,041
–
–
63,421
74,370,462

2009
74,403,577
878,059
(1,000,000)
25,405
74,307,041

Share capital
2010
1,102,619
–
–
1,512
1,104,131

2009
1,084,399
32,052
(14,575)
743
1,102,619

16. Employee share purchase plan:

The Company offers an employee share purchase plan for eligible employees of the Company and of its designated subsidiaries. Under the
employee share purchase plan, contributions by the Company and by eligible employees will be used by the plan administrator, CIBC Mellon
Trust Company, to make purchases of common shares of the Company on the open market. Each eligible employee may contribute up to 10%
of the employee’s salary to the employee share purchase plan. The Company will contribute to the plan administrator the funds required to
purchase one common share of the Company for each two common shares purchased on behalf of the eligible employee, up to a maximum
annual contribution of $3. Shareholder approval is not required for this plan or any amendments to the plan.

The Company accounts for its contributions as compensation expense when the amounts are contributed to the plan. Compensation expense
related to this plan was $1,320 for the year ended December 31, 2010 (2009 – $1,324).

17. Share option plan:

The Company established a share option plan in 2002, the year of its initial public offering. All employees of the Company and those of its
designated subsidiaries at or above the director level are eligible to be granted share options under the share option plan.

According to the terms of the Company’s plan, under no circumstances may any one person’s share options and all other share compensation
arrangements exceed 5% of the outstanding common shares issued of the Company. 4,064,226 common shares of the Company remain
reserved for issuance upon exercise of share options granted under the plan, representing approximately 5% of the outstanding common
shares of the Company.

The fair value of each share option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
assumptions used for grants in 2010: dividend yield of 4.1% (2009 – 3.5%); expected volatility of 32.8% (2009 – 26.8%); risk-free interest rate
of 3.5% (2009 – 4.0%) and expected life of 7 years (2009 – 7 years).

Options granted will expire in 2011, 2012, 2013, 2014, 2015, 2016, and 2017.

Share options granted in 2010 have a strike price of $29.52. Share options granted in 2009 have strike prices in the range of $31.59 to $34.24.

Share options:

Outstanding, beginning of year
Granted
Forfeited
Exercised
Outstanding, end of year

2010

2009

Number of
share options
1,382,569
457,782
(98,199)
(63,421)
1,678,731

Weighted average
exercise price
35.53
29.52
40.24
19.32
34.23

Number of
share options
1,021,819
635,717
(249,562)
(25,405)
1,382,569

Weighted average
exercise price
39.14
31.63
41.65
22.58
35.53

At December 31, 2010, 720,715 options were fully vested and exercisable at strike prices in the range of $10.53 to $54.50. During 2010, the
Company recognized compensation costs of $2,798 in relation to its share option plan (2009 – $2,909).

TMX-0000-AR-Back-v13.indd 91

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Notes to Consolidated Financial Statements 91

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

18. Interim bonus and long-term incentive plan:

Effective January 1, 2001, the Company introduced an interim bonus plan (in lieu of a long-term incentive plan) for certain employees or
officers of the Company. The interim bonus plan provided a deferred award based on the annual financial performance of the Company.
Amounts earned in 2001 were converted into deferred share units (“DSUs”) for executive officers and restricted share units (“RSUs”) for other
participants, based on the price of one common share of the Company, in conjunction with the public offering of the Company. Amounts
earned in 2002 were converted into DSUs or RSUs based on the value of one common share of the Company on December 31, 2002.

The DSUs discussed above are fully vested, but can only be redeemed for cash payment upon termination of employment or retirement.
The RSUs discussed above vested and were redeemed in cash by December 31, 2005.

In January 2004, the Board approved a long-term incentive plan (“LTIP”) for certain employees or officers of the Company. The LTIP provides
for the granting of RSUs, which vest over a maximum of three years and are payable provided the employee is still with the Company.
The amount of the award payable at the end of the second year following the year in which the RSUs were granted will be determined
by the total shareholder return over the period. Total shareholder return represents the appreciation in share price of the Company plus
dividends paid on a common share of the Company, measured at the time RSUs vest.

In addition, to assist the Company’s officers to meet their equity ownership requirements, the Company gives officers who have not met their
ownership requirements the opportunity to convert all or part of their short-term incentive award into DSUs. These DSUs vest immediately.

The Company records its obligation under the LTIP, if any, in the period in which the award is earned. The Company has purchased swaps
to economically hedge against the impact of its share price fluctuations on the non-performance based portion of the LTIP (note 21). As at
December 31, 2010, the total accrual for the Company’s LTIP is $11,466 (December 31, 2009 – $6,303) and this is included in accounts payable
and accrued liabilities and other liabilities. The accrual is based on actual dividends paid, continuation of the most recent quarterly dividend
and the closing price of the Company’s common shares for the period.

