TMX GROUP LIMITED
2020
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2020 Annual Report
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TMX Group Limited
The future
is yours
to see.
2020 Annual Report
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TMX Group Limited
Letter from the chair
This past year was defined by uncertainty in global markets
as the widespread economic impacts of the ongoing COVID-19
pandemic drove higher volatility and created significant
challenges for TMX’s issuers, participants and investors
across the capital markets ecosystem. As market activity
surged, Canada’s markets remained resilient, performing our
crucial function for the nation’s economy. I would like to thank
TMX’s employees for their dedicated efforts and tremendous
accomplishments throughout the year, and also thank our
industry stakeholders for their partnership in ensuring our
markets stay up and running.
In August, we appointed John McKenzie to lead our organization
as CEO. John has been with the company for over 20 years,
serving in multiple senior roles, most recently as CFO. As we
move forward, we believe that TMX Group’s skilled leadership
team, diversified business model and balanced strength
across the organization have us well-positioned for continued,
sustainable long-term growth.
In closing, I want to acknowledge my fellow board members
for their hard work and commitment to our strategic vision.
Christian Exshaw, Harry Jaako, Jean Martel and Gerri Sinclair
will be retiring as Directors this year. I thank them for their
valued contributions to our Board of Directors. I would like to
welcome our new Directors Moe Kermani, Claude Tessier, and, of
course, John. Finally, on behalf of the Board of Directors, I offer
a sincere thank you to our clients and shareholders for their
ongoing support for our company.
Charles Winograd
Chair, Board of Directors
TMX Group Limited
March 26, 2021
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TMX Group Limited
Letter from the CEO
This past year was largely marked by the COVID-19 pandemic.
On behalf of all of us at TMX, I want to send sincere thanks to
all of the brave people who have been working on the front
lines throughout this crisis; including healthcare workers,
first responders and others providing essential services and
crucial support to people in our communities.
As much as any period in our history, 2020 served as
compelling evidence of the benefits of our diversification
strategy and the intrinsic strength of our stress-tested
business model. In 2020, about 51% of our revenue in 2020
was recurring, and approximately 33% of our revenue was
from outside of Canada. Overall, revenue of $865 million
was up 7% from 2019 reflecting increases from Equities and
Fixed Income Trading and Clearing, Global Solutions, Insights
and Analytics, and Capital Formation slightly offset by lower
revenue in our Derivatives Trading and Clearing business.
2020 Highlights
Capital Formation
The 2020 performance of our Capital Formation business
highlights the efficacy of our ecosystem and the fundamental
role healthy public markets play in maintaining the Canadian
economy. Revenue in the Capital Formation business grew 5%
in 2020, fueled by strong financing activity on Toronto Stock
Exchange (TSX) and TSX Venture Exchange (TSXV). Canada’s
tech sector continued to thrive in 2020, with technology
companies listed on our exchanges raising over
$8 billion; a record for the sector on TMX exchanges.
In September 2020, we announced an agreement to acquire
AST Canada, a leading provider of transfer agency, corporate
trust and related services to Canadian companies. This
acquisition, which is expected to close later this year, subject
to regulatory approval, will help to accelerate TSX Trust’s
growth and enhance our competitive position.
In December 2020, we announced important changes to
TSXV’s signature Capital Pool Company, or CPC program. The
CPC program is a unique listing vehicle exclusively offered
by TSXV and a popular go-public vehicle for growth stage
companies. The changes to the program are designed to
increase flexibility, reduce regulatory burden, and improve the
economics and overall value proposition for issuers.
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TMX Group Limited
Equities and Fixed Income Trading & Clearing
Revenue from Equities and Fixed Income Trading and
Clearing was up 17% from 2019, driven by significantly
higher trading activity. Last year marked the second highest
trading volume in TSX history, with over 115 billion securities
traded, trailing only 2009. On a combined basis, volumes on
our equity markets, including TSX, TSXV and Alpha, were up
42% compared to the previous year, with dramatic spikes in
messaging activity.
Derivatives Trading & Clearing
While overall volumes on the Montreal Exchange (MX) in
2020 were flat year-over-year, revenue was down slightly due
to an unfavourable product mix. The historically-low interest
rate environment had a negative impact on volumes in some
of MX's key products, particularly short-term interest rate
contracts, during the second and third quarter of 2020. We
have seen encouraging signs recently as MX volumes grew
30% sequentially from the third to fourth quarter of 2020.
MX’s plans to roll out our extended hours initiative into
Asia remain on track with the expected launch date in the
second quarter of 2021. We have seen strong engagement
from investors and participants in the region to date. The
availability of our products during Asia's business hours will
enable investors and risk managers to trade Canada, such
as the Canadian yield curve, on a relative value basis against
other markets like Australia and Japan.
Global Solutions, Insights & Analytics (GSIA)
Revenue in our GSIA business was up 8% from 2019. Within
this segment revenue from Trayport, including VisoTech,
increased by 14% and the rest of our GSIA business was
up 4%. Trayport (excluding VisoTech) reported a 6% increase
in average trader subscribers, and 7% increase in average
total subscribers in 2020. Trayport recently launched a data
analytics tool that has met with positive client feedback
and expanded the functionality of its AutoTRADER algo
product to cover other markets and products as they
continue to emerge.
Looking Ahead
We are firmly committed to advancing our long-term
strategy, and executing on our Roadmap for Growth, the
plan we rolled out at the end of 2018 to which we aspire to
generate mid single digit revenue growth over the long term.
While the strategy has not changed, in just over two years,
so much has changed in our operating environment and the
world around us, reminding us that sustainable long-term
growth must be supported by an engaged team and
a commitment to the broader stakeholder community.
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TMX Group Limited
In December 2020, we presented an update of our corporate
strategy to the Board of Directors, identifying four priority
areas of focus:
Growth Acceleration
Consistent with our strategy, we continue to pursue
opportunities to position TMX competitively in chosen areas
of high growth potential, including our globally-unique
TSXV model, derivatives, Trayport and data analytics.
Talent and Culture
So much of our success is driven by the exemplary efforts
and unwavering commitment of our people. We are
undertaking vital work to bolster employee engagement
and purpose, ensure a respectful and inclusive workplace,
and amplify our employer brand to attract and retain
talent, and foster employee development.
Public Advocacy for Better Markets
We have an important role to play in advocating
for measures to ensure Canada remains competitive
on the world stage, and ensuring that we elevate the
status of our markets to a global leadership position.
Advancing Sustainability and Environmental,
Social and Governance (ESG) Initiatives
We have set about the work of integrating ESG objectives
and initiatives into TMX’s core objectives and positioning
TMX as a world-leading marketplace for sustainable
investment and finance with our products and services.
Sustainable investment touches virtually every facet of
our business, and today we have a number of initiatives
underway, including:
• ESG 101, a portal of issuers support services and
resources to help listed companies navigate the
fundamentals of ESG reporting,
• We launched the trading of sustainable bonds issued
by governments and quasi- governmental entities this
month, enabling retail investors to gain access to an
otherwise opaque OTC bond market,
• Last July, TMX Datalinx launched a set of ESG indices,
including the S&P/TSX 60 ESG Index, which measures
the performance of constituents in the S&P/TSX 60 Index
that meet sustainability criteria, and
•
In December, MX launched the trading of S&P/TSX 60
ESG Index Futures.
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TMX Group Limited
In Conclusion
Going into my first full year as CEO, I am pleased to be leading
such a talented team in advancing our sustainable long-term
growth strategy. I look forward to updating you on our progress
at our virtual Annual and Special Meeting in May.
John McKenzie
Chief Executive Officer
TMX Group Limited
March 26, 2021
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TMX Group Limited
2020 MD& A
Management's Discussion and Analysis
2020 Annual Report
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TMX Group Limited
TMX Group Limited
MANAGEMENT'S DISCUSSION AND ANALYSIS
February 8, 2021
This Management’s Discussion and Analysis (MD&A) of TMX Group Limited’s (TMX Group) financial condition and
financial performance is provided to enable a reader to assess our financial condition, material changes in our financial
condition and our financial performance, including our liquidity and capital resources, for the year ended December 31,
2020, compared with the year ended December 31, 2019 and as at December 31, 2020 and December 31, 2019. This
MD&A should be read together with our audited annual consolidated financial statements for the year ended
December 31, 2020 (financial statements).
Our financial statements and this MD&A for 2020 are filed with Canadian securities regulators and can be accessed at
www.tmx.com and www.sedar.com. The financial measures included in this MD&A are based on financial statements
prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International
Accounting Standards Board (IASB), unless otherwise specified. All amounts are in Canadian dollars unless otherwise
indicated.
Certain comparative figures have been reclassified in order to conform with the financial presentation adopted in the
current year.
Additional information about TMX Group, including the Annual Information Form, is available at www.tmx.com and
www.sedar.com. We are not incorporating information contained on our website in this MD&A.
MD&A Structure
Our MD&A is organized into the following key sections:
• Mission, Client First Vision, Sustainable Growth and Financial Objectives;
• Our Response to COVID-19 Pandemic;
•
Initiatives and Accomplishments - 2020 initiatives and accomplishments;
• Organizational Changes - an update on senior management changes;
•
Regulatory Changes - an update on the regulatory environment;
• Market Conditions - a discussion of our current business environment;
• Our Business - a detailed description of our operations and our products and services;
•
•
Results of Operations - a year-over-year comparison of results;
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;
• Managing Capital - an outline of objectives for managing our cash and cash equivalents, marketable securities,
share capital, Commercial Paper, Debentures, and credit and liquidity facilities;
•
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Financial Instruments;
Critical Accounting Estimates - a review of our goodwill and intangible assets - valuation and impairment;
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•
•
•
Select Annual and Quarterly Financial Information - a discussion of select annual information from 2018-2020,
the fourth quarter of 2020 compared with the corresponding period in 2019 and the results over the previous
eight quarters;
Enterprise Risk Management - a discussion of the risks to our business as identified through our risk
management process as well as Financial Risk Management;
Accounting and Control Matters - a discussion of changes in accounting policies adopted in 2020 and future
changes in accounting policies, an evaluation of our disclosure controls and procedures and internal control
over financial reporting and changes to internal control over financial reporting; and
•
Caution Regarding Forward-Looking Information.
MISSION, CLIENT FIRST VISION, SUSTAINABLE GROWTH AND FINANCIAL OBJECTIVES
Mission
Powering capital and commodity markets, investment, and economic growth for clients in Canada, across North
America, and around the world.
Client First Vision
To be an indispensable solution for companies around the world to raise capital and the preferred destination for
traders and investors to prosper.
Sustainable Growth1
We prioritize four areas in our efforts to drive sustainable growth and in order to thrive in both today and tomorrow’s
environmental context:
•
•
•
•
Growth Acceleration: Accelerate strategies to position TMX Group competitively in areas of high growth
potential such as Capital Formation, Derivatives Trading & Clearing, and Trayport
Talent and Culture: Invest in our people to both fulfil our employee purpose and to foster long-term
sustainable growth
Advocate for Better: Collaborate with clients, regulators, and government stakeholders to make the Canadian
capital markets more competitive globally
Environmental, Social and Governance (ESG): Drive long-term sustainable growth through an integration of
ESG objectives and initiatives into divisional and corporate objectives
Financial Objectives2
In November 2018, we set long term financial objectives of achieving a mid single digit cumulative average annual
growth rate (CAGR)* for revenue and a double digit CAGR for adjusted EPS** based on certain assumptions and
expected performance over time. While we continue to believe that these aspirational goals are reasonable, we may
1 The "Sustainable Growth" section contains certain forward-looking statements. Please refer to "Caution Regarding Forward-
Looking Information" for a discussion of risks and uncertainties related to such statements.
2 The "Financial Objectives" section 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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not be able to achieve these financial objectives, as our assumptions may prove to be inaccurate and therefore our
actual results could differ materially from our long term objectives. For example, the COVID-19 pandemic is having an
unprecedented impact on the global economy and markets. At this point, it is difficult to predict the impact that this
will have in the short term on our business, and the longer term impact on our aspirational goals.
Our long term objectives do not constitute guidance. Our current profitability and our ability to attain these goals in a
given period must be weighed against our need to invest in our business in order to execute on our strategy. Some
examples of these assumptions include successful execution of our strategic growth initiatives and business objectives;
continued investment in growth businesses; and continued re-prioritization of investment towards enterprise
solutions.
Our business is organized into the following areas:
Capital formation: Our exchanges are integral to the efficient operation of the capital markets. We continually support
the capital markets community by providing companies of all types and at all stages of development with access to
equity capital, while also providing market oversight to ensure market integrity.
Lines of business include Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) listing and issuer services, and
TSX Trust (TMX Group's transfer agency and corporate trust services business).
Equities and fixed income trading and clearing: Operate fair and transparent markets, with innovative, efficient and
reliable platforms for equities and fixed income trading and clearing.
Lines of business include TSX, TSXV and TSX Alpha Exchange (Alpha) equities trading, Shorcan Brokers Limited (Shorcan)
fixed income trading and Canadian Depository for Securities Limited and its subsidiaries including CDS Clearing and
Depository Services Inc (CDS Clearing) and CDS Innovations (collectively, CDS).
Derivatives trading and clearing: Accelerating new product creation and leveraging our unique market position to
meet the increasing demand for derivative products both in Canada and globally.
Lines of business include Montréal Exchange (MX) and Canadian Derivatives Clearing Corporation (CDCC).
Global solutions, insights and analytics: Deliver equities data, index data as well as integrated data sets to fuel high-
value proprietary and third party analytics which help clients make better trading and investment decisions. We also
provide solutions to European and global wholesale energy markets for price discovery, trade execution, post-trade
transparency and straight through processing.
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Lines of business include TMX Datalinx (information services), Co-location, and Trayport (acquired December 14, 2017)
which includes Vienna-based VisoTech (acquired May 15, 2019).
Sustainability and Environmental, Social and Governance (ESG)
Integrating sustainability and ESG factors with our overall enterprise strategy goes hand in hand with our mission and
Client First Vision.
In May 2020, we issued our inaugural ESG report. The goal of the report is to inform all of our stakeholders, including
current shareholders and potential investors, of our progress in incorporating ESG matters into our corporate strategy,
process and operations. We recognize that this initial report is very much a first step on an important journey for TMX
Group.
We continue to evaluate our role in Canadian capital markets in a transitioning economy and to engage with the
industry as well as our stakeholders as we integrate these factors into the way we do business. We look to:
•
•
•
Lead by example by building a strong foundation of our own sustainable company practices and reporting
Engage with the market and support our issuer base and clients through a transitioning economy
Support transition finance with our products and services
OUR RESPONSE TO COVID-19 PANDEMIC
The novel coronavirus (COVID-19) pandemic has altered the world and the way we operate. It has impacted individuals,
communities, businesses and governments in significant ways. In these extraordinary times, we believe that our core
organizational values, enterprise strategy, risk management practices and staff, are guiding us through this changing
and highly complex situation. Powered by the dedicated and collaborative efforts of employees, the vast majority of
whom are working remotely, TMX Group has been able to fulfil our core mission of keeping Canada’s markets
operational throughout the pandemic.
The health and safety of our people, our clients and the entire capital markets community is our top priority in this time
of great uncertainty, and consistently guides the decisions that we make. Effective March 17, 2020, we directed all
staff other than those required to be physically present in the office to complete business critical tasks to work from
home and transitioned approximately 95% of our workforce to working remotely by the end of the month. Those
employees working remotely will continue to do so until Q2/21 at the earliest. TMX Group will continue to reassess our
return to work date as new information becomes available. We have deployed various IT and human resources tools to
support both our employees working from home as well as our limited recovery staff who are on site performing
critical duties. The TMX Building Back Better initiative was launched in 2020 to reimagine our future work
environments. In April 2020, we conducted our first successful all-remote disaster recovery (DR) test on most of our
critical systems. There were subsequent tests in both September 2020 and October 2020.
Throughout this period, we continue to work closely with our clients, regulators and government representatives to
ensure continuity. TMX Group’s markets play a crucial role in the economy, and we strongly believe that it is in the
public interest and in the best interest of our stakeholders, including issuers, investors, and market participants, that
markets remain open.