19. Earnings per share:

Net income
Weighted average number of common shares outstanding
Basic earnings per share
Diluted weighted average number of common shares outstanding
Diluted earnings per share

20. Income taxes:

2010
196,535
74,331,877
2.64
74,423,104
2.64

2009
104,701
74,131,244
1.41
74,255,480
1.41

Income tax expense attributable to income differs from the amounts computed by applying the combined federal and provincial income tax
rate of 31% (2009 – 33%) to pre-tax income from operations as a result of the following:

Income before income taxes, and after non-controlling interests

Computed expected income tax expense
Rate differential due to various jurisdictions
Provincial tax holiday
Impairment charges and non-deductible expenses
Share of income from affiliate
Deferred revenue not affecting income tax expense
Impact of changes in substantively enacted income tax rates
Valuation allowance
Future tax rate adjustments on temporary differences
Other

92 TMX Group Annual Report | 2010

2010
287,276

89,055
(2,685)
(3,512)
1,758
(401)
–
–
1,275
6,695
(1,444)
90,741

2009
201,653

66,548
(7,257)
(3,393)
22,176
(137)
(380)
10,356
8,605
2,360
(1,926)
96,952

TMX-0000-AR-Back-v13.indd 92

29/03/11 3:55 PM

In recent years, the Company has benefited from tax measures announced by the ministère des Finances du Québec in 2001, which were
intended to support the financial sector in the province of Québec, including, among others, exchanges and clearing houses such as MX and
CDCC. These measures provided income tax exemption, capital tax exemption, and an exemption from employer contributions to the Health
Services Fund relating to eligible activities performed by MX and CDCC. This provincial tax holiday was in place until December 31, 2010, and
standard statutory rates will be applicable going forward.

The income tax provisions for the years ended December 31, 2010 and 2009 are as follows:

Current income tax expense
Future income tax expense (benefit)

2010
99,734
(8,993)
90,741

2009
93,410
3,542
96,952

The tax effects of temporary differences that give rise to significant portions of the future tax asset and liability at December 31, 2010 and
2009 are presented below:

Non-capital loss carryforwards
Premises and equipment
Cumulative eligible capital/intangible assets
Total return swaps and interest rate swaps
Restructuring provision
Deferred listing revenue
Employee future benefits
Long term incentive plan
Other temporary differences
Valuation allowance

Future tax assets:
Current
Long-term
Future tax liabilities:
Current
Long-term

2010
8,726
3,584
(202,138)
(1,060)
–
137,264
(2,274)
5,883
2,267
(6,847)
(54,595)

29,651
152,500

(10)
(236,736)

2009
8,438
2,003
(199,468)
1,834
185
128,384
(1,885)
3,803
2,335
(9,218)
(63,589)

26,675
144,551

(118)
(234,697)

TMX-0000-AR-Back-v13.indd 93

29/03/11 3:55 PM

Notes to Consolidated Financial Statements 93

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

21. Financial instruments:

The Company has classified the significant impacts of its financial instruments as follows:

(a) Financial instruments – carrying values and fair values:

Asset /(Liability)

Held for trading

Cash and cash equivalents
Marketable securities
Restricted cash
Accounts receivable
Energy contracts receivable
Fair value of open energy contracts
Daily settlements and cash deposits
Investments in privately-
owned companies
Accounts payable and
accrued liabilities
Total return swaps
Interest rate swaps
Obligations under capital leases
Energy contracts payable
Fair value of open energy contracts
Daily settlements and cash deposits
Term loan payable, net

Classified
–
–
–
–
–
141,894
–

–

–
4,479
(697)
–
–
(141,894)
–
–

Available-
for-sale
(carried at
cost less
impairment)
–
–
–
–
–
–
–

Loans and
receivables /
(other
financial
liabilities)
–
–
–
85,201
754,933
–
193,065

December 31, 2010

Carrying
amount
68,797
261,605
1,105
85,201
754,933
141,894
193,065

Fair value
68,797
261,605
1,105
85,201
754,933
141,894
193,065

Designated
68,797
261,605
1,105
–
–
–
–

–

–
–
–
–
–
–
–
–

6,617

–

6,617

–
–
–
–
–
–
–
–

(59,093)
–
–
(7,125)
(754,933)
–
(193,065)
(429,754)

(59,093)
4,479
(697)
(7,125)
(754,933)
(141,894)
(193,065)
(429,754)

(59,093)
4,479
(697)
(7,125)
(754,933)
(141,894)
(193,065)
(428,880)

Available-
for-sale
(carried at
cost less
impairment)
–
–
–
–
–
–
–

Loans and
receivables /
(other
financial
liabilities)
–
–
–
79,427
714,545
–
565,408

December 31, 2009

Carrying
amount
87,978
103,169
911
79,427
714,545
202,760
565,408

Fair value
87,978
103,169
911
79,427
714,545
202,760
565,408

Designated
87,978
103,169
911
–
–
–
–

–

–
–
–
–
–
–
–
–

8,280

–

8,280

–
–
–
–
–
–
–
–

(44,350)
–
–
(8,925)
(714,545)
–
(565,408)
(429,016)

(44,350)
(533)
(5,701)
(8,925)
(714,545)
(202,760)
(565,408)
(429,016)

(44,350)
(533)
(5,701)
(8,925)
(714,545)
(202,760)
(565,408)
(427,025)

Asset /(Liability)

Held for trading

Classified
–
–
–
–
–
202,760
–

–

–
(533)
(5,701)
–
–
(202,760)
–
–

94 TMX Group Annual Report | 2010

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29/03/11 3:55 PM

(b) Fair value measurement:

The Company uses a fair value hierarchy to categorize the inputs used in its valuation of assets and liabilities carried at fair value. The extent of
the Company’s use of unadjusted quoted market prices (Level 1), models using observable market information as inputs (Level 2) and models
using unobservable market information (Level 3) in its valuation of assets and liabilities carried at fair value is as follows:

Asset/(Liability)

Fair value measurements using:

Cash and cash equivalents
Marketable securities
Restricted cash
Fair value of open energy contracts
Total return swaps
Interest rate swaps
Fair value of open energy contracts

Level 1
68,797
261,605
1,105
–
–
–
–

Level 2
–
–
–
141,894
4,479
(697)
(141,894)

Asset/(Liability)

Fair value measurements using:

Cash and cash equivalents
Marketable securities
Restricted cash
Fair value of open energy contracts
Total return swaps
Interest rate swaps
Fair value of open energy contracts

Level 1
87,978
73,308
911
–
–
–
–

Level 2
–
29,861
–
202,760
(533)
(5,701)
(202,760)

As at December 31, 2010

Level 3
–
–
–
–
–
–
–

Assets/(liabilities)
at fair value
68,797
261,605
1,105
141,894
4,479
(697)
(141,894)

As at December 31, 2009

Level 3
–
–
–
–
–
–
–

Assets/(liabilities)
at fair value
87,978
103,169
911
202,760
(533)
(5,701)
(202,760)

There were no significant transfers during the years between Levels 1 and 2.

The investment portfolio includes pooled fund investments managed by an external investment fund manager. There is no contracted maturity
date for the investments.

The Company has designated its marketable securities as held-for-trading. At December 31, 2010, these investments have been measured
at fair value and unrealized losses of $635 have been reflected in net income in the consolidated financial statements for the year ended
December 31, 2010 (2009 – unrealized losses of $153).

(d) Total return swaps:

The Company has entered into a series of total return swaps (“TRSs”) which synthetically replicate the economics of the Company purchasing
the Company’s shares as a partial fair value hedge to the share appreciation rights of the non-performance element of RSUs and DSUs that
are awarded to directors and employees of the Company and its designated subsidiaries. The Company marks to market the fair value of the
TRSs as an adjustment to income, and simultaneously marks to market the liability to holders of the units as an adjustment to income. Both
amounts are reflected within Compensation and benefits in the income statement. The fair value of the TRSs is based upon the excess or
deficit of the volume weighted average price of the Company’s shares for the last five trading days of the year compared with the Company’s
share price at the date of entering into the TRSs. The fair value of the TRSs and the obligation to unit holders are reflected on the balance sheet.
The contracts are settled in cash upon maturity.

TMX-0000-AR-Back-v13.indd 95

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Notes to Consolidated Financial Statements 95

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

The following tables represent the TRSs which are outstanding:

As at December 31, 2010:

Equity contract #20
Equity contract #25
Equity contract #26
Equity contract #27
Equity contract #28
Equity contract #29

As at December 31, 2009:

Equity contract #16
Equity contract #20
Equity contract #21
Equity contract #22
Equity contract #23
Equity contract #24

Remaining term to maturity (notional amount)
Under 1 year
–
–
5,161
540
3,411
2,079
11,191

1 to 3 years
1,258
820
–
–
–
–
2,078

Total
1,258
820
5,161
540
3,411
2,079
13,269

Remaining term to maturity (notional amount)
Under 1 year
407
–
5,338
600
4,408
2,399
13,152

1 to 3 years
–
1,258
–
–
–
–
1,258

Total
407
1,258
5,338
600
4,408
2,399
14,410

Fair value

Gain
332
250
1,642
220
1,264
771
4,479

Loss
–
–
–
–
–
–
–

Net
332
250
1,642
220
1,264
771
4,479

Fair value

Gain
–
58
–
29
–
–
87

Loss
(28)
–
(574)
–
(12)
(6)
(620)

Net
(28)
58
(574)
29
(12)
(6)
(533)

Unrealized gains of $5,012 have been reflected in net income in the consolidated financial statements for the year ended December 31, 2010
(2009 – unrealized gains of $5,305).

(e) Interest rate swaps:

The Company entered into a series of interest rate swap agreements, which commenced on August 28, 2008, to partially manage its exposure
to interest rate fluctuations on the non-revolving three year term facility (notes 10 and 11). As at December 31, 2010, there was only one
interest rate swap still in effect.

The Company marks to market the fair value of the interest rate swaps. Unrealized gains of $5,004 and realized losses of $5,227 have been
reflected within net income, as Mark to market on interest rate swaps, for the year ended December 31, 2010 (2009 – unrealized gains of $6,776
and realized losses of $8,190).

(f) NGX energy contracts:

The fair value at the balance sheet date of the undelivered physically settled trading contracts and the forward financially settled trading
contracts is recognized in the consolidated assets and liabilities as open energy contracts. There is no impact on the consolidated statement
of income.

(g) CDCC daily settlements and cash deposits:

The amounts due from and to CDCC as a result of marking open futures positions to market and settling option transactions each day are
required to be collected from or paid to Clearing Members prior to the commencement of trading the next day. Daily settlements and cash
deposits also include cash margin deposits and clearing fund cash deposits of Clearing Members held in the name of CDCC. The amounts due
from Clearing Members are presented as an asset in the balance sheet and are not offset against the amounts due to other Clearing Members,
which are presented as a liability. There is no impact on the consolidated statement of income.