We have also undertaken a number of significant initiatives to help support our key stakeholders most acutely affected
by this ongoing crisis, such as:
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•
•
•
•
Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) implemented blanket relief measures to
lessen the administrative burden on our more than 3,200 listed issuers during the COVID-19 pandemic and
provide flexibility in volatile markets.
TMX Group successfully advocated for amendments to the federal Government's COVID-19 response package
to include public companies in the wage subsidy program – this was an important win for Canadian small
businesses and, most importantly, for the thousands of Canadians that they employ.
In TSX trading, we made adjustments to relax Market Maker performance levels, and in TSX and TSXV, we
waived fees associated with 're-opening' trades after a market-wide circuit breaker.
And in CDS, to support our participants, CDS paid $2.0 million of the $4.0 million annual fixed rebate on the
May 2020 invoice payable in June 2020. The balance of $2.0 million was paid in November 2020, as planned.
As we look into the future, despite prevailing uncertainty looming in our operating environment as the business world
prepares to emerge from the COVID-19 pandemic, TMX Group remains firmly focused on serving our clients with
excellence, providing our markets with continuity, and executing against our global growth strategy.
INITIATIVES AND ACCOMPLISHMENTS
Capital Formation3
AST Canada transaction
In September 2020, we announced an agreement to acquire AST Investor Services Inc. (Canada), and its subsidiary AST
Trust Company (Canada) (collectively, AST Canada), a leading provider of transfer agency, corporate trust and related
services to Canadian public and private companies for $165 million in cash consideration, which includes $30 million of
cash in their businesses, subject to customary closing conditions and working capital adjustments.
The acquisition will significantly strengthen our ability to serve the needs of companies across the marketplace by
bringing to our TSX Trust business a proven team of industry professionals, and a wider range of products and
technology capabilities. From a strategic perspective, this transaction will help to accelerate TSX Trust’s growth and
enhance its competitive position, deepening relationships with existing clients and broadening the scope and scale of
its service offerings.
AST Canada offer a comprehensive portfolio of products and services, including transfer agency services, equity plan
solutions, corporate trust, structured finance and proxy related services. AST Canada has approximately 150
employees4 in offices in Toronto, Montreal, Calgary and Vancouver.
3 The "Capital Formation" section contains certain forward-looking statements. Please refer to "Caution Regarding Forward-Looking
Information" for a discussion of risks and uncertainty related to such statements.
4 As of September 25, 2020.
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Transaction details:
•
AST Trust Company (Canada)’s last twelve months (LTM) unaudited revenue through June 30, 2020 was $46.5
million (including $8.0 million of margin income) and adjusted earnings before interest, taxes, depreciation
and amortization (EBITDA)5 was $11.6 million, excluding indirect allocations from the parent company.6
• Over 50% recurring revenue for the year ended June 30, 2020.7
•
The transaction is expected to have a positive impact on TMX Group's adjusted earnings per share
(EPS)8(excluding amortization of acquired intangibles as well as transaction and integration costs) in the first
full year of ownership, before expected synergies.9
• We expect to realize combined revenue and technology cost synergies of approximately $8.0 million over the
first two years, following acquisition.
•
•
The transaction is expected to be financed with a combination of cash and debt capacity.
The transaction is expected to close within 12 months from the date of signing the agreement (September 25,
2020), subject to receipt of regulatory approval under the Trust and Loan Companies Act (Canada). We have
received regulatory approval under the Competition Act (Canada).
Capital Pool Company (CPC) program
In December 2020, TSXV announced changes to its Capital Pool Company (CPC) program, following extensive
consultation with stakeholders across the TSXV community. The CPC program is a unique listing vehicle exclusively
offered by TSXV and accounted for almost 50% of new TSXV listings in the past 10 years.
New changes to the policy took effect on January 1, 2021 and provide:
•
•
•
Increased flexibility - new jurisdictions added, residency restrictions eased, spending restrictions simplified
Reduced regulatory burden - relaxed requirements on shareholder distribution and shareholder approval,
fewer restrictions on professional subscriptions
Improved economics - increased seed investment, finders' fees and shorter escrow
5Adjusted EBITDA of AST Canada provided above is a Non-IFRS measure and does not have a standardized meaning prescribed by
IFRS and is, therefore, unlikely to be comparable to similar measures presented by other companies. TMX Group presents this
adjusted EBITDA to indicate operating and financial performance exclusive of adjustments including indirect allocations from the
parent company. Management uses this measure because it believes doing so results in a more effective analysis of underlying
financial performance, including in some cases, our ability to generate cash. Excluding this item also enables comparability across
periods. The exclusion of certain items does not imply that they are non-recurring. Adjusted EBITDA as calculated for the purposes of
this acquisition excludes indirect corporate overhead.
6 Revenue and adjusted EBITDA are compilations of financial information provided to us by AST Trust Company (Canada). This
information is unaudited and may not be prepared in accordance with IFRS for public companies.
7 Recurring revenue is a compilation of financial information provided to us by AST Trust Company (Canada). This information is
unaudited and may not be prepared in accordance with IFRS for public companies.
8 Adjusted EPS provided above is a Non-IFRS measures and does not have a standardized meaning prescribed by IFRS and is,
therefore, unlikely to be comparable to similar measures presented by other companies. TMX Group presents adjusted EPS to
indicate operating and financial performance exclusive of items such as indirect allocations from the parent company and other
items as disclosed in this MD&A. Management uses this measure because it believes doing so results in a more effective analysis of
underlying financial performance, including in some cases, our ability to generate cash. Excluding these items also enables
comparability across periods. The exclusion of certain items does not imply that they are non-recurring.
9 Based on internal analysis.
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ESG initiatives
At the end of March 2020, we launched ESG 101, a new hub of ESG resources curated for TSX and TSXV issuers by us
and by many of Canada’s leading ESG experts. The site includes a collection of guides, articles, events, podcasts and
definitions to help issuers understand the fundamentals of ESG reporting. In addition, it provides an Expert Centre
which offers contact details to help connect issuers to the right people for answers, including ESG rating agencies. The
site is updated regularly with new content from our own library (podcasts, workshops, guides) and from our partners.
This tool addresses a growing client need and will complement our in-person mentorship and education initiatives,
including the existing governance modules of our Growth Accelerator program, a new ESG-focused Growth Accelerator
module launched in September 2020, and our ESG-focused workshops. In August 2020, we released, in partnership
with Chartered Professional Accountants of Canada, an updated Primer for Environmental & Social Disclosure with the
objective of helping listed issuers get started with, or enhance, their ESG disclosure.
Equities and Fixed Income Trading and Clearing10
Market On Close (MOC) Modernization
In October 2020, TSX published and filed for regulatory approval a proposed new Closing Auction model, the first
substantive changes to the MOC since its introduction in 2004. The MOC Modernization proposal was developed after
two years of extensive consultation from market participants unified in supporting a best-in-class closing auction that
effectively meets the liquidity and execution needs of Canadian and global investors. The new TSX MOC facility will
provide an improved trading experience for market participants, better serve stakeholder needs for enhanced liquidity
at the close, and enhance efficiencies in determining closing prices in Canada. The new MOC model is expected to be
launched in the second half of 2021, subject to regulatory approvals. The new MOC model has received regulatory
approval from the Ontario Securities Commission (OSC).
TSX DRK
The expansion of TSX’s Dark Trading offering continued throughout 2020 with the successful introduction of new
pricing programs and targeted sales campaigns. As a result, TSX DRK made substantial gains in this market segment,
increasing its continuous trading market share in TSX listed securities from 18% in 2019 to 26% in 2020. Planned
expansion initiatives and investments are expected to increase user adoption, introduce new offerings, and support
continued market share growth in 2021.
Sustainable Bonds Posted for Trading on TSX
TMX Group is introducing on-Exchange trading for Sustainable Bonds issued by governments and quasi-governmental
entities. This platform will be activated in 1H/21. For trading in these bonds, we will use the same TSX trading engine,
dissemination tools and distribution channels as those used for trading equities and ETFs on TSX. Offering Sustainable
Bonds on TSX will enable retail investors efficient access to an otherwise opaque OTC bond market, and respond to
issuers' needs for wider investor ownership of their Sustainable Bonds.
TSX has also modernized its listing fee schedule to accommodate all reporting issuers (typically corporations) in their
listing of bonds. The new fee schedule is scaled to issuance size and maturity.
10 The "Equities and Fixed Income Trading & Clearing" section contains certain forward-looking statements. Please refer to "Caution
Regarding Forward-Looking Information" for a discussion of risks and uncertainty related to such statements.
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Derivatives Trading and Clearing 11
In October 2018, MX launched extended trading hours from the previously 6:00 a.m. ET open to a 2:00 a.m. ET open.
Initially, this included MX's interest rate products12. Beginning in February 2019, MX offered clients the ability to also
trade its equity index futures13 in these extended hours. For 2020, volumes during extended trading hours represented
approximately 6% of total volumes in these products. MX is preparing for the next phase of extended hours to align
with trading hours in Asia in Q2/21. As part of its global expansion efforts, MX obtained Recognized Oversees
Investments Exchange status with the UK Financial Conduct Authority.
In June 2020, MX launched a new three-month Canadian Overnight Repo Rate Average (CORRA) futures contract. As
many jurisdictions around the world transition away from interbank offered rates (IBOR), which are survey-based, to
new transaction-based reference rates, Canada followed suit by enhancing the CORRA benchmark, now under the
administration of the Bank of Canada. Since the launch on June 12, 2020, 13,077 contracts traded through December
31, 2020. There was open interest of 5,578 contracts at December 31, 2020. Canada is expected to be a dual-rate
jurisdiction for the foreseeable future, so this new instrument will coexist with MX's flagship BAX product for years to
come.
In December 2020, MX launched the S&P/TSX 60 ESG Index Futures14 (SEG) and launched a new market making
program to support the growth of its Two-Year Government of Canada Bond Futures (CGZ). In 2020, 97,912 CGZ
contracts traded with open interest of 25,585 contracts at December 31, 2020.
The S&P/TSX 60 ESG Index14 measures the performance of constituents in the S&P/TSX 60 Index14 that meet
sustainability criteria, while taking into account the industry group weights of the S&P/TSX 60 Index14. The S&P/TSX 60
ESG Index Futures14 (SEG) is an ESG version of the established S&P/TSX 60 Standard Index Futures14 (SXF), enabling
investors to align with ESG strategies or UN Principles for Responsible Investing (PRI) objectives.
The revitalization of the Two-Year Government of Canada Bond Futures (CGZ) is part of MX's efforts to increase the
number of liquid points on the Canadian listed yield curve, as a next step after the successful revitalization of the Five-
Year Government of Canada Bond Futures (CGF) started in 2018.
Global Solutions, Insights and Analytics (GSIA)15
Trayport
Trayport is the primary connectivity network and data and analytics platform for European wholesale energy markets.
Trayport's solutions enable price discovery, trade execution, post-trade transparency and post-trade straight through
processing.
11 The "Derivatives Trading and Clearing" section contains certain forward-looking statements. Please refer to "Caution Regarding
Forward-Looking Information" for a discussion of risks and uncertainty related to such statements.
12 BAX - Three-Month Canadian Bankers' Acceptance Futures, CRA - Three-month Canadian Overnight Repo Rate Average (CORRA)
Futures (launched June 12, 2020), CGZ - Two-Year Government of Canada Bond Futures, CGF - Five-Year Government of Canada
Bond Futures and CGB - Ten-Year Government of Canada Bond Futures.
13 SXF - S&P/TSX 60 Index Standard Futures and SXM - S&P/TSX 60 Index Mini Futures.
14 The S&P/TSX 60 ESG Index Futures, S&P/TSX 60 ESG Index, S&P/TSX 60 Index, and S&P/TSX 60 Standard Index Futures are
products of the S&P Dow Jones Indices are products of S&P Dow Jones Indices LLC ("SPDJI") and TSX Inc. ("TSX"). Standard & Poor's®
and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of
Dow Jones Trademark Holdings LLC ("Dow Jones"); and TSX® is a registered trademark of TSX. SPDJI, Dow Jones, S&P and TSX do not
sponsor, endorse, sell or promote any products based on the S&P/TSX Indices and none of such parties make any representation
regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions or interruptions of
the S&P/TSX Indices or any data related thereto.
15 The "Global Solutions Insights and Analytics" section contains certain forward-looking statements. Please refer to "Caution
Regarding Forward-Looking Information" for a discussion of risks and uncertainty related to such statements.
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Trayport successfully supported its trader and broker customers as they transitioned to working from home during the
COVID-19 pandemic. Volumes have been strong through December 31, 2020 with record volumes in both the
European power and gas markets driven by the market volatility. Volumes for these power and gas products were up
10% and 14%, respectively compared with 2019.
Global Gas - Liquid Natural Gas (LNG)
Volumes remained strong for the European and Asian benchmark gas contracts, the Dutch Title Transfer Facility (TTF)
and the Japan Korea Marker (JKM). TTF volumes rose 27% in 2020 compared with 201916 and we have seen record JKM
over the counter (OTC) cleared volumes from Trayport brokered customers. While not directly correlated, the increase
in volumes in these markets can result in an expansion in market participants, which can drive growth in the number of
subscribers connecting with Trayport to trade these products.
Algorithmic Trading and Data Analytics Products
The trend of algorithmic power trading in European intraday markets continued through to December 31, 2020. In
2020, intraday volumes on EPEX Spot grew 14% compared with 2019.17
This algorithmic trading trend is also developing across the rest of the markets Trayport serves in Europe. Trayport has
responded to this demand by launching a Data Analytics product to store and analyze customers data sets, which is
now live and has been well received by customers. Trayport is also expanding its AutoTrader algorithmic design and
execution product to cover these additional forward and futures markets. Together, these products provide an end to
end solution for customers to design, backtest, and execute algorithmic strategies.
Geographic Expansion
In October 2019, Trayport and Nodal Exchange, a Washington D.C.-based derivatives exchange serving North American
commodities markets, announced an agreement to offer Trayport’s core trading screen, Joule, to trading participants
of Nodal Exchange. Nodal has started rolling out screens to trader clients.
TMX Datalinx
On July 27, 2020, we launched the following S&P/TSX ESG18 indices to enable our clients to gain exposure to ESG
investments and manage risks associated with ESG:
S&P/TSX 60 ESG Index18
The Index is designed to track the performance of the constituent companies of the S&P/TSX 60 Index18, while taking
into account each company's S&P DJI ESG Scores. The index construction methodology is based on the S&P/TSX 60
Index18; companies are then re-weighted according to their sustainability score and relative to industry-specific
standards.
16 Source: Trayport's Euro Commodities Report.
17 Sourced from collection of monthly EPEX volume reports.
18 The S&P/TSX 60 Index, S&P/TSX Composite Index, S&P/TSX 60 ESG Index, S&P/TSX Composite ESG Index, S&P/TSX 60 Carbon
Price Risk Index and S&P/TSX Composite Carbon Price Risk Index are products of the S&P Dow Jones Indices are products of S&P Dow
Jones Indices LLC ("SPDJI") and TSX Inc. ("TSX"). Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's
Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and TSX®
is a registered trademark of TSX. SPDJI, Dow Jones, S&P and TSX do not sponsor, endorse, sell or promote any products based on the
S&P/TSX Indices and none of such parties make any representation regarding the advisability of investing in such product(s) nor do
they have any liability for any errors, omissions or interruptions of the S&P/TSX Indices or any data related thereto.
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S&P/TSX Composite ESG Index18
The Index is designed to target 75% of the float capitalization of each GICS® industry group within the S&P/TSX
Composite Index18, using S&P DJI ESG Scores for constituent selection.
S&P/TSX 60 Carbon Price Risk Index and S&P/TSX Composite Carbon Price Risk Index18
S&P Carbon Price Risk Indices are designed to measure the performance of the constituent companies of the S&P/TSX
60 Index18 and S&P/TSX Composite Index18, respectively, reweighed to account for the potential impact of 2030 carbon
prices on constituents’ stock prices. The S&P Carbon Price Risk 2030 Adjusted Index18 Series aims to re-balance index
constituents in a way that adjusts for their differing levels of future carbon price risk, based on pricing risks arising from
industry and geographic distribution of emissions, as well as levels of emissions.