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(h) Investments in privately-owned companies:

The Company holds certain equity investments in privately-owned companies. As these equity instruments are privately owned and do not
have quoted market prices in active markets, these available-for-sale investments are carried at cost less any impairment losses. During
2010, the Company recognized an unrealized loss of $1,662 on its investments, a significant portion of which was an unrealized foreign
exchange loss.

22. Risk management:

(a) Credit risk:

Credit risk is the risk of financial loss to the Company associated with a counterparty’s failure to fulfill its financial obligations and arises
principally from the Company’s investments in marketable securities, total return swaps and interest rate swaps, accounts receivable and the
clearing and/or brokerage operations of Shorcan, Shorcan Energy, NGX and CDCC.

(i)

Investments in marketable securities

The Company manages its exposure to credit risk arising from investments in marketable securities by holding investment funds that
actively manage credit risk. The investment policy of the Company will only allow excess cash to be invested within a specific money
market fund and a specific short term bond and mortgage fund. The money market fund manages credit risk by limiting its investments
to government or government-guaranteed treasury bills, and high-grade corporate notes. The short term bond and mortgage fund
manages credit risk by limiting its investments to high-quality Canadian corporate bonds, government bonds and up to 40% of the
fund’s net assets in conventional first mortgages and mortgages guaranteed under the National Housing Act (Canada). Corporate bonds
held must have a minimum credit rating of BBB by DBRS Limited at the time of purchase. Mortgages may not comprise more than
40% of the portfolio and must be either multi-residential conventional first mortgages or multi-residential government guaranteed
mortgages. The Company does not have any investments in non-bank asset-backed commercial paper.

(ii)

Total return swaps and interest rate swaps

The Company limits its exposure to credit risk on TRSs and interest rate swaps by contracting with a major Canadian chartered bank.

(iii) Accounts receivable

The Company’s exposure to credit risk resulting from uncollectable accounts is influenced by the individual characteristics of its
customers, many of whom are banks and financial institutions. The Company invoices its customers on a regular basis and maintains a
collections team to monitor customer accounts and minimize the amount of overdue receivables. There is no concentration of credit risk
arising from accounts receivable from a single customer. In addition, customers that fail to maintain their account in good standing risk
loss of listing, trading or data privileges.

(iv) Clearing and/or brokerage operations

The Company is exposed to credit risk in the event that customers, in the case of Shorcan and Shorcan Energy, or contracting parties,
in the case of NGX, or Clearing Members, in the case of CDCC, fail to settle on the contracted settlement date.

Shorcan and Shorcan Energy’s risk is limited by their status as agents, in that they do not purchase or sell securities for their own
account. As agents, in the event of a failed trade, Shorcan or Shorcan Energy have the right to withdraw their normal policy of anonymity
and advise the two counterparties to settle directly.

NGX requires each contracting party to provide sufficient collateral, in the form of cash or letters of credit, to exceed its outstanding
credit exposure as determined by NGX in accordance with its margining methodology. The cash collateral deposits and letters of credit
are held by a major Canadian chartered bank. This collateral may be accessed by NGX in the event of default by a contracting party. NGX
measures total potential exposure for both credit and market risk for each contracting party on a real-time basis as the aggregate of:

(a) Outstanding energy contracts receivable;

(b) “Variation Margin”, comprised of the aggregate “mark-to-market” exposure for all forward purchase and sale contracts with an

adverse value from the perspective of the customer; and

(c) “Initial Margin”, an amount that estimates the worst expected loss that a contract might incur under normal market conditions

during a liquidation period.

As a result of these calculations of contracting party exposure at December 31, 2010, NGX held cash collateral deposits of $835,739
(December 31, 2009 – $1,040,319) and letters of credit of $1,941,367 (December 31, 2009 – $1,963,685). These amounts are not included
in the Company’s consolidated balance sheet.

Notes to Consolidated Financial Statements 97

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Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

CDCC is exposed to the risk of default of its Clearing Members. CDCC is the central counterparty and guarantor of all transactions carried
out on MX’s markets and on the OTC market when the transaction is cleared through CDCC. It primarily supports the risk of one or
more counterparties, meeting strict financial and regulatory criteria, defaulting on their obligations, in which case the obligations of
that counterparty would become the responsibility of CDCC. This risk is greater if market conditions are unfavourable at the time of the
default.

CDCC’s principal risk management practice is the collection of risk-based margin deposits in the form of cash, letters of credit, equities
and liquid government securities. Should a Clearing Member fail to meet a daily margin call or otherwise not honour its obligations
under open futures and options contracts, margin deposits would be available to apply against the costs incurred to liquidate the
Clearing Member’s positions.

CDCC’s margining system is complemented by a Daily Capital Margin Monitoring (“DCMM”) process that evaluates the financial strength
of a Clearing Member against its margin requirements. Every day, CDCC monitors the margin requirements of a Clearing Member as
a percentage of its capital (net allowable assets). CDCC will make additional margin calls when the ratio of margin requirement/net
allowable assets exceeds 100%. The additional margin requirement is equal to the excess of the ratio over 100%.

CDCC also maintains a clearing fund of deposits of cash and securities from all Clearing Members. The aggregate level of clearing funds
required from all Clearing Members must cover the worst loss that CDCC could face if one counterparty is failing under various extreme
but plausible market conditions. Each Clearing Member contributes to the clearing fund in proportion to its margin requirements. If, by a
Clearing Member’s default, further funding is necessary to complete a liquidation, CDCC has the right to require other Clearing Members
to contribute additional amounts equal to their previous contribution to the clearing fund.

CDCC’s margin deposits and clearing fund deposits are held by approved depositories under irrevocable agreements. This collateral may
be accessed by CDCC in the event of default by a Clearing Member. As a result of these calculations of Clearing Member exposure at
December 31, 2010, CDCC held margin deposits of $2,911,169 (December 31, 2009 – $3,101,757), and clearing fund deposits of $264,087
(December 31, 2009 – $205,055), held primarily in government and equity securities. These amounts are not included in the Company’s
consolidated balance sheet.

(v)

Facilities and guarantees

NGX maintains an unsecured clearing backstop fund of USD 100,000. The Company is the guarantor, on an unsecured basis, of this fund.

In response to both the credit and liquidity risks that CDCC is exposed to through its clearing operations, CDCC has arranged a total of
$50,000 in revolving standby credit facilities with a Canadian Schedule 1 bank to provide liquidity in the event of default by a Clearing
Member. Borrowings under the facilities, which are required to be collateralized, bear interest based on the bank’s prime rate plus 0.75%.

Neither facility has been drawn upon at December 31, 2010.

(b) Market risk:

Market risk is the risk that changes in market price, such as foreign exchange rates, interest rates, commodity prices and equity prices will
affect the Company’s income or the value of its holdings of financial instruments.

(i)

Foreign currency risk

The Company is exposed to foreign currency risk on revenue, cash and cash equivalents, marketable securities, accounts receivable
and accounts payable principally denominated in USD. In 2010, the Company recognized USD denominated revenue of approximately
USD 105,000, including BOX, less various USD expenses (2009 – USD 110,000). The approximate impact of a 10% rise and a 10%
decline in the Canadian dollar (“CAD”) compared to the USD on these transactions as at December 31, 2010 is a $5,300 decrease or
increase in net income respectively. At December 31, 2010, cash and cash equivalents and accounts receivable, excluding BOX, and
current liabilities, excluding BOX, include USD 13,379 (December 31, 2009 – USD 11,920), and USD 755 (December 31, 2009 – USD
598) respectively, which are exposed to changes in the USD – CAD exchange rate. The approximate impact of a 10% rise and a 10%
decline in the CAD compared to the USD on these exposed balances at December 31, 2010 is a $1,256 decrease or increase in net
income respectively. In addition, net assets related to BOX are denominated in USD, and the effect of exchange rate movements on
the Company’s share of these net assets is included in other comprehensive income. The approximate impact of a 10% rise and a
10% decline in the CAD compared to the USD on the translation of the net assets related to BOX at December 31, 2010 is a $5,213
decrease or increase in other comprehensive income respectively.

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(ii)

Interest rate risk

The Company is exposed to interest rate risk on its marketable securities, non-revolving term loan payable and interest rate swaps.

External investment fund managers have been engaged by the Company to manage the asset mix and the risks associated with its
marketable securities. At December 31, 2010 the Company held $261,605 in these funds (December 31, 2009 – $103,169). The
approximate impact on the carrying value of these investments of a 1% rise and a 1% fall in interest rates is ($2,796) and $2,796
respectively.

The Company has a non-revolving term loan payable of $430,000 (note 10). The Company entered into a series of interest rate swap
agreements to partially manage its exposure to interest rate fluctuations on the loan (note 11). At December 31, 2010, the fair value of
the remaining interest rate swap was a liability of $697. The approximate impact of a 1% rise or fall in interest rates on the fair value of
the remaining swap is approximately a $300 decrease or increase in the liability respectively. The approximate impact on net income of a
1% rise and a 1% fall in interest rates with respect to the loan to expiry is a decrease of $(1,250) and an increase of $1,250 respectively.

(iii) Equity price risk

The Company is exposed to equity price risk arising from its RSU and DSU plans, as the Company’s obligation under the plans is partly
based on the price of the Company’s shares. The Company has entered into TRSs as a partial fair value hedge to the share appreciation
rights of the RSUs and DSUs awarded under the plan. The fair value of the TRSs is based upon the excess or deficit of the volume weighted
average price of the Company’s shares for the last five trading days of the reporting period compared with the Company’s share price
at the date of entering into the TRSs. As at December 31, 2010, a 25% increase in the share price of the Company would result in a net
$2,816 decrease in net income. A 25% decrease in the share price of the Company would result in a net $3,681 increase in net income.

(iv) Other market price risk

The Company is exposed to other market price risk from the activities of Shorcan, Shorcan Energy, NGX and CDCC if a customer,
contracting party or Clearing Member, as the case may be, fails to take or deliver either securities, derivative products or energy products
on the contracted settlement date where the contracted price is less favourable than the current market price.

Shorcan and Shorcan Energy’s risk is limited by their status as an agent, in that they do not purchase or sell securities or commodities
for their own account, the short period of time between trade date and settlement date, and the defaulting customer’s liability for any
difference between the amounts received upon sale of, and the amount paid to acquire, the securities or commodities.

Both NGX’s and CDCC’s measure of total potential exposure, as described previously, includes measures of market risk which are factored
into the collateral required from each contracting party or Clearing Member.

The Company is also exposed to other market price risk on a portion of its sustaining fees revenue, which is based on quoted market
values of listed issuers as at December 31 of the previous year.