Co-location Services
In July 2020, we received regulatory approval to increase pricing by 5% for co-location services, which became effective
on September 1, 2020. To meet client demand, we plan to increase capacity at our co-location facility by
approximately 25% in Q3/21.
TMX Market Centre
Construction of TMX Market Centre, a state-of-the-art modern digital facility located at the base of our Toronto
headquarters, was completed in Q4/20. The 8,500 square foot venue will be utilized for daily market open and close
ceremonies, and has the capacity to accommodate up to 320 people for corporate and shareholder events. The official
opening will be postponed until COVID-19 restrictions are removed, and external guests can be accommodated safely.
TMX Money
In Q2/20 we introduced a new TMX Money website, which integrates the prior TMX Money and TMX Matrix digital
platforms. This new website has been designed to help increase exposure for our issuers (particularly those on the TSX
Venture Exchange) with retail investors. As of Q3/20, all user traffic is now going to this new site, ensuring that our
retail investors and trader users can now benefit from the new improved user experience.
Update on Modernization of Clearing Platforms19
In 2017, we commenced work on an initiative to modernize the technology platforms for our CDS and CDCC clearing
and settlement businesses as well as for our entitlement systems. We have separated the modernization of our
clearing houses into two phases. In phase one, we focused on the CDCC risk management element of the project that
went live in Q2/19.
Phase two of this project involves the replacement of other legacy systems at CDS including those related to clearing
and settlement, as well as an expanded scope to address entitlement payment systems. In March 2017, we
18 The S&P/TSX 60 Index, S&P/TSX Composite Index, S&P/TSX 60 ESG Index, S&P/TSX Composite ESG Index, S&P/TSX 60 Carbon
Price Risk Index and S&P/TSX Composite Carbon Price Risk Index are products of the S&P Dow Jones Indices are products of S&P Dow
Jones Indices LLC ("SPDJI") and TSX Inc. ("TSX"). Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's
Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and TSX®
is a registered trademark of TSX. SPDJI, Dow Jones, S&P and TSX do not sponsor, endorse, sell or promote any products based on the
S&P/TSX Indices and none of such parties make any representation regarding the advisability of investing in such product(s) nor do
they have any liability for any errors, omissions or interruptions of the S&P/TSX Indices or any data related thereto.
19 The "Update on Modernization of Clearing Platforms" section 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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implemented an Issuer Services Program that included a number of fee changes in anticipation of the investment that
would be required to modernize the entitlement payments system. We spent $43.8 million up to the end of 2019 on
capital expenditures related to phase two and $27.8 million in 2020. Overall, we expect to incur between
approximately $100 and $110 million in capital expenditures during Phase two of this project. We expect to complete
this project in Q1/22. We will continue to provide updates on estimates for capital expenditures and timing as this
complex project progresses.
ORGANIZATIONAL CHANGES
On August 17, 2020, we announced that John McKenzie would lead the organization as its Chief Executive Officer
(CEO). Mr. McKenzie, who assumed the role on that date, also became a member of the TMX Group Limited Board of
Directors. Mr. McKenzie had served as TMX Group interim CEO, as well as Chief Financial Officer (CFO).
Frank Di Liso, Vice President, Corporate Finance and Administration, a member of the Finance department leadership
team for over ten years, was named interim Chief Financial Officer until a permanent successor to John McKenzie is
appointed.
On November 17, 2020, we announced the appointment of Cindy Bush as Chief Human Resources Officer, effective
December 7, 2020. Ms. Bush is responsible for leading all aspects of TMX Group's Human Resources function in
support of TMX Group's corporate objectives, including strategy development and execution, workplace culture,
performance management,employee communications, talent development and acquisition. Ms. Bush has more than
twenty-five years of experience in human resources, talent strategies and culture transformation at companies based
in Canada as well as in the United States, the United Kingdom and France.
REGULATORY CHANGES
Equities Trading
On January 23, 2020, the Canadian Securities Administrators (CSA) published a notice confirming that it has approved a
Trading Fee Rebate Pilot Study that applies temporary pricing restrictions on marketplace transaction fees, to examine
the effects of a prohibition of rebate payments by Canadian marketplaces (Pilot Study). The implementation of the Pilot
Study was conditional on the implementation of a similar study by the United States Securities and Exchange
Commission (SEC). With a Court ruling against the SEC in June 2020, we understand that the U.S. fee pilot study will
not proceed, and that the CSA will not be advancing the Pilot Study in Canada.
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MARKET CONDITIONS AND OUTLOOK20
The COVID-19 pandemic has had an unprecedented impact on market and general economic conditions. Heightened
volatility has resulted in significantly higher trading and clearing volumes for cash equities markets. At this point it is
difficult to project the longer term impact from this volatility, when it may subside, and the implications for capital
markets activity. The average CBOE Volatility Index (VIX) was 29.3 in 2020 compared with 15.4 in 2019. Overall,
Canadian equities trading volumes were up 39% in 2020 compared with 2019.21 Across all of our equities markets,
overall trading volumes were up 42% in 2020 compared with last year with trading volumes on Toronto Stock Exchange
(TSX), TSX Alpha Exchange (Alpha) and TSX Venture Exchange (TSXV) increasing by 37%, 64% and 47%, respectively. In
Canadian derivatives trading, the volume of contracts traded on MX was essentially unchanged in 2020 compared to
2019. While MX experienced significant increases in volumes earlier in 2020, volumes on interest rate products,
particularly short-term interest rate contracts, declined substantially throughout the year reflecting reduced trading in
a very low interest rate environment.
The highly uncertain and volatile economic and market environment has contributed to less favourable conditions for
capital raising in 2020. However, in recent months we have seen increased financing activity on both of our exchanges
as valuations have improved. On TSX, the total amount of financing dollars raised increased by 4% from 2019 to 2020,
and the total number of financings increased by 4% over the same period. On TSXV (including NEX) there was a 57%
increase in the total amount of financing dollars raised, and a 25% increase in the total number of financings in 2020
over last year.
On January 20, 2021, the Bank of Canada (the Bank) announced that it was maintaining its target overnight rate at ¼
percent. According to the Bank, economic recovery has been interrupted in many countries as new waves of COVID-19
infections force governments to re-impose containment measures. However, the arrival of effective vaccines
combined with further fiscal and monetary policy support have boosted the medium-term outlook for growth.
Canada’s economy had strong momentum through to late 2020, but the resurgence of cases and the reintroduction of
lockdown measures are a serious setback. Growth in the first quarter of 2021 is now expected to be negative. Assuming
restrictions are lifted later in the first quarter, the Bank expects a strong second-quarter rebound. After a decline in
real GDP of 5 ½ percent in 2020, the Bank projects the economy will grow by 4 percent in 2021, almost 5 percent in
2022, and around 2 ½ percent in 2023.
The Bank added that CPI inflation has risen to the low end of the Bank’s 1-3 percent target range in recent months,
while measures of core inflation are still below 2 percent. CPI inflation is forecast to rise temporarily to around 2
percent in the first half of the year, as the base-year effects of price declines at the pandemic’s outset — mostly
gasoline — dissipate. Excess supply is expected to weigh on inflation throughout the projection period. As it is
absorbed, inflation is expected to return sustainably to the 2 percent target in 2023.22
20 The "Markets Conditions and Outlook" section contains certain forward-looking statements. Please refer to "Caution Regarding
Forward-Looking Information" for a discussion of risks and uncertainty related to such statements.
21 Source: IIROC (excluding intentional crosses).
22 Source: Extracted from Bank of Canada press release, January 20, 2021.
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OUR BUSINESS
On the following pages, we provide an overview and description of products and services, strategy and revenue
description for each of our segments as outlined below:
1. Capital Formation
2.
Equities and Fixed Income Trading and Clearing
3. Derivatives Trading and Clearing
3. Global Solutions, Insights and Analytics
i. TMX Datalinx
ii. Co-location Services
iii. Trayport
For key statistics related to each business above, please see Results of Operations.
TMX 2020 Revenue: $865.1 million
Equities and Fixed Income
Trading and Clearing: 26%
Capital Formation: 22%
Derivatives Trading and
Clearing: 15%
Global Solutions, Insights
and Analytics: 37%
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Capital Formation
Year Ended December 31, 2020
Capital Formation revenue of $189.0 million
Other Issuer Services: 14%
TSX Venture Exchange: 25%
Toronto Stock Exchange: 61%
Overview and Description of Products and Services
Our goal is to provide solutions for corporate clients in need of growth capital and liquidity, and provide investors with a
broad range of investment opportunities.
TMX operates a unique two-tiered ecosystem, comprised of Toronto Stock Exchange (TSX) and TSX Venture Exchange
(TSXV), to help companies access the public markets, raise capital and provide liquidity to shareholders. TSX is a leading
listings venue for established domestic and international issuers. TSXV is the pre-eminent global platform for facilitating
venture stage capital formation.
In general, established issuers initially list on TSX through an Initial Public Offering (IPO), by graduating from TSXV, or by
seeking a secondary listing (to complement an existing listing on another listing venue). Venture stage companies
generally list on TSXV either in connection with an IPO, or through alternative methods such as TSXV’s Capital Pool
Company program or a reverse takeover. We also operate NEX, a market for issuers that have fallen below the listing
standards of TSXV.
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, debt or
convertible debt instruments, limited partnership units, ETFs, and structured products such as investment funds.
We are a global leader in listing small and medium-sized businesses with concentration in resource sector listings and a
growing number of innovation companies, including those in the technology, clean technology, renewable energy and
life science sectors. In 2020, we welcomed 300 new listings, of which 47 were innovation companies and 20 were
international (non-Canadian) companies. Issuers listed on TSX and TSXV raised a combined $42.8 billion in 2020 ($36.2
billion on TSX and $6.6 billion on TSXV).
In addition to our listing facilities, we offer other services to our listed issuers. TSX Company Services is focused on
enhancing and expanding our service offering to support the funding, growth, and success of our listed companies.
Together with industry leading service providers, we offer solutions and resources designed to help our clients reach
their corporate objectives.
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Within Capital Formation is TSX Trust, second by market share, servicing approximately 23% of listed issuers when
measured by clients on the TSX, TSXV, and Canadian Securities Exchange (CSE). The business supports approximately
1,200 equity and debt issuers and private companies with corporate trust, transfer agent, registrar and registered plan
services.
Strategy
•
•
•
•
•
•
•
•
Leveraging our global presence and channel partners to attract international listings across all sectors
Accelerating growth in targeted sectors (including the mining, energy, innovation, and ETF sectors) where we
are uniquely positioned
Activating new pools of capital (including sustainable investing capital) in Canada and globally
Accelerating our policy and regulatory advocacy and thought leadership efforts to stimulate investment in the
public markets, ease regulatory burdens, and promote fairness for public companies
Streamlining and digitizing issuer listing processes to enhance the issuer experience, achieve operational
excellence, and facilitate revenue protection and revenue growth
Driving policy innovation
Adapting to the evolving needs of public and private companies (across their business lifecycle) and their
capital providers by offering new platforms and solutions.
For TSX Trust, the strategy focuses on three main pillars of growth:
◦
◦
◦
Growing from the core - accelerating growth through expanding product line-up and selling more to
existing clients
Private markets - expand service offering to meet unique needs of the client base
Corporate, government and infrastructure debt - leveraging the trust license to expand into adjacent
markets with recurring revenue and cash balances
Revenue Description
We generate Capital Formation revenue from several fees and services, including:
Initial Listing Fees
TSX and TSXV issuers pay initial listing fees based on the value of the securities to be listed or reserved, subject to
minimum and maximum fees. Initial listing fees fluctuate with the value of securities being listed or reserved at the
time of listing. Revenues from initial listing fees are deferred over a 12-month period from the date of listing.
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 and reserving additional shares
to be issued under stock option plans. Additional listing fees are based on the value of the securities to be listed or
reserved, subject to minimum and maximum fees and are recognized in the period the transaction occurred.
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Sustaining Listing Fees23
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 for
existing issuers 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 for new issuers are billed in the quarter after the new listing takes
place, based on their market capitalization on the date of listing, and are amortized over the remainder of the year on a
straight-line basis.
Fees charged to issuers vary based on the type of issuer (corporate, structured product or ETF).
The aggregate market capitalization of issuers listed on TSX increased from $3.2 trillion at the end of 2019 to $3.4
trillion at the end of 2020. The market capitalization of issuers listed on TSXV including NEX increased from $45.4 billion
at the end of 2019 to $78.4 billion at the end of 2020. We estimate that the increase in the total market capitalization
on TSX should result in an increase in TSX sustaining fee revenue of approximately $2.0 million in 2021. We estimate
that the increase in the total market capitalization on TSXV should result in an increase in TSXV sustaining fee revenue
of approximately $3.0 million in 2021.
Other Services
TSX Trust has approximately 1,200 clients, and revenue is primarily derived from recurring monthly fees and net
interest income on cash balances. Corporate trust fees relate to services that include acting as trustee for debt
instruments, depository for takeover bid offers, warrant agent, subscription receipt agent, and agent for voluntary
escrow arrangements. TSX Trust launched a new business line in 2020 with its introduction of a Registered Plans
custody service to non-bank broker dealers. TSX Trust benefits from periodic and large cash balances that are held in
its trust account, which results in net interest income.
23 The "Sustaining Listing" 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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Equities and Fixed Income Trading & Clearing
Year ended December 31, 2020
Equities and Fixed Income Trading and Clearing revenue of $226.2 million
Equities and fixed income
clearing, settlement,
depository and other
services (CDS): 44%
Equities and fixed income
trading: 56%
Equities and Fixed Income Trading – TSX, TSXV, Alpha and Shorcan
Overview and Description of Products and Services
We operate innovative, efficient, reliable, high performance platforms for trading and clearing.
Equities Trading
TSX, TSXV and Alpha operate fully electronic exchanges that facilitate secondary trading in TSX and TSXV-listed
securities on a continuous auction basis throughout the trading day.
Retail, institutional and other proprietary investors and traders place orders to buy or sell securities through
Participating Organizations (POs)/Members of the exchanges. In addition to continuous trading throughout the day,
TSX and TSXV also operate opening and closing auctions, which are central sources of liquidity for trading in Canada
during those times. The closing auctions also establish the industry benchmark closing price for our listed securities. A
post-closing trading session on TSX and TSXV allows for further opportunity to trade at the closing price. Additional
trading features and functionalities are offered to accommodate a range of trading strategies and provide flexibility and
optionality to clients. Each of TSX, TSXV and Alpha also allow POs to report their internally matched orders, by printing
them as crosses on the exchanges at no cost.
Fixed Income Trading
Shorcan acts as an inter-dealer bond broker (IDB) that specializes in the Canadian fixed income marketplace, brokering
products that include Government of Canada, provincial, corporate, strip, and mortgage bonds, repurchase agreements
(repos) and swaps. Shorcan serves financial institutions that are broker-dealers registered with IIROC and that are CDCC
members; the buy-side does not participate. Inter-dealer brokers can be accessed via broker screens that run on
desktop computers at a trader’s desk or via voice lines.
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Strategy
Equities Trading
•
•
Continue to deploy innovative trading features and functionalities aimed at enhancing market efficiency and
trading liquidity
Continue to maintain leading market share
Fixed income Trading
• Maintain market leading position in Canada Trading
•
Continue to grow our Canadian Swaps business
Revenue Description
Equities Trading
Most of the fees on TSX, TSXV and Alpha are volume-based. These fees are applied to traded shares, and in most cases,
involve one side of the trade being charged a per share fee and the other side being provided with a per share rebate.
The excess of the fee over the rebate represents the exchanges' net fee per share traded. These types of models are
intended to incent different types of customers and behaviors. The primary fee structure on TSX and TSXV is a maker-
taker model that pays a rebate to the liquidity providing side of the trade so that market participants have an incentive
to enter passive orders into the central limit order book, while the liquidity taking side of the trade pays a fee. Alpha
supports an inverted pricing model which is intended to provide incentives to take liquidity by providing a rebate, with
the liquidity providing side of the trade paying the fee. Regardless of the fee structure applied, trading revenue is
recognized in the month in which the trade is executed.
Fixed Income Trading
Shorcan charges broker commissions on both sides of the trade upon execution. Shorcan broker commission varies by
different types of instruments and by execution method, voice vs. electronic.
Equities and Fixed Income Clearing, Settlement, Depository and Other Services - CDS
Overview and Description of Products and Services
CDS is Canada's national securities depository, clearing and settlement hub for domestic and cross-border depository-
eligible securities. CDS supports Canada's equities, fixed income and money markets and is accountable for the safe
custody and movement of securities, the processing of post-trade transactions, and the collection and distribution of
entitlements relating to securities deposited by participants.
CDS’s domestic clearing and settlement services enable participants to report, confirm or match, reconcile, net and
settle exchange and OTC traded equity, debt and money market transactions, as well as derivative transactions in
depository-eligible securities (e.g., the processing of rights and warrants and the settlement of exercised options). CDS
also offers related services such as buy-ins, risk controls and reporting, and facilitates trading in CDSX (CDS’s
multilateral clearing and settlement system) eligible securities before they are publicly distributed (trades in these
securities settle after public distribution). CDSX is designated by the Bank of Canada as being systemically important,
under the Payment Clearing and Settlement Act (Canada).
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CDS Depository is accountable for the safe custody and movement of depository-eligible domestic and international
securities, accurate record-keeping, processing post-trade transactions, and collecting and distributing entitlements
arising from securities deposited by participants.
Other CDS services include, the issuance of International Security Identification Numbers (ISINs), depository eligibility,
securities registration as well as entitlement and corporate action (E&CA) event management.
Strategy
TMX Group is implementing a post-trade services strategy to replace the existing clearing, settlement and custody
system at CDS. During 2020, the development and internal testing of the system was substantially completed. Testing
with participants will commence in Q2/21. Under this strategy, TMX Group will continue to invest in modernizing core
technology and developing growth opportunities for each of the two businesses under these main focuses:
•
•
•
Clearing and Depository: Develop and migrate to an advanced clearing, settlement, and risk management
solution, to deliver enhanced client experiences at higher efficiency (see INITIATIVES AND
ACCOMPLISHMENTS - Update on Modernization of Clearing Platforms).
Global Liquidity Solutions: Provide streamlined access to funding and margining, and continue growth in Repo
central-counterparties offering.
Global Connectivity Solutions: Create access gateways that connect global clients within an increasingly global
marketplace such as the CDS-DTCC (The Depository Trust & Clearing Corporation) link and collateral
optimization opportunities through one of 2 European providers.
Revenue Description
For reported trades, both exchange traded and OTC trades, CDS charges clearing fees to participants on a per trade
basis. Clearing fees are recognized as follows:
•
•
Reporting fees are recognized when the trades are delivered to CDS.
Netting/novation fees are recognized when the trades are netted and novated.
Other clearing-related fees are recognized when services are performed.
For those trades that are netted in Continuous Net Settlement (CNS), settlement fees are charged on the basis of the
number of netted trades settled. Settlement fees for those trades that are not netted (i.e., trades that are settled
individually on a trade-for-trade (TFT) basis) are charged on a per transaction basis. Settlement-related fees are
recognized when the trades are settled.
Depository fees are charged per transaction and custody fees are charged based on a daily average of volume (i.e.,
number of shares held for equity securities and nominal value held for fixed income securities) and positions held.
Depository fees are charged for custody of securities, depository related activities, and processing of entitlement and
corporate actions, and are recognized when the services are performed.
International revenue consists of revenue generated through offering links as channels to participants to affect cross-
border transactions and custodial relationships with other international organizations. The related fees are recognized
as follows:
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•
•
Fees are charged to participants based on participant usage of National Securities Clearing Corporation (NSCC)
and Depository Trust Company (DTC) services. Participants are sponsored into NSCC and DTC services via the
New York Link service and the DTC Direct Link service respectively.
Custodial fees and other international services related revenues are recognized when the services are
performed.
Issuer services fees are fees levied to issuers and/or their agents for ISIN, and entitlements and corporate actions
management services for which they benefit. The transition period for the discount on entitlement and corporate
action event management fees ended on December 31, 2018.
50:50 Rebates on Core CDS Services
For the period starting November 1, 2012 and subsequent fiscal years starting on January 1, 2013, CDS shares with
participants, on a 50:50 basis, any annual increases in revenue on clearing and other core CDS Clearing services, as
compared with revenues in fiscal year 2012 (the 12-month period ending October 31, 2012). Beginning January 1, 2015
and subsequent years, CDS also shares with Participants, on a 50:50 basis, any annual increases in revenue applicable
to the New York Link/Depository Trust Company Direct Link Liquidity Premium. Rebates are paid on a pro rata basis to
participants in accordance with the fees paid by such participants for these services.
Additional Rebates
In addition, CDS must rebate an additional $4.0 million annually to participants in respect of exchange clearing services
for trades conducted on an exchange or alternative trading systems (ATS).
In December 2019, CDS filed a proposal to make two changes to the existing fee model. The first and most significant
change was the proposal to modify its fee model by eliminating the rebates that are paid annually to participants based
on their respective use of CDS services. The second change was the elimination of network connectivity fees currently
paid by participants.
CDS expects to publish an amended proposal In Q1/21, which includes two changes to the original application:
•
•
CDS is proposing to cease charging for reports that it transmits to participants. These report fees generated
$1.2 million of revenue in 2020. The elimination of the report fees are in addition to the originally proposed
elimination of network connectivity fees which were $3.1 million in 2020
CDS is proposing to modify the effective date of the proposed rebate elimination to coincide with the
Modernization of Clearing Platforms launch which is expected to be in Q1/22 (See Initiatives and
Accomplishments - Update on Modernization of Clearing Platforms).
The elimination of the rebates is being proposed to ensure that the significant investment required to modernize CDS
technology now can be made, and to ensure adequate funding of ongoing future technology upgrades, while enabling
us to earn an appropriate rate of return on our capital investments. The elimination of network connectivity fees and
report fees is intended to enable participants to obtain a further netting benefit as against the impact of the rebate
elimination.
For the five-year period from 2016 to 2020 inclusive, CDS rebated an average of approximately $10.0 million annually.
In 2020, CDS rebated $14.3 million reflecting increased volumes.
The above proposals are all subject to further public comment and regulatory approval.
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Derivatives Trading and Clearing
Derivatives Trading and Clearing – MX, CDCC and BOX
Overview and Description of Products and Services
Our domestic financial derivatives trading is conducted through MX, Canada’s standardized financial derivatives
exchange. Headquartered in Montréal, MX offers trading in interest rate, index, equity and currency derivatives. BOX is
an equity options market located in the U.S. for which MX provided transitional technology services in 2019, and the
first half of 2020. As at December 31, 2020, MX held approximately 43% ownership interest in BOX.
Derivatives - Trading
MX
MX offers interest rate, index, equity and currency derivatives to Canadian and international market participants. 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 2020, approximately 59% of MX’s volume was represented by
four futures contracts – the Three-Month Canadian Bankers’ Acceptance Futures contract (BAX), the 5-Year
Government of Canada Bond Futures contract (CGF), the 10-Year Government of Canada Bond Futures contract (CGB)
and the S&P/TSX 60 Standard Futures contract (SXF) – with the balance largely represented by our equity and ETF
options market.
BOX
BOX (BOX Holdings Group LLC and BOX Exchange LLC) is an all-electronic equity derivatives market and is one of a
number of equity options markets in the U.S. All BOX trade volume is cleared through the Options Clearing
Corporation. BOX ran on our SOLA technology. Effective December 31, 2018, the term of such service offerings ended,
and we provided transitional services to BOX until Q2/20. In 2020, Derivatives Trading and Clearing revenue included
approximately $1.7 million of revenue from providing transitional services to BOX.
Derivatives – Clearing
CDCC acts as the central clearing counterparty for exchange-traded derivative products in Canada and for a growing
range of customized financial instruments. CDCC’s role is to ensure the integrity and stability of the markets that it
supports. CDCC provides central clearing counterparty (CCP) clearing and settlement services for all MX transactions
and certain over-the-counter (OTC) derivatives, including fixed income repurchase and reverse repurchase agreement
(REPO) transactions. In addition, CDCC is the issuer of options traded on MX markets.
CDCC is an integrated central clearing counterparty in North America that clears and settles futures, options and
options on futures. The Canadian Derivatives Clearing Service (CDCS) operated by CDCC has been designated by the
Bank of Canada as being a systemically important financial market infrastructure under the Payment Clearing and
Settlement Act (Canada).
CDCC generates revenue from clearing and settlement, as well as from options and futures exercise activities (see
Revenue Description section below).
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TMX Group Limited
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Derivatives – Regulatory Division
MX is recognized by the Autorité des marchés financiers (AMF) as a Self-Regulatory Organization (SRO) that has
responsibility for maintaining the transparency, credibility and integrity of the exchange-traded derivatives market in
Canada. MX’s Regulatory Division oversees the regulatory functions. It is responsible for the regulation of its markets
and its trading participants.
The Regulatory Division operates as a separate and independent unit of MX. It is subject to the 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 operations are self-funded and are carried out on a not-for-profit
basis.
The Regulatory Division generates revenue from regulatory fees principally comprised of market surveillance fees
collected by MX on behalf of its 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 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 fines are
accounted for separately from regulatory fees revenues. The regulatory fines can be used only for specifically
approved purposes, such as educational initiatives.
Strategy
MX sales and business development efforts will focus on:
•
•
Continuation of global expansion through trading hours and access expansion
Introduction of new client-focused products and services with new offerings to unlock the yield curve and
further build out the equities derivatives complex
CDCC strengthens and supports Derivatives markets growth with trusted, deep post-trade capabilities. Enhancements
of CDCC’s products and services will focus on:
•
•
•
•
Supporting a vertically-integrated introduction of new derivatives products and services
Providing efficient international access to a global pool of traders and asset owners
Upgrading operational, risk and regulatory compliance capabilities
Complementing the Derivatives ecosystem with an expanded REPO facility
Revenue Description
Those who trade on MX are charged fees for buying and selling derivatives products on a per transaction basis,
determined by factors that include contract type and volume of contracts traded. Since MX trading fee rates are
charged on each transaction based on the number of contracts included in each transaction, MX trading revenue is
largely correlated to the volume of contracts traded on the derivatives market. Derivatives trading revenue is
recognized in the month in which the trade is executed.
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TMX Group Limited
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CDCC clearing members (Clearing Members) pay fees for clearing and settlement, including OTC fixed income and REPO
transactions, on a per transaction basis. Fees for fixed income transactions are based on the size and term of the
original agreement. Clearing Members are also eligible for a revenue sharing arrangement based on annual cleared
volumes of REPO transactions. Clearing and settlement revenues other than for REPO transactions are correlated to
the trading volume of such products and therefore fluctuate based on the same factors that affect our derivatives
trading volume. Revenue is recognized as performance obligations are satisfied; this occurs within a short period of
time. Clearing revenue for fixed income REPO agreements is recognized on the novation date of the related
transaction.
Global Solutions, Insights, and Analytics (GSIA)
Year ended December 31, 2020
GSIA revenue $323.7 million
Other: 4%
Index (incl. Benchmarks): 5%
Co-location: 5%
Feeds: 13%
Trayport: 42%
Subscribers & Usage: 31%
Overview and Description of Products and Services
We deliver data to fuel high-value proprietary and third party analytics to help clients make better trading and
investment decisions, and provide solutions to European wholesale energy markets for price discovery, trade execution,
post-trade transparency, and post-trade straight through processing.
TMX Datalinx
Real-Time Equity Market Data Products – TSX and TSXV Level 1 and Level 2 and Alpha Feeds
Trading activity on TSX, TSXV and Alpha 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, our information services division, into real-time market data products and delivered to end users directly
2020 Annual Report
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TMX Group Limited
Page 23
or via Canadian and global redistributors that sell data as feeds and for desktop product use. Our market data is
available globally through a large number of network carriers and extranets.
We offer our subscribers Level 1, and Level 2 real-time services for TSX, TSXV and Alpha. Level 1 provides trades,
quotes, corporate actions and index level information. Level 2 provides a more in-depth look at the order book and
allows distributors to obtain Market Book for TSX, TSXV and Alpha. Market Book is an end-user display service that
includes Market-by-Price, Market-by-Order and Market Depth by Broker for all committed orders and trades.
We also provide market participants with low-latency access to real-time Level 1 and Level 2 market data consolidated
to include all domestic equities marketplaces, by way of our TMX Information Processor Consolidated Data Feed (CDF),
Canadian Best Bid and Offer (CBBO), Consolidated Last Sale (CLS), and Consolidated Depth of Book (CDB) services. Our
Information Processor mandate from securities regulators was approved in June 2018 for an additional four year
period.
Real-Time Derivative Market Data Products
We also derive data revenue from MX. Similarly to equities markets, we distribute MX real-time Level 1, and Level 2
trading data to market participants on a global basis directly and through data distributors.
Historical, Online, and Other Market Data Products
Historical market data products include market information such as historical tick data, official market statistics and
close prices and corporate information such as dividends and corporate actions used in research, analysis and trade
clearing, including via TMX Analytics product suites to enable increased usability for clients.
Equities and Derivatives - Index Products
We have an arrangement with S&P Dow Jones Indices (S&P DJI) under which we share license fees received from
organizations that create products, such as mutual funds and ETFs, based on the S&P/TSX indices24. In general, these
license fees are based on a percentage of funds under management in respect of these proprietary products. The multi-
year Index Operation and License Agreement between TSX Inc. and S&P DJI covers the creation and publication of all
S&P/TSX indices24, while also providing MX with the rights to list futures and options on the S&P/TSX indices24.
Enterprise non-professional (non-pro) fee discount program
Under this program we introduced tiered discounts for clients based on the total amount spent on all non-pro TSX and
TSXV products and a fee cap after a specific spend limit has been reached. During the 2020 eligibility window for
entering the Enterprise non-pro fee discount program, we added two new clients. In Q4/20, we added an international
client. As of December 31, 2020, we have 11 clients in the program including the six largest Canadian banks.
TMX Datalinx Xpress
TMX Datalinx Xpress is our new approach to market data audits. The Xpress program was designed to ensure that the
clients and TMX Group have a common ongoing understanding around data feed usage, pricing and policies, and to
ensure that the administration of the prior approval, contracts, entitlements, reporting, and billing are all completed as
effortlessly as possible. After the introduction of TMX Datalinx Xpress in 2019, this optional program now has over 200
participants.
24 The S&P/TSX indices are a product of S&P Dow Jones Indices LLC (“SPDJI”) and TSX Inc. (“TSX”). Standard & Poor’s® and S&P® are
registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones
Trademark Holdings LLC and TSX® is a registered trademark of TSX.
2020 Annual Report
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TMX Group Limited
Page 24
Co-location Services
We provide co-location services to a broad range of domestic and international market participants. Our co-location
services clients, benefit from stable, low-latency access to TSX, TSXV, Alpha, and MX trading engines and market data
feeds, as well as access to other capital market clients, financial content providers, and technology providers.
Trayport
Trayport is the primary connectivity network and data and analytics platform for the European wholesale energy
markets. Trayport's solutions provide price discovery, trade execution, post-trade transparency, and post-trade straight
through processing.
Strategy
TMX Datalinx
•
•
•
•
Go to market with innovations in product pricing and packaging and secure multiple-year pricing agreements
Expand our suite of multi-asset class, real time and historical data and analytics products
Capture the global addressable market for TMX Group content and products
Provide new distribution platforms for TMX Group proprietary content
Trayport
Trayport intends to focus on capitalizing on four macro themes in the global energy markets that present growth
opportunities in both new markets and in new services to existing clients:
•
•
•
•
Leverage increasing demand for data and analytics, and provide a new analytic interface and new applications
giving clients the ability to mine critical data sets
Provide enhanced execution, data and analytics to both new and existing clients globally who need to access
developing gas markets. Trayport clients will have one of the most complete views and trading access to the
rapidly growing global gas market
Leverage new technologies to drive automation and efficiency as business processes become digitized. This
will enable Trayport to deliver increased value along the full trade lifecycle by increasing data and analytics
tools available for OTC markets and facilitating broker expansion into new asset classes and geographies
The rise of renewable energy sources is having an increasing impact on energy generation and trading.