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they become due. The Company manages
liquidity risk through the management of its Cash and Marketable securities, all of which are held in short term instruments, and its credit
facilities (note 10) and capital (note 23).

TMX-0000-AR-Back-v13.indd 99

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Notes to Consolidated Financial Statements 99

Notes to the Consolidated Financial Statements

Years ended December 31, 2010 and 2009 (In thousands of Canadian dollars, except per share amounts)

23. Capital maintenance:

The Company’s primary objectives in managing capital, which it defines as including its share capital and various credit facilities, include:

(i)

Maintaining sufficient capital for operations, to ensure market confidence and to meet capital maintenance requirements imposed on
its subsidiaries:

(a) In respect of TSX, as required by the OSC to maintain certain financial ratios as defined in the OSC recognition order, as follows:

(i)

a current ratio not less than 1.1:1;

(ii) a debt to cash flow ratio not greater than 4:1; and

(iii) a financial leverage ratio consisting of adjusted total assets to adjusted shareholders’ equity not greater than 4:1

The Company has complied with these externally imposed capital requirements;

(b) In respect of TSX Venture Exchange Inc., as required by various provincial securities commissions to maintain adequate

financial resources

The Company has complied with these externally imposed capital requirements;

(i) maintain adequate financial resources as required by the Alberta Securities Commission; and

(ii)

maintain a current ratio of no less than 1:1 and a tangible net worth of not less than $9,000 as required by a major Canadian
chartered bank

The Company has complied with these externally imposed capital requirements;

(d) In respect of MX, as required by the AMF to maintain certain financial ratios as defined in the AMF recognition order, as follows:

(i)

a working capital ratio of more than 1.5:1;

(ii) a cash flow to total debt ratio of more than 20%; and

(iii) a financial leverage ratio consisting of total assets to shareholders’ equity of less than 4:1

The Company has complied with these externally imposed capital requirements;

(e) In respect of Shorcan by the Investment Industry Regulatory Organization of Canada (“IIROC”) which requires Shorcan to maintain

a minimum level of shareholders’ equity of $500

The Company has complied with these externally imposed capital requirements;

(ii)

Providing sufficient capital to meet the covenants imposed in connection with credit facilities (note 10) that require the Company
to maintain:

(a) a maximum debt to adjusted EBITDA ratio of 3.5:1;

(b) a minimum consolidated net worth based on a contracted formula; and

The Company has complied with these externally imposed capital requirements;

(iii) Retaining sufficient capital to invest and continue to grow our business; and

(iv)

Returning capital to shareholders through dividends paid to shareholders and purchasing shares for cancellation pursuant to normal
course issuer bids.

The current economic conditions have not changed our objectives, policies or processes for managing capital.

24. Related party transactions:

Any transactions entered into between the Company and related parties are on terms and conditions that are at least as favourable to the
Company as market terms and conditions and are recorded at the agreed upon exchange amount.

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25. Contingent liabilities:

From time to time in connection with its operations, the Company or its subsidiaries are named as a defendant in actions for damages and
costs sustained by plaintiffs, or as a respondent in court proceedings challenging the Company’s or its subsidiaries’ regulatory actions,
decisions or jurisdiction.

26. Comparative figures:

Certain comparative figures have been reclassified to conform to the financial presentation adopted in the current period. In particular,
commencing in 2010, provisions for doubtful accounts receivable are included in General and administration expenses whereas, in 2009, these
provisions were reflected as a reduction in various sources of revenue. The comparative figures for both revenue and expenses in 2009 have
been reclassified to conform with the financial presentation adopted in 2010.

27. Subsequent event:

The Company announced on February 9, 2011 an agreement to combine its operations with London Stock Exchange Group plc (“LSEG”) in an
all-share merger of equals. The merger is being unanimously recommended by the Board of Directors of TMX Group Inc.(“TMX”) and the Board
of Directors of LSEG. The merger will be implemented by means of a Canadian plan of arrangement under which TMX shareholders will receive
2.9963 LSEG shares for each TMX share they hold. TMX shareholders that are residents of Canada for tax purposes will be entitled to elect to
receive exchangeable shares (each an “Exchangeable”) in a Canadian subsidiary of LSEG for each TMX share that they hold. TMX shareholders
electing to receive Exchangeables will receive the same number of Exchangeables as the number of new ordinary LSEG shares to which they
would otherwise have been entitled to receive under the terms of the merger. On an ongoing basis, each Exchangeable will carry the right to be
exchanged for one LSEG share and will carry mirror-image economic rights to an LSEG share (together with certain ancillary rights). In addition,
each Exchangeable will permit the holder to vote one LSEG share at any shareholder meeting of LSEG. The Exchangeables allow Canadian
resident TMX shareholders to participate in the transaction on a tax-deferred basis, provided they file a valid tax election. The Exchangeables
will also allow Canadian resident TMX shareholders to receive dividends from a Canadian corporation, which are generally subject to more
favourable tax treatment than dividends from a non-Canadian corporation. TMX shareholders will therefore own 45% and LSEG shareholders
will own 55% of the combined TMX-LSEG group (“Merged Group”). The shares of the Merged Group will be listed on Toronto Stock Exchange,
trading in Canadian Dollars and London Stock Exchange, trading in Sterling. The Exchangeables will also be listed on Toronto Stock Exchange,
trading in Canadian Dollars.