Trayport will help clients meet the increasing demand in spot power and gas markets with new trading tools
2020 Annual Report
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TMX Group Limited
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Revenue Description
TMX Datalinx
Subscribers generally pay fixed monthly rates for access to real-time streaming data, which differ depending on 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. We charge market data vendors and direct feed clients a fixed monthly fee
for access to data feeds.
Real-time market data revenue is recognized based on usage as reported by customers and vendors, less a provision for
sales allowances from the same customers. Other Global Solutions, Insights and Analytics revenue is recognized when
the services are provided.
Generally, we sell historical data products for a fixed amount per product accessed. Fees vary depending on the type of
end use.
Co-location Services
Subscribers to TMX Group’s co-location services, pay a fixed monthly fee depending on the number of cabinets and
other related services they receive. Co-location services are normally contracted for a period of one to five years.
Trayport
Trayport subscribers pay a monthly rate for access to the platform. While some customers are on multi-year contracts,
the average term is about one year.
In 2020, approximately 48% of our GSIA (excluding Trayport) revenue was billed in U.S. dollars, and approximately 93%
of our Trayport revenue was billed in British Pound Sterling. We do not currently hedge this revenue and therefore it is
subject to foreign exchange fluctuations. (For details, see Financial Risk Management - Market Risk - Foreign Currency
Risk.)
2020 Annual Report
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TMX Group Limited
Page 26
Results of Operations
Non-IFRS Financial Measures
Adjusted earnings per share, adjusted diluted earnings per share and adjusted net income are non-IFRS measures and
do not have standardized meanings prescribed by IFRS and are, therefore, unlikely to be comparable to similar
measures presented by other companies. We present adjusted earnings per share, adjusted diluted earnings per share,
and adjusted net income to indicate ongoing financial performance from period to period, exclusive of a number of
adjustments. These adjustments include amortization of intangibles related to acquisitions, impairment charges,
strategic re-alignment expenses, net litigation settlement costs, gain on sale of interest in Bermuda Stock Exchange,
transaction related costs, change in net deferred income tax liabilities resulting from decrease in Alberta corporate
income tax rate, increase in deferred income tax liabilities relating to a change in the U.K. tax rate, and reduction in
commodity tax provision. Management uses these measures, and excludes certain items, because it believes doing so
results in a more effective analysis of underlying operating and financial performance, including, in some cases, our
ability to generate cash. Excluding these items also enables comparability across periods. The exclusion of certain
items does not imply that they are non-recurring or not useful to investors.
Year ended December 31, 2020 (2020) Compared with Year ended December 31, 2019 (2019)
The information below reflects the financial statements of TMX Group for 2020 compared with 2019. Certain
comparative information has been reclassified in order to conform with the financial presentation adopted in the
current year.
(in millions of dollars, except per
share amounts)
Revenue
Operating expenses
Income from operations
Net income
Adjusted net income25
Earnings per share
Basic
Diluted
Adjusted Earnings per share26
Basic
Diluted
2020
$865.1
449.2
415.9
279.7
334.9
4.96
4.91
5.93
5.88
2019
$ increase
% increase
$806.9
424.5
382.4
247.6
300.2
4.42
4.38
5.36
5.31
$58.2
24.7
33.5
32.1
34.7
0.54
0.53
0.57
0.57
66.9
7%
6%
9%
13%
12%
12%
12%
11%
11%
19%
Cash flows from operating activities
410.9
344.0
25 See discussion under the heading "Non-IFRS Financial Measures".
26 See discussion under the heading "Non-IFRS Financial Measures".
2020 Annual Report
35
TMX Group Limited
Page 27
Net Income and Earnings per Share
Net income in 2020 was $279.7 million, or $4.96 per common share on a basic and $4.91 per common share on a
diluted basis, compared with a net income of $247.6 million, or $4.42 per common share on a basic and $4.38 on a
diluted basis, for 2019. The increase in net income reflected an increase in income from operations of $33.5 million.
The increase in income from operations from 2019 to 2020 was driven by an increase in revenue of $58.2 million, offset
by an increase in operating expenses of $24.7 million. The increase in operating expenses was partly attributable to net
litigation settlement costs of $12.4 million (16 cents per basic and diluted common share) in Q2/20. There was also an
increase in our share of income from BOX. In addition, during 2019, there was an $18.0 million (32 cents per basic and
diluted common share) non-cash impairment charge related to Shorcan.
The increase in net income and earnings per share was reduced by significantly higher income tax expense, and a
higher effective income tax rate, in 2020 compared with 2019.
•
•
During 2020, there was a change in the U.K. corporate income tax rate. This resulted in an increase in deferred
income tax liabilities and a corresponding increase in income tax expense of $7.4 million, which reduced net
income.
In 2019, the Alberta general corporate income tax rate decreased. This change resulted in a decrease in net
deferred income tax liabilities and a corresponding decrease in income tax expense of $4.3 million. In 2019, we
incurred non-cash impairment charges of $18.0 million related to Shorcan, which is not deductible for income tax
purposes. This resulted in an increase in our effective tax rate, which essentially offset the positive impact from
the decrease in the Alberta general corporate income tax rate.
The increase in diluted earnings per share was somewhat reduced by an increase in the number of weighted-average
common shares outstanding in 2020 compared with 2019.
2020 Annual Report
36
TMX Group Limited
Page 28
Adjusted Earnings per Share27 Reconciliation for 2020 and 2019
The following is a reconciliation of earnings per share to adjusted earnings per share:
(unaudited)
Earnings per share
Adjustments related to:
Amortization of intangibles related to acquisitions
Impairment charges
Strategic re-alignment expenses28
Net litigation settlement costs
Gain on sale of interest in Bermuda Stock Exchange
Transaction related costs29
Change in net deferred income tax liabilities resulting
from decrease in Alberta corporate income tax rate
Increase in deferred income tax liabilities relating to
change in U.K. tax rate
Reduction in commodity tax provision
Adjusted earnings per share30
Weighted average number of common shares outstanding
2020
2019
Basic
$4.96
Diluted
$4.91
0.67
—
—
0.16
—
0.03
—
0.13
0.67
—
—
0.16
—
0.03
—
0.13
(0.02)
$5.93
(0.02)
$5.88
Basic
$4.42
0.68
0.32
0.05
—
(0.04)
0.01
(0.08)
—
—
Diluted
$4.38
0.67
0.32
0.05
—
(0.04)
0.01
(0.08)
—
—
$5.36
$5.31
56,425,302
56,950,290
56,045,211
56,570,669
Adjusted diluted earnings per share increased by 11% from $5.31 in 2019 to $5.88 in 2020 largely driven by increased
revenue, somewhat offset by higher operating expenses, excluding net litigation settlement costs of $12.4 million.
There was also an increase in our share of income from BOX and lower net finance costs.
The increase in adjusted diluted earnings per share was somewhat offset by an increase in the number of weighted-
average common shares outstanding in 2020 compared with 2019.
27 See discussion under the heading "Non-IFRS Financial Measures".
28 In 2019 we incurred approximately $3.3 million related to organizational changes, and net expense of $0.4 million related to
onerous contracts. The organizational changes generated annual savings of approximately $1.8 million starting in Q2/19.
29 Includes costs related to the AST Canada transaction in 2020 and costs related to the acquisition of Visotech in 2019. See
Initiatives and Accomplishments - Capital Formation - AST Canada transaction for more details.
30 See discussion under the heading "Non-IFRS Financial Measures".
2020 Annual Report
37
TMX Group Limited
Page 29
Adjusted Net Income31 Reconciliation for 2020 and 2019
The following is a reconciliation of net income to adjusted net income:
(in millions of dollars)
(unaudited)
Net income
Adjustments related to:
Amortization of intangibles related to
acquisitions
Impairment charges
Strategic re-alignment expenses32
Net litigation settlement costs
Gain on sale of interest in Bermuda Stock
Exchange
Transaction related costs33
Change in net deferred income tax liabilities
resulting from decrease in Alberta corporate
income tax rate
Increase in deferred income tax liabilities
relating to change in U.K. tax rate
2020
$279.7
38.1
—
—
9.1
—
1.7
—
7.4
Reduction in commodity tax provision
Adjusted net income34
(1.1)
$334.9
2019
$ increase /
(decrease)
% increase /
(decrease)
$247.6
$32.1
13%
37.5
18.0
2.8
—
(2.0)
0.6
(4.3)
—
—
$300.2
0.6
(18.0)
(2.8)
9.1
2.0
1.1
4.3
7.4
(1.1)
$34.7
2%
(100)%
(100)%
n/a
(100%)
183%
(100%)
n/a
n/a
12%
Adjusted net income increased by 12% from $300.2 million in 2019 to $334.9 million in 2020 largely driven by increased
revenue, somewhat offset by higher operating expenses, excluding net litigation settlement costs of $12.4 million.
There was also an increase in our share of income from BOX and lower net finance costs.
31 See discussion under the heading "Non-IFRS Financial Measures".
32 In 2019 we incurred approximately $3.3 million related to organizational changes, and net expense of $0.4 million related to
onerous contracts. The organizational changes generated annual savings of approximately $1.8 million starting in Q2/19.
33 Includes costs related to the AST Canada transaction in 2020 and costs related to the acquisition of Visotech in 2019. See
Initiatives and Accomplishments - Capital Formation - AST Canada transaction for more details.
34 See discussion under the heading "Non-IFRS Financial Measures".
2020 Annual Report
38
TMX Group Limited
Page 30
Revenue
(in millions of dollars)
2020
2019
$ increase /
(decrease)
% increase /
(decrease)
Capital Formation
$189.0
$180.7
Equities and Fixed Income Trading
and Clearing
Derivatives Trading and Clearing
Global Solutions, Insights and
Analytics
Other
226.2
126.2
323.7
0.0
193.5
133.2
299.7
(0.2)
$865.1
$806.9
$8.3
32.7
(7.0)
24.0
0.2
$58.2
5%
17%
(5)%
8%
(100)%
7%
Revenue was $865.1 million in 2020, up $58.2 million or 7% compared with $806.9 million in 2019 attributable to
increases in revenue from Capital Formation, Equities and Fixed Income Trading and Clearing as well as Global
Solutions, Insights and Analytics offset by a decrease in Derivatives Trading and Clearing revenue.
Capital Formation
(in millions of dollars)
Initial listing fees
Additional listing fees
Sustaining listing fees
Other issuer services
2020
$10.1
81.8
69.3
27.8
2019
$11.0
72.7
68.9
28.1
$189.0
$180.7
$ increase /
(decrease)
% increase /
(decrease)
$(0.9)
9.1
0.4
(0.3)
$8.3
(8)%
13%
1%
(1)%
5%
•
•
•
•
Initial listing fees in 2020 decreased from 2019 due to a decline in the amount of deferred initial listing fee revenue
recognized in 2020 compared with 2019 on TSXV, somewhat offset by an increase in the amount of deferred initial
listing fee revenue recognized on TSX. We recognized initial listing fees received in 2019 and 2020 of $8.9 million
in 2020 compared with initial listing fees received in 2018 and 2019 of $10.0 million in 2019.
Based on initial listing fees billed 2020, the following amounts have been deferred to be recognized in Q1/21,
Q2/21, Q3/21 and Q4/21: $2.4 million, $2.1 million, $1.4 million and $0.4 million respectively. Total initial listing
fees revenue for future quarters will also depend on listing activity in those quarters.
Additional listing fees in 2020 increased compared to 2019 reflecting an increase in additional listing fee revenue
on TSXV where there was an increase in both the number of financings and total financing dollars raised. There
was also an increase in additional listing fee revenue on TSX reflecting an increase of 9% in the number of
transactions billed below the maximum fee, from 2019 to 2020 somewhat offset by a 2% decrease in the number
of transactions billed at the maximum listing fee of $250,000.
Issuers listed on TSX and TSXV 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. There was an increase in TSX, partially
offset by a decrease in TSXV from 2019 to 2020.
2020 Annual Report
39
TMX Group Limited
Page 31
• Other issuer services revenue in 2020 was lower compared to 2019 reflecting decreased revenue from TSX Trust
primarily due to lower margin income and a decrease in recoverable revenue. The decreases were somewhat
offset by an increase in transfer agent fee revenue.
Equities and Fixed Income Trading and Clearing
(in millions of dollars)
2020
2019
$ increase
% increase
Equities and fixed income trading
$127.0
Equities and fixed Income clearing,
settlement, depository and other
services (CDS)
99.2
$98.0
95.5
$226.2
$193.5
$29.0
3.7
$32.7
30%
4%
17%
•
•
•
•
•
There was an increase in Equities and Fixed Income Trading revenue in 2020 compared with 2019 driven by
significantly higher overall volumes across all of our exchanges. The impact from the higher volumes was
somewhat offset by a less favourable product mix in 2020 compared with 2019. There was also an increase in fixed
income trading revenue reflecting increased activity in swaps.
The overall volume of securities traded on our equities marketplaces increased by 42% (186.4 billion securities in
2020 versus 131.4 billion securities in 2019). There was an increase in volumes of 37% on TSX, 47% on TSXV and
64% on Alpha in 2020 compared with 2019.
Excluding intentional crosses, for TSX and TSXV listed issues, our combined domestic equities trading market share
was approximately 67% in 2020, up 2% from approximately 65% in 2019.35 We only trade securities that are listed
on TSX or TSXV.
Excluding intentional crosses, in all listed issues in Canada, our combined domestic equities trading market share
was 59% in 2020, up 2% from 57% in 201936.
CDS revenue increased from 2019 to 2020 reflecting higher clearing and settlement revenue due to higher
volumes, increased depository fee revenue as well as higher international revenue. The increases in revenue were
partially offset by higher rebates.
Derivatives Trading and Clearing
(in millions of dollars)
2020
2019
$ (decrease)
% (decrease)
$126.2
$133.2
$(7.0)
(5)%
35 Source: IIROC.
36 Source: IIROC.
2020 Annual Report
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TMX Group Limited
Page 32
•
•
The decrease in Derivatives Trading and Clearing revenue was primarily attributable to reduced revenue of
approximately $3.8 million from BOX relating to our agreement to provide transitional services, which ended on
June 30, 2020.
The decrease in revenue was also driven by a 3% decrease in revenue from MX and CDCC. While volumes on MX
were essentially unchanged from 2019 to 2020 (115.9 million contracts traded in 2020 versus 116.2 million
contracts traded in 2019), there was lower revenue per contract attributable to an unfavourable product mix.
Global Solutions, Insights and Analytics
(in millions of dollars)
2020
2019
$ increase
% increase
Trayport
GSIA (excluding Trayport)
$136.7
187.0
$323.7
$119.6
180.1
$299.7
$17.1
$6.9
$24.0
14%
4%
8%
The increase in Global Solutions, Insights and Analytics (GSIA) revenue in 2020 compared with 2019 was primarily
driven by increased revenue from Trayport, including revenue from VisoTech (acquired May 15, 2019). The higher
revenue includes a favourable impact from a weaker Canadian dollar relative to British Pound Sterling (GBP) in 2020
compared with 2019. Revenue from GSIA, excluding VisoTech was up 7% in 2020 from 2019.
Trayport
The following table summarizes the average number of Trayport subscribers (excluding VisoTech) over the last eight
quarters:
Trader Subscribers
Total Subscribers37
Q4/20
Q3/20
Q2/20
Q1/20
Q4/19
Q3/19
Q2/19
Q1/19
5,262
5,149
4,998
5,191
5,072
4,863
4,834
4,716
25,254
24,661
24,276
24,711
24,116
23,201
22,823
22,349
Revenue (in millions of GBP)
£20.4
£19.6
£19.7
£19.4
£18.0
£18.2
£17.8
£16.7
Total Subscribers means all chargeable licenses of core Trayport products in core customer segments including Traders,
Brokers and Exchanges. Trader Subscribers are a subset of Total Subscribers. Trader Subscribers revenue represents
over 50% of total Trayport revenue.
Revenue from Trayport, including VisoTech (acquired May 15, 2019), was £79.1 million in 2020, up 12% over 2019.
Excluding VisoTech, revenue from Trayport was up 10%.
GSIA (excluding Trayport)
Revenue from GSIA (excluding Trayport) increased by 4% from 2019 to 2020. There were higher revenues related to
usage based quotes, feeds, benchmarks and indices as well as co-location, partially offset by lower revenues related to
under-reported usage of real-time quotes in prior periods. The higher revenue includes a favourable impact from a
weaker Canadian dollar relative to the U.S. dollar in 2020 compared with 2019.
37 Previous amounts have been restated based on current data.
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TMX Group Limited
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•
•
The average number of professional market data subscriptions for TSX and TSXV products was essentially
unchanged from 2019 to 2020 (100,635 professional market data subscriptions in 2020 compared with 100,792 in
2019.)
The average number of MX professional market data subscriptions decreased 1% from 2019 to 2020 (18,607 MX
professional market data subscriptions in 2020 compared with 18,820 in 2019).
Other
(in millions of dollars)
2020
$—
2019
$ increase
% increase
$(0.2)
$0.2
100%
•
The increase in Other revenue reflected a decrease in net foreign exchange losses on net monetary assets from
2019 to 2020.
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Operating expenses
(in millions of dollars)
2020
2019
$ increase /
(decrease)
% increase /
(decrease)
Compensation and benefits
$226.6
$207.9
$18.7
Information and trading systems
Selling, general and administration
Depreciation and amortization
Strategic re-alignment expenses
57.6
84.7
80.3
—
51.9
81.4
79.6
3.7
$449.2
$424.5
5.7
3.3
0.7
(3.7)
$24.7
9%
11%
4%
1%
(100)%
6%
Operating expenses in 2020 were $449.2 million, up $24.7 million or 6%, from $424.5 million in 2019. The increase in costs
was partly attributable to net litigation settlement costs of $12.4 million (16 cents per basic and diluted share) included
within Selling, general and administration expenses in Q2/20. There were also higher costs related to our short term
employee performance incentive plan of $14.4 million, increased severance costs of $3.1 million (excluding Strategic re-
alignment expenses), higher headcount, increased software licensing and information technology professional services, a
write-off of leasehold improvements, as well as increased costs related to managing our business during the COVID-19
pandemic. In addition, we incurred $1.7 million (3 cents per basic and diluted share) in transaction related costs related to
the proposed AST Canada transaction.
The increases were somewhat offset by a decline in recruitment, pension and long term employee performance incentive
plan costs, travel and entertainment expenses, consulting fees and marketing costs. There was also a reduction of $1.5
million in a commodity tax provision (2 cents per basic and diluted share), which reduced Selling, general and
administration expenses. Lastly, there were Strategic re-alignment expenses of $3.7 million in 2019 with no similar costs
in 2020.
Compensation and benefits
(in millions of dollars)
2020
2019
$ increase
% increase
$226.6
$207.9
$18.7
9%
•
•
The increase in Compensation and benefits expenses reflected higher short term employee performance incentive
plan costs of $14.4 million, increased severance costs of $3.1 million (excluding Strategic re-alignment expenses),
higher headcount as well as COVID-19 pandemic related costs, somewhat offset by lower recruitment, pension, and
long term employee performance incentive plan costs.
There were 1,383 TMX Group employees at December 31, 2020 versus 1,287 employees at December 31, 2019
reflecting an increase in headcount attributable to investing in the various growth areas of our business.
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Information and trading systems
(in millions of dollars)
2020
$57.6
2019
$51.9
$ increase
% increase
$5.7
11%
•
The increase in Information and trading systems expenses from 2019 to 2020 reflected higher software license and
information technology professional services costs, as well as increased costs related to the COVID-19 pandemic as
employees worked from home.
Selling, general and administration
(in millions of dollars)
2020
$84.7
2019
$81.4
$ increase
% increase
$3.3
4%
•
•
Selling, general and administration expenses increased by $3.3 million in 2020 compared with 2019 primarily due to
incurring net litigation settlement costs of $12.4 million (16 cents per basic and diluted share) in Q2/20. In addition,
we incurred $1.7 million (3 cents per basic and diluted share) in transaction related costs for the proposed AST Canada
transaction. The increase was also due to higher costs attributable to the COVID-19 pandemic, and a write-off of
leasehold improvement costs.
The increases in Selling, general and administration expenses were partially offset by lower travel and entertainment
expenses, consulting fees and marketing costs. There was also a reduction of $1.5 million in a commodity tax
provision (2 cents per basic and diluted share), which reduced Selling, general and administration expenses.
Depreciation and amortization
(in millions of dollars)
2020
$80.3
2019
$79.6
$ increase
% increase
$0.7
1%
•
•
•
There were higher Depreciation and amortization costs reflecting increased amortization on new intangible assets.
The Depreciation and amortization costs in 2020 of $80.3 million included $47.4 million related to amortization of
intangibles assets related to acquisitions (67 cents per basic and diluted share).
The Depreciation and amortization costs in 2019 of $79.6 million included $47.1 million related to amortization of
intangibles assets related to acquisitions (68 cents per basic and 67 cents per diluted share).
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Strategic re-alignment expenses
2020
2019
(in millions of dollars)
Pre-tax Amount
Basic and Diluted
Earnings per Share
Impact
Pre-tax Amount
Basic and Diluted
Earnings per Share
Impact
$—
$—
$3.7
$0.05
•
Strategic re-alignment expenses for 2019 were $3.7 million, which included $3.3 million related to organizational
changes we made in our post trade business, elimination of our centralized innovation product development unit, and
changes to our enterprise risk approach. There were also non-recurring charges for onerous contracts related to our
initiative on modernizing our clearing platforms of $1.3 million. In Q4/19, we recovered approximately $0.9 million of
these charges (See INITIATIVES AND ACCOMPLISHMENTS - Update on Modernization of Clearing Platforms).
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Additional Information
Share of income from equity accounted investees
(in millions of dollars)
2020
$5.7
2019
$3.8
$ increase
% increase
$1.9
50%
•
In 2020 our share of income from equity accounted investees increased by $1.9 million primarily due to an
increase in our share of income from BOX reflecting higher revenues driven by an 80% increase in volumes,
somewhat offset by a significant increase in long term employee performance incentive plan costs. Our share of
these long term employee performance incentive plan costs was approximately $5.1 million (7 cents per basic and
diluted share).
Impairment charge
(in millions of dollars)
2020
$—
2019
$18.0
$ (decrease)
% (decrease)
$(18.0)
(100)%
•
In Q4/19 we determined that the fair value of Shorcan was below its carrying value, resulting in a non-cash
impairment charge of $18.0 million. There was no impairment charge in 2020.
Other income
(in millions of dollars)
2020
$—
2019
$2.3
$ (decrease)
% (decrease)
$(2.3)
(100)%
•
In 2019, we completed the sale of our interest in Bermuda Stock Exchange resulting in a gain on sale of
approximately $2.3 million before tax ($2.0 million after income tax, or 4 cents per basic and diluted share).
Net finance costs
(in millions of dollars)
2020
$32.8
2019
$35.6
$ (decrease)
% (decrease)
$(2.8)
(8)%
•
The decrease in net finance costs for 2020 compared to 2019 reflected net lower interest expense due to
decreased debt levels and lower interest rates.
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Income tax expense and effective tax rate
Income Tax Expense (in millions of dollars)
Effective Tax Rate (%)
2020
$109.1
2019
$87.3
2020
28%
2019
26%
Excluding adjustments, primarily related to the items noted below, the effective tax rate would have been
approximately 26% for both 2020 and 2019.
2020
•
In 2020, there was an increase in deferred income tax liabilities and a corresponding increase in income tax
expense of $7.4 million relating to the U.K. corporate income tax rate. In Q1/20, it was announced that the U.K.
corporate income tax rate would not decline as previously anticipated; therefore, we were required to revalue
deferred income tax liabilities related to acquired intangible assets.
2019
•
In 2019, the Alberta general corporate income tax rate decreased. This change resulted in a decrease in net
deferred income tax liabilities and a corresponding decrease in income tax expense of $4.3 million. In 2019, we
incurred non-cash impairment charges of $18.0 million related to Shorcan, which is not deductible for income tax
purposes. This resulted in an increase in our effective tax rate, which essentially offset the positive impact from
the decrease in the Alberta general corporate income tax rate.
Total equity
(in millions of dollars)
Total equity
As at December 31,
2020
As at December 31,
2019
$3,611.5
$3,499.1
$ increase
$112.4
•
•
•
As at December 31, 2020, there were 56,301,119 common shares issued and outstanding and 1,205,874 options
outstanding under the share option plan.
At February 1, 2021, there were 56,241,475 common shares issued and outstanding and 1,167,482 options
outstanding under the share option plan.
The increase in Total equity is primarily attributable to the inclusion of net income of $279.7 million less dividend
payments to shareholders of TMX Group of $153.6 million. In addition, the cost of repurchasing 473,400 of our
common shares under a normal course issuer bid was largely offset by proceeds received on the exercise of
options.
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Segments
The following information reflects TMX Group’s segment results for 2020 compared with the 2019.
2020
(in millions of dollars)
Capital
Formation
Equities and
Fixed
Income
Trading &
Clearing
Derivatives
Trading &
Clearing
Global
Solutions,
Insights &
Analytics
Other
Total
Revenue from external customers $
189.0 $
226.2 $
126.2 $
323.7 $
— $
865.1
Inter-segment revenue
0.2
1.9
—
0.3
Total revenue
189.2
228.1
126.2
324.0
(2.4)
(2.4)
—
865.1
Income (loss) from operations
100.0
119.0
60.0
207.8
(70.9)
415.9
2019
(in millions of dollars)
Capital
Formation
Equities and
Fixed
Income
Trading &
Clearing
Derivatives
Trading &
Clearing
Global
Solutions,
Insights &
Analytics
Other
Total
Revenue from external customers $
180.7 $
193.5 $
133.2 $
299.7 $
(0.2) $
806.9
Inter-segment revenue
—
1.6
—
0.3
Total revenue
180.7
195.1
133.2
300.0
(1.9)
(2.1)
—
806.9
Income (loss) from operations
96.8
85.8
59.3
193.0
(52.5)
382.4
Income (loss) from operations
The increase in Income from operations from Capital Formation primarily reflected higher revenue from additional
listing fees in 2020 compared with 2019. This was somewhat offset by lower initial listing fee revenue and higher
operating expenses in 2020 compared with 2019.
The increase in Income from operations from Equities and Fixed Income Trading and Clearing was largely driven by
significantly higher revenue from Equities trading due to substantially higher volumes across all of our exchanges. In
addition, there was an increase in revenue from CDS and Fixed income trading.
The increase in Income from operations from Derivatives Trading and Clearing primarily reflected lower operating
expenses in 2020 compared with 2019, including reduced expenses relating to BOX. The increase was somewhat offset
by lower revenue from Derivatives Trading and Clearing. The decrease in Derivatives Trading and Clearing revenue was
primarily attributable to reduced revenue of approximately $3.8 million from BOX relating to our agreement to provide
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TMX Group Limited
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transitional services, which ended on June 30, 2020. While volumes on MX were essentially unchanged from 2019 to
2020 , there was lower revenue per contract attributable to an unfavourable product mix.
The increase in Income from operations from Global Solutions, Insights and Analytics reflects higher revenue from
Trayport, including VisoTech (acquired May 15, 2019) and TMX Datalinx. The increase in Trayport revenue reflected
higher total subscribers as well as a favourable impact from a weaker Canadian dollar relative to GBP in 2020 compared
with 2019. Within TMX Datalinx, there were higher revenues related to usage based quotes, feeds, benchmarks and
indices as well as co-location, partially offset by lower revenues related to under-reported usage of real-time quotes in
prior periods. The higher revenue includes a favourable impact from a weaker Canadian dollar relative to the U.S.
dollar in 2020 compared with 2019. The increase in Income from operations was somewhat offset by an increase in
operating expenses.
Other includes certain revenue as well as corporate and other costs related to initiatives, not allocated to the operating
segments. Revenue related to foreign exchange gains and losses and other services are presented in the Other
segment. Costs and expenses related to the amortization of purchased intangibles, along with certain consolidation
and elimination adjustments, are also presented in Other. The increase in Other revenue reflected a decrease in net
foreign exchange losses on net monetary assets from 2019 to 2020. The loss from operations for the Other segment
was higher in 2020 compared to 2019, reflecting net litigation settlement costs of $12.4 million, $1.7 million in
transaction related costs for the proposed AST Canada transaction, and certain COVID-19 related costs allocated to the
Other segment.
LIQUIDITY AND CAPITAL RESOURCES
2020 compared with 2019
(in millions of dollars)
Cash flows from operating activities
Cash flows (used in) financing activities
Cash flows (used in) investing activities
2020
$410.9
(303.1)
(34.8)
2019
$344.0
(234.8)
(95.3)
$ increase /
(decrease) in cash
$66.9
(68.3)
60.5
•
•
•
In 2020, Cash flows from operating activities increased compared with 2019 reflecting higher income from
operations (excluding depreciation and amortization), an increase in cash from trade and other payables and a
decrease in income taxes paid.
In 2020, Cash flows used in financing activities were higher than in 2019 largely due to $56.8 million of share
repurchases under our normal course issuer bid program, which was launched in Q1/20, and an increase in
dividends paid to TMX Group shareholders of $12.3 million.
In 2020, Cash flows used in investing activities were lower than in 2019. This was largely due to an increase in cash
of $24.6 million from the net sale of marketable securities in 2020 compared with net purchases of marketable
securities in 2019 of $24.8 million In addition, during 2019, we had a cash outflow of $23.6 million related to the
VisoTech acquisition, which was somewhat offset by receiving $3.8 million on the sale of our interest in the
Bermuda Stock Exchange. Offsetting the increases, cash used for additions to premises and equipment increased
by $9.5 million from 2019 to 2020.
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Summary of Cash Position and Other Matters38
Cash, Cash Equivalents and Marketable Securities
(in millions of dollars)
As at December 31,
2020
As at December 31,
2019
$ increase
$277.9
$229.4
$48.5
We had $277.9 million of cash, cash equivalents and marketable securities as at December 31, 2020. There was an
increase in cash, cash equivalents and marketable securities primarily reflecting cash flows from operating activities of
$410.9 million, and proceeds from exercised options of $31.7 million. Offsetting these increases in cash and cash
equivalents were cash outflows for dividends to our shareholders of $153.6 million, additions to premises and
equipment and intangible assets of $67.1 million, repurchases our shares under a normal course issuer bid of $56.8
million, interest paid, net of interest received, of $31.6 million, and a net decrease in Commercial Paper of $79.6
million. Based on our current business operations and model, we believe that we have sufficient cash resources and
access to financing to operate our business, make interest payments, as well as meet our covenants under the trust
indentures governing our Debentures and the terms of the Credit Agreement (as defined in this MD&A) and
commercial paper program (Commercial Paper Program) (see LIQUIDITY AND CAPITAL RESOURCES - Commercial
Paper, Debentures, Credit and Liquidity Facilities), and satisfy the capital maintenance requirements imposed by
regulators.
We will also have cash outlays related to the modernization of our clearing platforms (see - INITIATIVES AND
ACCOMPLISHMENTS - Update on Modernization of Clearing Platforms) and to fund the AST Canada transaction,
which will be financed with a combination of cash and debt capacity (see - INITIATIVES AND ACCOMPLISHMENTS -
Capital Formation - AST Canada transaction)
Our ability to obtain funding in the future will depend on the liquidity and condition of the financial markets, including
the credit market, and our financial condition at the time, the covenants in the Credit Agreement and the trust
indentures governing the Debentures, and by capital maintenance requirements imposed by regulators. At December
31, 2020, there was $160.0 million of Commercial Paper outstanding, and the authorized limit under the program was
$500.0 million, which is fully backstopped by the TMX Group credit facility (see - LIQUIDITY AND CAPITAL RESOURCES
- Credit Facility ).