Completion of the merger is subject to customary regulatory and other approvals as well as certain other conditions. The following provides an
overview of certain approvals and conditions that must be met:

Approval by at least 66 2/3% of the votes cast by shareholders of TMX at a special meeting of TMX shareholders;

Approval by a majority of votes cast by LSEG shareholders at a general meeting of LSEG shareholders;

Ontario court approval of the Plan of Arrangement;

Listing of the LSEG shares and the Exchangeables on Toronto Stock Exchange and listing of the LSEG shares issuable pursuant to the Plan
of Arrangement on the London Stock Exchange.

The merger agreement, which provides for a long-stop date of November 9, 2011 (with up to a 30-day extension in certain circumstances),
contains customary provisions for a transaction of this nature, including customary representations and warranties, covenants, undertakings
and conditions. In the merger agreement, each of TMX and LSEG have agreed not to solicit other offers. The merger agreement provides that
the Boards of Directors of each of TMX and LSEG may, under certain circumstances, terminate the agreement in favour of an unsolicited
superior proposal, subject to a payment of a termination fee of 1% of the market capitalization of the LSEG at the time of entering into the
agreement, and subject to a right by each party to match the superior proposal in question.

It is anticipated that the relevant shareholders’ meetings will take place in the second quarter of 2011 and court approval will be sought within
three business days of TMX’s shareholders approving the merger. Subject to obtaining shareholder, court and regulatory approvals, the merger
is expected to become effective in the third quarter of 2011.

TMX-0000-AR-Back-v13.indd 101

29/03/11 3:55 PM

Notes to Consolidated Financial Statements

101

Three-Year Review – Financial Information*

(in thousands of dollars)

Revenue:

Issuer Services

Trading, clearing and related

Information services

Technology services and other

2010

20091

20082

162,955
242,165
154,415
15,928
575,463

142,962
237,535
149,004
30,631
560,132

153,049
222,932
136,988
22,127
535,096

Expenses

286,525

276,949

229,725

Income from operations
Income from investment in affiliate
Unrealized loss on investment carried at cost
Investment income
Goodwill impairment charge
Interest expense
Mark to market on interest rate swaps
Other acquisition related expenses
Non-controlling interests
Income taxes
Net Income

Operating cash flow
Working capital3
Total Assets
Shareholders' Equity

$
$
$
$

288,938
1,307
(1,662)
5,212
–
(6,205)
(223)
–
(91)
(90,741)
196,535

280,197
(145,855)
3,281,919
853,111

$
$
$
$

283,183
420
–
4,623
(77,255)
(6,071)
(1,414)
–
(1,833)
(96,952)
104,701

204,877
161,973
3,524,475
770,576

$
$
$
$

305,371
1,426
–
14,824
–
(10,508)
(13,289)
(15,902)
(1,821)
(98,149)
181,952

244,189
146,931
3,688,645
794,629

Certain comparative figures have been reclassified to conform with the financial presentation adopted in the current year.

The financial results of NetThruPut Inc., acquired May 1 2009, have been included in these results from acquisition.

The financial results of Montreal Exchange Inc., acquired May 1 2008, and Boston Options Exchange Inc., acquired August 29, 2008, have been included in these results from acquisition.

Please see note 10 of the financial statements for further details on the term loan due for repayment in 2011.

102 TMX Group Annual Report | 2010

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Board of Directors
As of March 25, 2011

WAYNE C. FOX (CHAIR)

Corporate Director
Committees: Governance, Human Resources
Director since: 1997

J. SPENCER LANTHIER

Corporate Director
Committees: Finance and Audit (Chair), Governance
Director since: 2000

TULLIO CEDRASCHI

JEAN MARTEL

Corporate Director
Committees: Governance, Human Resources (Chair)
Director since: 2001

RAYMOND CHAN

Executive Chairman
Baytex Energy Trust
Committees: Finance and Audit and Human Resources
Director since: 2006

DENYSE CHICOYNE

Corporate Director
Committees: Finance and Audit
Director since: 2008

JOHN A. HAGG

Corporate Director
Committees: Human Resources, Public Venture Market
Director since: 2001

HARRY A. JAAKO

Executive Officer and Principal
Discovery Capital Management Corp.
Committees: Finance and Audit, Public Venture Market (Chair)
Director since: 2001

THOMAS A. KLOET

Chief Executive Officer
TMX Group Inc.
Director since: 2008

Partner
Lavery, de Billy LLB
Committees: Finance and Audit, Public Venture Market
Director since: 1999

JOHN P. MULVIHILL

Chairman and Chief Executive Officer
Mulvihill Capital Management Inc.
Committees: Governance (Chair)
Director since: 1996

KATHLEEN M. O’NEILL

Corporate Director
Committees: Finance and Audit, Governance
Director since: 2005

GERRI B. SINCLAIR

Executive Director
Centre for Digital Media
Committees: Human Resources, Public Venture Market
Director since: 2005

JEAN TURMEL

President
Perseus Capital Inc.
Committees: Governance
Director since: 2008

LAURENT VERREAULT

Chief Executive Officer and Chairman
GLV Inc.
Committees: Human Resources
Director since: 2008

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TMX Board of Directors

103

TMX Group Executive Committee
As of March 25, 2011

THOMAS A. KLOET

Chief Executive Officer
TMX Group Inc.