Total Assets
(in millions of dollars)
As at December 31,
2020
As at December 31,
2019
$ increase
$36,098.6
$32,359.7
$3,738.9
• Our consolidated balance sheet as at December 31, 2020 includes Balances with Participants and Clearing
Members related to our clearing operations. These balances have equal amounts included within Total Liabilities.
The increase in Total Assets of $3,738.9 million from December 31, 2019 reflected higher collateral balances in
both CDS and CDCC at December 31, 2020 driven by the Bank of Canada requiring participants to post substantially
more collateral (to address Cover 1 liquidity risk under Principles of Financial Market Infrastructure (PFMI)).
38 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.
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Defined Benefits Pension Plan
Based on the most recent actuarial valuations (as at December 31, 2019 or January 1, 2020 depending on the plan), we
estimate a net deficit of approximately $7.3 million of which $3.6 million was funded in 2020. The next required tri-
annual valuation for the TMX registered pension plan (RPP) will be as at December 31, 2022.
Commercial Paper, Debentures, Credit and Liquidity Facilities
Commercial Paper
(in millions of dollars)
As at December 31,
2020
As at December 31,
2019
$ (decrease)
$160.0
$239.6
$(79.6)
There was $160.0 million of Commercial Paper outstanding, including accrued interest, under the program at
December 31, 2020 reflecting a net reduction of $79.6 million from December 31, 2019. Commercial paper is short
term in nature, and the average term to maturity from the date of issue was 29 days in Q4/20. The Commercial Paper
Program is fully backstopped by the TMX Group credit facility (see - LIQUIDITY AND CAPITAL RESOURCES - Credit
Facility).
For additional information on our credit facilities, please see Credit Facilities under the heading LIQUIDITY AND
CAPITAL RESOURCES.
Debentures
As of December 31, 2020, TMX Group had the following Debentures outstanding:
Debenture
Series B
Series D
Series E
Principal
Amount ($
millions)
250.0
300.0
200.0
Coupon
Maturity Date
DBRS Credit Rating
4.461% per annum, payable in
arrears in equal semi-annual
installments (long first coupon)
2.997% per annum, payable in
arrears in equal semi-annual
installments
3.779% per annum, payable in
arrears in equal semi-annual
installments
October 3, 2023
A (high)
December 11, 2024
A (high)
June 5, 2028
A (high)
• On June 5, 2018, TMX Group completed a Canadian private placement offering of $200.0 million aggregate
principal amount of 3.779% senior unsecured debentures due June 5, 2028 ("Series E Debentures") to accredited
investors in Canada. The Series E Debentures received a credit rating of A (high) with a Stable trend from DBRS
Limited. TMX Group incurred financing costs of $1.1 million for the initial issuance of the Series E Debentures, and
these costs are offset against the initial carrying value of the Series E Debentures.
•
The Series B and Series E Debentures may be redeemed, at the option of TMX Group, in whole or in part at the
redemption price together with accrued and unpaid interest to the date fixed for redemption. The redemption
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TMX Group Limited
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price is equal to the greater of the applicable Canada Yield Price (as defined in the relevant Trust Indenture (as
defined below)) and 100% of the principal amount of the Series B and Series E Debentures being redeemed to the
date fixed for redemption. If the Series B and Series E Debentures are redeemed anytime on or after three months
prior to the maturity date of the series, the redemption price is equal to 100% of the aggregate principal amount
outstanding on the Series B and Series E Debentures together with accrued and unpaid interest to the date of the
redemption.
•
The Series D Debentures may be redeemed, in whole or in part, at the option of TMX Group, at the redemption
price together with accrued and unpaid interest to the date fixed for redemption. The redemption price is equal to
the greater of the Canada Yield Price (as defined in the relevant Trust Indenture) and 100% of the principal amount
of the Series D Debentures being redeemed. If the Series D Debentures are redeemed anytime on or after two
months prior to the maturity date of the series, the redemption price will be equal to 100% of the aggregate
principal amount outstanding on the Series D Debentures together with accrued and unpaid interest to the date of
the redemption.
•
The trust indenture and the supplements thereto which govern the Debentures (collectively, the Trust Indentures
and each a Trust Indenture) include the following covenants:
◦
◦
◦
◦
A negative pledge which restricts the ability of TMX Group and each of its material subsidiaries (as defined
in the Trust Indentures) to create a lien on these entities’ assets unless the Debentures are similarly
secured on an equal and rateable basis.
A limitation on the ability of material subsidiaries of TMX Group to enter into certain types of
indebtedness.
In the event of a change of control (as such term is defined in the Trust Indentures) of either TSX Inc. or
MX, if the rating of the Debentures is lowered to below investment grade (as defined in the Trust
Indentures), TMX Group will be required, at the option of the Debenture holder to repurchase, in whole
or in part, the holder’s Debentures at a cash price of 101% of the outstanding principal amount of the
Debentures plus all accrued and unpaid interest up to the date of repurchase.
A requirement for TMX Group to maintain at least one credit rating from a Specified Credit Rating Agency
(as defined in the Trust Indentures).
(in millions of dollars)
Series B - Non-Current Debentures
Series D - Non-Current Debentures
Series E - Non-Current Debentures
Credit Facilities
As at December 31,
2020
As at December 31,
2019
$ increase
$249.8
$298.7
$199.0
$747.5
$249.6
$298.6
$198.9
$747.1
$0.2
$0.1
$0.1
$0.4
In 2016, TMX Group entered into an amended and restated credit agreement (as amended on each of December 14,
2017 and September 12, 2018, the Credit Agreement) which replaced our existing 2014 credit agreement. The Credit
Agreement provides 100% backstop to the Commercial Paper Program and is also available for general corporate
purposes. $500 million (or the USD equivalent) is available under the Credit Agreement which amount is reduced by the
outstanding amount of Commercial Paper and any outstanding inter-company notes payable to CDS and CDCC. The
maturity date of the Credit Agreement is May 2, 2021.
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Under the terms of the Credit Agreement there is:
•
•
an Interest Coverage Ratio of more than 4.0:1. The Interest Coverage Ratio is the ratio of adjusted EBITDA for the
period comprised of the four most recently completed financial quarters to the consolidated interest expense for
such four financial quarters. Adjusted EBITDA means earnings on a consolidated basis before interest, taxes,
extraordinary, unusual or non-recurring items, depreciation and amortization, as well as non-cash items;
a Total Leverage Ratio of not more than 3.5:1. Total Leverage Ratio at any time is the ratio of consolidated debt as
at such time to adjusted EBITDA for the period comprised of the four most recently completed financial quarters.
As at December 31, 2020, all covenants were met under the Credit Agreement.
The following table summarizes the Applicable Rates and Fee Rates and corresponding Total Leverage Ratios under the
Credit Agreement. The Standby Fee is charged on the unutilized portion of the revolving facility. The Applicable Rate
represents the corporate spread that is included in the interest rate that is applied to the drawn portion of the facility.
Applicable Margin Pricing Matrix
Total Leverage Ratio (x)
Standby Fee for undrawn
portion of Revolving Facility
Prime Rate Loans and US
Base Rate Loans
BA Instruments/ LIBOR
Loans / Letters of Credit
≤ 2.0
> 2.0 and ≤ 2.5
> 2.5 and ≤ 3.0
> 3.0 and ≤ 3.5
21.5 bps
24.5 bps
27.5 bps
32.5 bps
7.5 bps
22.5 bps
37.5 bps
62.5 bps
107.5 bps
122.5 bps
137.5 bps
162.5 bps
Effective Interest Rates
The effective interest rates as at December 31, 2020 for the Debentures and Commercial Paper are shown below:
Debentures and Commercial Paper
Principal
($CAD millions)
Maturity
All-in Rate
Series B Debentures
Series D Debentures
Series E Debentures
Commercial Paper
250
300.0
200.0
160.0
Oct. 3, 2023
Dec. 11, 2024
Jun. 5, 2028
Jan 4 to Jan 29, 2021
4.461%
2.997%
3.779%
0.249%
Other Credit and Liquidity Facilities
CDCC maintains daylight liquidity facilities for a total of $975.0 million to provide liquidity on the basis of collateral in
the form of securities that have been received by, or pledged to, CDCC. The daylight liquidity facilities must be cleared
to zero at the end of each day.
CDCC maintains a $27,012 million REPO uncommitted facility ($18,102.0 million at December 31, 2019) that is in place
to provide end of day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero. On April
30, 2020, the amount was further amended from $20,622.0 million at March 31, 2020 to $27,012.0 million. On
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February 28, 2020, CDCC extended this facility to February 26, 2021. The facility would provide liquidity in exchange for
securities that have been received by, or pledged to, CDCC.
CDCC also maintains a $320.0 million syndicated revolving standby liquidity facility ($400.0 million at December 31,
2019) to provide end of day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero.
Advances under the facility are secured by collateral in the form of securities that have been pledged to or received by
CDCC. On February 28, 2020, this facility was extended to February 26, 2021.
As at December 31, 2020, CDCC had drawn $4.3 million to facilitate a failed REPO settlement. The amount is fully
collateralized by liquid securities included in cash and cash equivalents and was fully repaid subsequent to the
reporting date.
CDS Clearing maintains a secured standby liquidity facility of US$720.0 million, or Canadian dollar equivalent, that can
be drawn in either United States (US) or Canadian currency. On March 24, 2020, CDS Clearing extended the maturity
date to March 23, 2021.
CDS Clearing also has a secured standby liquidity facility of $2.0 billion or US equivalent that can be drawn in either
Canadian or US currency. On March 24, 2020, CDS Clearing extended the maturity date to March 23, 2021.
Contractual Obligations
(in millions of dollars)
Total
Less than 1 year
December 31, 2020
Between 1 and 5
years
Greater than 5
years
Participants’ tax withholdings*
153.3
Accrued interest payable
Other trade and other payables
Provisions
Lease liabilities
Balances with Participants and Clearing
Members*
Total return swaps
Commercial Paper
Debentures
3.8
71.8
9.1
94.3
153.3
3.8
71.8
1.1
8.1
30,270.4
30,270.4
2.4
160.0
747.5
2.4
160.0
—
—
—
—
8.0
32.1
—
—
—
548.5
—
—
—
—
54.1
—
—
—
199.0
*The above financial liabilities are covered by assets that are restricted from use in the ordinary course of business.
MANAGING CAPITAL
The Company’s primary objectives in managing capital, which we define to include our cash and cash equivalents,
marketable securities, share capital, Commercial Paper, Debentures, and various credit facilities, include:
• Maintaining sufficient capital for operations to ensure market confidence and to meet regulatory
requirements and credit facility requirements (see Commercial Paper, Debentures, Credit and Liquidity
Facilities for a description of certain financial covenants under the Credit Agreement). Currently, we target to
retain a minimum of $165 million in cash, cash equivalents and marketable securities, a decrease from $185
million in Q3/20. This amount is subject to change;
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TMX Group Limited
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• Maintaining a credit rating in a range consistent with the Company’s current A (high) and R1-low credit ratings
from DBRS;
Using excess cash to invest in and continue to grow the business;
Returning capital to shareholders through methods such as dividends paid to shareholders and purchasing
shares for cancellation pursuant to normal course issuer bids; and
•
•
• Maintaining debt levels to be below the total leverage ratios as discussed in (a) below, which decrease over
time.
TMX Group aims to achieve the above objectives while managing its capital subject to capital maintenance
requirements imposed on TMX Group and certain subsidiaries as follows:
a.
In respect of the TMX Group Limited credit facility that requires TMX Group to maintain:
i.
ii.
an interest coverage ratio of more than 4.0:1;
a total leverage ratio of not more than 3.50:1
b.
In respect of TSX and Alpha Exchange Inc, to maintain the following requirements, on both a consolidated and
non-consolidated basis, as set out in the amended and restated recognition order issued by the Ontario
Securities Commission (OSC) effective September 2020:
i.
maintain sufficient financial resources for the proper performance of its functions and to meet its
responsibilities; and
ii.
calculate on a monthly basis:
1.
2.
3.
a current ratio;
a debt to cash flow ratio; and
a financial leverage ratio.
c.
d.
In respect of TSX Venture Exchange, as required by certain provincial securities commissions, to maintain
sufficient financial resources to perform its functions.
In respect of MX, as required by the AMF, to maintain certain financial ratios as defined in the AMF
recognition order, as follows:
i.
ii.
iii.
a working capital ratio of more than 1.5:1;
a cash flow to total debt outstanding ratio of more than 20%; and
a financial leverage ratio of less than 4.0.
e.
In respect of CDCC, to maintain certain amounts, as follows:
i.
ii.
iii.
maintain sufficient financial resources as required by the OSC and AMF;
$5.0 million cash and cash equivalents or marketable securities as part of the Clearing Member
default recovery process plus an additional $5.0 million in the event that the initial $5.0 million is fully
utilized during a default;
sufficient cash, cash equivalents and marketable securities to cover 12 months of operating expenses,
excluding amortization and depreciation; and
iv.
$30.0 million total shareholder's equity.
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TMX Group Limited
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f.
In respect of CDS and CDS Clearing, as required by the OSC and the AMF to maintain certain financial ratios as
defined in the OSC recognition order, as follows:
i.
ii.
a debt to cash flow ratio of less than or equal to 4:1; and
a financial leverage ratio of less than or equal to 4:1.
In addition, the OSC requires CDS and CDS Clearing to maintain working capital to cover 6 months of operating
expenses (excluding, in the case of CDS, the amount of shared services fees charged to CDS Clearing).
CDS is required to dedicate a portion of its own resources in the CNS default waterfall for the CNS function.
The Company maintains $1.0 million in cash and cash equivalents or marketable securities to cover potential
losses incurred as a result of a Participant default.
g.
In respect of Shorcan:
i.
ii.
iii.
by IIROC which requires Shorcan to maintain a minimum level of shareholders’ equity of $0.5 million;
by the National Futures Association ("NFA") which requires Shorcan to maintain a minimum level of
net capital; and
by applicable Canadian securities commissions which requires Shorcan to maintain a minimum level
of excess working capital.
h.
In respect of TSX Trust:
i.
as required by the Office of the Superintendent of Financial Institutions, to maintain the following
minimum capital ratios:
1.
2.
3.
common equity tier 1 capital ratio of 7%;
tier 1 capital ratio of 8.5%; and
total capital ratio of 10.5%
ii.
as required by IIROC, to maintain in excess of $100.0 million of paid up capital and surplus on the last
audited balance sheet for the acceptable institution designation.
As at December 31, 2020 and 2019, we were in compliance with each of the externally imposed capital requirements in
effect at the applicable period-end.
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. Marketable securities consist of Federal and Provincial treasury bills.
We have designated our marketable securities as fair value through profit and loss. Fair values have been determined
by reference to quoted market prices.
The primary risks related to cash, cash equivalents and marketable securities are credit risk, market risk and liquidity
risk. For a description of these risks, please refer to Enterprise Risk Management - Financial Risks.
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TMX Group Limited
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Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents contains tax withheld by CDS on entitlement payments made by CDS on behalf of
CDS participants. The restricted cash and cash equivalents related to this withheld tax is ultimately under the control of
CDS; however, the amount is payable to various taxation authorities within a relatively short period of time and so is
restricted from use in normal operations. An equivalent and offsetting amount is included in the consolidated balance
sheet under the caption Participants' tax withholdings. At December 31, 2020, we had restricted cash and cash
equivalents of $153.3 million.
The primary risks related to restricted cash and cash equivalents are credit risk and liquidity risk. For a description of
these risks, please refer to Enterprise Risk Management - Financial Risks.
Trade Receivables
Our financial instruments include accounts receivable, which represents amounts that our customers owe us. The
carrying value is based on the actual amounts owed by the customers, net of loss allowances for trade receivables
measured at an amount equal to lifetime expected credit losses, calculated using historical credit loss experience taking
into account current observable data at the reporting date to reflect the effects of any relevant current market
conditions and forecasts of future economic conditions.
The primary risks related to trade receivables are credit risk and market risk. For a description of these risks, please
refer to Enterprise Risk Management - Financial Risks.