KEVAN COWAN

President, TSX Markets and Group Head of Equities

BRENDA HOFFMAN

Senior Vice President, Group Head of Information Technology
TMX Group Inc.

MARY LOU HUKEzALIE

Vice President, Group Head of Human Resources
TMX Group Inc.

PETER KRENKEL

President and Chief Executive Officer
NGX

ALAIN MIQUELON

President and Chief Executive Officer
Montréal Exchange Inc.

SHARON C. PEL

Senior Vice President, Group Head of Legal and Business Affairs
TMX Group Inc.

MICHAEL PTASzNIK

Senior Vice President and Chief Financial Officer
TMX Group Inc.

ERIC SINCLAIR

President
TMX Datalinx

104 TMX Group Annual Report | 2010

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Shareholder Information

STOCK LISTING

Toronto Stock Exchange
Share Symbol “X”

AUDITOR

KPMG LLP
Toronto, ON

REGISTERED OFFICE AND HEAD OFFICE OF TMX GROUP

The Exchange Tower
130 King Street West
Toronto, ON
M5X 1J2

HEAD OFFICE OF TSX VENTURE EXCHANGE

300 – 5th Avenue SW
10th Floor
Calgary, AB
T2P 3C4

HEAD OFFICE OF MONTRÉAL EXCHANGE

Tour de la Bourse
800, square Victoria
Montreal, QC
H4Z 1A9

HEAD OFFICE OF NGX

140 – 4th Avenue SW
Suite 2330
Calgary, AB
T2P 3N3

HEAD OFFICE OF SHORCAN

20 Adelaide Street East
Suite 1000
Toronto, ON
M5C 2T6

HEAD OFFICE OF EQUICOM

20 Toronto Street
Suite 500
Toronto, ON
M5C 2B8

REGIONAL OFFICE

VANCOUVER
650 West Georgia Street
Suite 2700
Vancouver, BC
V6B 4N9

SHARE TRANSFER AGENT

Requests for information regarding share transfers
should be directed to the Transfer Agent:

CIBC Mellon Trust Company
PO Box 7010
Adelaide Street Postal Station
Toronto, ON
M5C 2W9
Tel: (416) 643-5500 (Toronto Area)
1-800-387-0825 (North America)
Fax: (416) 643-5501
E-mail: inquiries@cibcmellon.com

INVESTOR CONTACT INFORMATION

Investor Relations may be contacted at:
Tel: (416) 947-4277 (Toronto Area)
1-888-873-8392 (North America)
Fax: (416) 947-4727
E-mail: shareholder@tmx.com

Canadian Best Bid and Offer, Capital Pool Company, CBBO, CDEX, CDF,
CDB, CPC, DEX, Groupe TMX, Groupe TSX, Market Book, Market-by-Price,
MarketDepth, Natural Gas Exchange, NEX, NGX, PC-Bond, TMX, TMX Argent,
TMX Datalinx, TMX Group, TMX Money, TMXnet, TMX Select, Toronto Stock
Exchange, TSX, TSX Datalinx, TSX Group, TSX Markets, TSX Quantum, TSX
Technologies, TSX Venture Exchange, TSXV, Volume BLOX and their respective
designs are trade-marks of TSX Inc.

BAX, Bourse de Montréal, CGB, Montréal Exchange, MX, SOLA, and their
respective designs are trade-marks of Bourse de Montréal Inc. and are used
under license.

Boston Options Exchange, BOX and their respective designs are trade-marks
of Boston Options Exchange Group, LLC and are used under license.

Canadian Derivatives Clearing Corporation, Corporation canadienne de
compensation de produits dérivés, CDCC, CCCPD and their respective designs
are the trade-marks of Canadian Derivatives Clearing Corporation.

CanDeal and design is the trade-mark of Candeal.ca Inc. and is used under
license.

EDX and EDX London are registered trade-marks of EDX London Limited and
are used with permission.

Equicom is a trade-mark of The Equicom Group Inc. and is used under license.

ICE is a trade-mark of IntercontinentalExchange Inc. and is used under
license.

NetThruPut and NetThruPut design are trade-marks of NGX and are used
under license.

Shorcan, Shorcan Brokers and Shorcan Energy Brokers are trade-marks of
Shorcan Brokers Limited and are used under license.

“S&P”, as part of the composite mark of S&P/TSX which is used in the name
the S&P/TSX Composite Index, the S&P/TSX Venture Composite Index, the
S&P/TSX 60 Index and other S&P/TSX indices, is a trade-mark of Standard &
Poor’s Financial Services LLC and is used under license.

“VIX”, “VIXC” and “VIXCanada” are the trade-marks of the Chicago Board
Options Exchange (“CBOE”), used by Standard &Poor’s Financial Services LLC,
TSX Inc. and its affiliates with the permission of CBOE.

All other trade-marks used in this Annual Report are the property of their
respective owners.

Design and production by TMX Equicom.

Shareholder Information

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Equities, derivatives,
ﬁ xed income,
energy, data
and over 150 years
of know-how
under one roof.

Exchange with us

Go to TMX.com/exchange

Equities
Toronto Stock Exchange
TSX Venture Exchange
Equicom

Derivatives
Montréal Exchange
CDCC
Montréal Climate Exchange

Fixed Income
Shorcan

Energy
NGX

Data
TMX Datalinx
PC Bond

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