CDS – Participant cash collateral and entitlements and other funds
As part of CDS’s clearing operations, CDS Participant Rules require participants to pledge collateral to CDS in the form
of cash or securities in amounts calculated in relation to their activities. Cash pledged and deposited with CDS is
recognized as an asset and an equivalent and offsetting liability is recognized as these amounts are ultimately owed to
the participants. There is no impact on the consolidated income statement. Securities pledged do not result in an
economic inflow to CDS, and therefore, are not recognized.
The primary risks associated with these financial instruments are credit risk, market risk and liquidity risk. For a
description of these risks, please refer to Enterprise Risk Management - Financial Risks.
CDCC – Daily Settlements due to and due from Clearing Members
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 Balances with Participants and Clearing Members. There is
no impact on the consolidated statements of income.
CDCC – Clearing Members’ cash margin deposits and clearing fund cash deposits
These balances represent the cash deposits of Clearing Members held in the name of CDCC as margins against open
positions and as part of the clearing fund. The cash held is recognized as an asset and an equivalent and offsetting
liability is recognized as these amounts are ultimately owed to the Clearing Members. There is no impact on the
consolidated income statement.
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TMX Group Limited
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CDCC – Net amounts receivable/payable on open REPO agreements
CDCC clears fixed income REPO agreements. OTC REPO agreements between buying and selling Clearing Members are
novated to CDCC whereby the rights and obligations of the Clearing Members under the REPO agreements are
cancelled and replaced by new agreements with CDCC. Once novation occurs, CDCC becomes the counterparty to both
the buying and selling Clearing Member. As a result, the contractual right to receive and return the principal amount
of the REPO as well as the contractual right to receive and pay interest on the REPO is thus transferred to CDCC. These
balances represent outstanding balances on open REPO agreements. Receivable and payable balances outstanding
with the same Clearing Member are offset when they are in the same currency and are to be settled on the same day,
as CDCC has a legally enforceable right to offset and the intention to net settle. The balances include both the original
principal amount of the REPO and the accrued interest, both of which are carried at amortized cost. As CDCC is the
central counterparty, an equivalent amount is recognized in both TMX Group's’ assets and liabilities.
The primary risks associated with these financial instruments are credit risk, market risk and liquidity risk. For a
description of these risks, please refer to Enterprise Risk Management - Financial Risks.
Commercial Paper
TMX Group maintains a Commercial Paper Program to offer potential investors up to $500.0 million (or the equivalent
U.S. dollars) of Commercial Paper to be issued in various maturities of up to one year from the date of issue. The
Commercial Paper bears interest rates based on the prevailing market conditions at the time of issuance. The
Commercial Paper Program is supported by the Credit Agreement. The Commercial Paper issued represents an
unsecured obligation and ranks equally with all other senior unsecured obligations of TMX Group. The Commercial
Paper has been assigned a rating of “R-1 (low)” with a Stable trend by DBRS.
The Commercial Paper is subject to market risk and liquidity risk. For a description of these risks, please refer to
Enterprise Risk Management - Financial Risks.
Debentures
TMX Group has the following Debentures outstanding: a $250-million Series B Debentures with a 4.461% coupon and a
10-year term, a $300.0-million principal amount Series D Debentures with a 2.997% coupon and a 7-year term, and a
$200.0-million Series E Debentures with a 3.779% coupon and a 10-year term. The Debentures received and maintain a
credit rating of A (high) with a Stable trend from DBRS.
The Debentures are subject to market risk and liquidity risk. For a description of these risks, please refer to Enterprise
Risk Management - Financial Risks.
Total Return Swaps (TRS)
We have entered into a series of TRSs, which synthetically replicate the economics of purchasing our shares as a
partial economic hedge to the share appreciation rights of the RSUs and DSUs.
We have classified our series of TRSs as fair value through profit and loss and mark to market the fair value of the TRSs
as an adjustment to income. We also simultaneously mark to market the liability to holders of the units as an
adjustment to income. Fair value is based on the share price of our common shares at the end of the reporting period.
The fair value of the TRSs and the obligation to unit holders are reflected on the consolidated balance sheet. The
contracts are settled in cash upon maturity.
For the year ended December 31, 2020, unrealized losses and realized gains on the TRSs of $1.4 million and $8.7
million, respectively have been reflected in the consolidated income statement (2019 – unrealized and realized gains of
$2.8 million and $10.8 million, respectively).
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TMX Group Limited
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TRSs are subject to credit risk and market risk. For a description of this risk, please refer to Enterprise Risk
Management - Financial Risks.
CRITICAL ACCOUNTING ESTIMATES
Goodwill and Intangible Assets – Valuation and Impairment Testing
We recorded goodwill and intangible assets valued at $5,047.7 million as at December 31, 2020, up by $6.5 million
from $5,041.2 million at December 31, 2019. Management has determined that the testing for impairment of goodwill
and intangible assets involves making critical accounting estimates.
Goodwill is recognized at cost on acquisition less any subsequent impairment in value. We measure goodwill arising on
a business combination as the fair value of the consideration transferred less the fair value of the identifiable assets
acquired and liabilities assumed, all measured as of the acquisition date.
Intangible assets are measured at cost less accumulated amortization, where applicable, and any impairment in value.
Cost includes any expenditure that is directly attributable to the acquisition of the asset. The cost of internally
developed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing
the assets to a working condition for their intended use.
Assets are considered to have indefinite lives where management believes that there is no foreseeable limit to the
period over which the assets are expected to generate net cash flows.
We test for impairment as follows:
The carrying amounts of our goodwill and intangible assets are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, are tested for
impairment at least annually even if there is no indication of impairment, and the recoverable amount is estimated
each year at the same time.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest
group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of
other assets or groups of assets (the cash-generating unit, or CGU). For the purposes of goodwill impairment testing,
goodwill acquired in a business combination is allocated to the CGU, or the group of CGUs, that is expected to benefit
from the synergies of the combination and reflects the lowest level at which that goodwill is monitored for internal
reporting purposes.
The recoverable amount of an asset or CGU is based on the higher of the value in use or fair value. In assessing value in
use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset. The cash flow projections
cover a period of five years with the exception of Capital Formation - Listings, which covers seven years and Global
Solutions, Insights and Analytics - Trayport, which covers eight years.
An impairment loss is recognized if the carrying amount of an asset, or its CGU, exceeds its estimated recoverable
amount. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any
goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit on a pro rata
basis. Impairment losses along with any related deferred income tax effects are recognized in the consolidated income
statement.
There was a non-cash impairment related to the goodwill associated with Shorcan of $18.0 million for 2019 (see
RESULTS OF OPERATIONS - Impairment Charge). There was no impairment charge for 2020.
Considerable judgement is required to predict future operating performance and to estimate cash flows. Economic
weakness due to macroeconomic factors moderating activity and heightening risks may impact our business. Such
2020 Annual Report
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TMX Group Limited
Page 51
factors include political and civil uncertainty in Hong Kong as well as the tensions over trade deficits and technology
companies between China and the United States, softened international trade and investment, the impact of COVID-19
on economic recovery and timing of recovery, and financial market pressures. These factors could result in future
impairment charges related to goodwill and intangible assets. A significant impairment charge in the future could have
a significant impact on our reported net income.
In 2020, management updated its growth projections. Based on current assumptions, the recoverable amount for
Capital Formation - Listings, Equities Trading, CDS, Derivatives Trading and Clearing - MX/CDCC, GSIA - TMX Datalinx,
GSIA - Trayport, and Other - Shorcan remains above carrying value, and as such no impairment has been identified for
these CGUs. Management has identified three key assumptions, the pre-tax discount rate, the terminal growth rate,
and the cash flow projections, that have a significant impact on the estimate of the recoverable amount.
At December 31, 2019, we determined that the fair value of the Shorcan CGU was lower than its carrying amount. This
fair value of Shorcan had declined below the carrying value primarily due to lower revenue projections for the business.
This resulted in a non-cash impairment charge of $18.0 million.
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TMX Group Limited
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SELECT ANNUAL INFORMATION
(in millions of dollars expect per share amounts)
2020
2019
2018
Revenue
Net income
$
Total Assets (as at December 31)
Non-current liabilities (as at December 31)
Earnings per share:
Basic
Diluted
Adjusted earnings per share:39
Basic
Diluted
Cash dividends declared per common share
2020 compared with 2019
865.1
279.7
36,098.6
1,706.0
4.96
4.91
5.93
5.88
2.72
806.9
247.6
32,359.7
1,707.6
4.42
4.38
5.36
5.31
2.52
820.7
286.0
31,657.9
1,615.7
5.14
5.10
5.20
5.16
2.24
(See RESULTS OF OPERATIONS and LIQUIDITY AND CAPITAL RESOURCES - Year ended December 31, 2020 (2020)
compared with Year ended December 31, 2019 (2019)).
2019 compared with 2018
Revenue
Revenue was $806.9 million in 2019, down $13.8 million or 2% compared with $820.7 million in 2018. There was a
decrease in Capital Formation revenue driven by lower additional listings fees, a reduction in Other revenue as well as
lower Equities and Fixed Income Trading revenue. These decreases were partially offset by an increase in Global Solutions,
Insights and Analytics revenue, including higher revenue from Trayport and VisoTech (acquired May 15, 2019), as well as
higher Derivatives Trading and Clearing and CDS revenue.
Net income, Earnings per share and Adjusted earnings per share
Net income in 2019 was $247.6 million, or $4.42 per common share on a basic and $4.38 per common share on a diluted
basis, compared with a net income of $286.0 million, or $5.14 per common share on a basic and $5.10 on a diluted basis,
for 2018. The decrease in net income and earnings per share was largely driven by lower gains on the sale of investments
in 2019 compared with 2018 and higher income tax expense:
•
•
In 2018, we recognized a gain on the sale of our interest in TMX FTSE of $26.8 million before and after income tax
(48 cents per basic and diluted share). In 2019, we recognized a gain of $2.3 million before income tax ($2.0
million after income tax, or 4 cents per basic and diluted share) on the sale of our interest in the Bermuda Stock
Exchange.
In 2018, the income tax expense was lower because we carried back a capital loss to reduce prior year income tax
paid by approximately $10.0 million.
39 See discussion under the heading "Non-IFRS Financial Measures".
2020 Annual Report
61
TMX Group Limited
Page 53
•
In 2019, the Alberta general corporate income tax rate decreased. This change resulted in a decrease in net
deferred income tax liabilities and a corresponding decrease in income tax expense of $4.3 million (8 cents per
basic and diluted common share).
In addition, during 2019, we determined that the fair value of Shorcan was below its carrying value, resulting in a non-cash
impairment charge of $18.0 million (32 cents per basic and diluted common share), which reduced net income.
Offsetting the declines in net income, income from operations increased by $13.4 million. The increase in income from
operations from 2018 to 2019 was largely driven by a decrease in operating expenses of $27.2 million from 2018 to 2019.
In 2018, we recorded a commodity tax provision of $7.6 million (10 cents per basic and diluted share) and a lease
termination payment of $4.5 million (6 cents per basic and diluted share). There was also a decrease in severance costs of
approximately $7.8 million and a reduction in short term employee performance incentive plan costs of approximately
$6.8 million from 2018 to 2019. The decreases in expenses were somewhat offset by higher long term employee
performance incentive plan costs of approximately $0.5 million. Revenue declined by $13.8 million from 2018 to 2019.
There was a decrease in Capital Formation revenue driven by lower additional listings fees, a reduction in Other revenue as
well as lower Equities and Fixed Income Trading revenue. These decreases were partially offset by an increase in Global
Solutions, Insights and Analytics revenue, including higher revenue from Trayport and VisoTech (acquired May 15, 2019),
as well as higher Derivatives Trading and Clearing and CDS revenue. In addition, net finance costs declined by $4.8 million
from 2018 to 2019.
Adjusted diluted earnings per share increased by 3% from $5.16 in 2018 to $5.31 in 2019. The increase in adjusted diluted
earnings per share from 2018 to 2019 was largely driven by lower operating expenses related to lease termination, a
decrease in severance costs, a reduction in short term employee performance incentive plan costs as well as lower net
finance costs. The decreases in expenses were slightly offset by higher long term employee performance incentive plan
costs. There was also an increase in revenue from Global Solutions, Insights and Analytics revenue, including higher
revenue from Trayport and VisoTech (acquired May 15, 2019), as well as higher Derivatives Trading and Clearing and CDS
revenue. The increases in revenue were more than offset by decreases in Capital Formation revenue driven by lower
additional listings fees, a reduction in Other revenue as well as lower Equities and Fixed Income Trading revenue. The
increase in adjusted diluted earnings per share was also somewhat reduced by an increase in the number of weighted-
average common shares outstanding in 2019 compared with 2018.
Total assets
Our consolidated balance sheet as at December 31, 2019 includes outstanding balances on open REPO agreements within
Balances with Participants and Clearing Members. These balances have equal amounts included within Total Liabilities.
The increase in Total Assets of $701.4 million from December 31, 2018 reflected higher balances in CDCC at December 31,
2019 related to both REPO agreements and increased collateral. There was also an increase in Total Assets relating to the
implementation of IFRS 16 (see Accounting and Control Matters - ADOPTION OF IFRS 16 in 2019 MD&A). On transition
to IFRS 16, we recognized $94.9 million of right-of-use assets. The amount included in Total Assets at December 31, 2019
was $93.0 million.
Non-current liabilities
Non-current liabilities as at December 31, 2019 were $91.9 million higher than as at December 31, 2018. The increase was
largely driven by the recognition of current lease liabilities that arose with the transition to IFRS 16 in 2019.
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TMX Group Limited
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QUARTERLY FINANCIAL INFORMATION
(in millions of dollars except
per share amounts - unaudited)
Dec 31
2020
Sep 30
2020
Jun 30
2020
Mar 31
2020
Dec 31
2019
Sep 30
2019
Jun 30
2019
Mar 31
2019
Capital Formation
$50.6
$50.2
$48.1
$40.1
$42.6
$43.7
$52.6
$41.8
Equities and Fixed
Income Trading
Equities and fixed
Income - clearing,
settlement, depository
and other services
(CDS)
Derivatives Trading &
Clearing
Global Solutions,
Insights and Analytics
Other
Revenue
30.6
28.5
34.7
33.2
22.7
23.5
25.6
26.2
25.7
23.7
24.8
25.0
28.4
21.8
23.0
22.3
30.8
24.9
30.0
40.5
33.3
33.5
33.8
32.6
82.6
(0.8)
80.3
81.0
79.8
—
(0.9)
1.7
75.9
(0.1)
73.6
0.2
75.6
(0.3)
74.6
—
219.5
207.6
217.7
220.3
202.8
196.3
210.3
197.5
Operating expenses
113.4
107.2
119.3
109.3
106.3
104.7
106.2
107.3
Income from operations
106.1
100.4
Net income
Earnings per share40
Basic
Diluted
71.8
70.0
1.27
1.26
1.24
1.23
98.4
67.8
1.20
1.19
111.0
70.1
1.25
1.24
96.5
47.5
0.85
0.84
91.6
61.7
1.10
1.09
104.1
77.2
1.38
1.37
90.2
61.2
1.10
1.09
Q4/20 compared with Q4/19
•
Revenue was $219.5 million in Q4/20, up $16.7 million or 8% from $202.8 million in Q4/19 attributable to
increases in revenue from Capital Formation, Equities and Fixed Income Trading as well as Global Solutions,
Insights and Analytics offset by a decrease in CDS, Derivatives Trading and Clearing and Other revenue.
• Operating expenses in Q4/20 were $113.4 million, up $7.1 million or 7%, from $106.3 million in Q4/19. The
increase in costs was primarily attributable to higher short term employee performance incentive costs of $7.1
million, increased severance costs of $3.1 million (excluding Strategic re-alignment expenses), higher long term
performance incentive plan costs of $1.5 million, as well as higher headcount, higher software licensing and
information technology professional services costs, the write-off of costs related to discontinued initiatives as well
as increased costs related to managing our business during the COVID-19 pandemic. In addition, we incurred $0.3
million in transaction related costs related to the proposed AST Canada transaction.
Offsetting these increases, in Q4/19, recoverable costs of $5.3 million related to CDS's clearing operation that
were previously netted, were reclassified and included in both CDS revenue and Selling, general and
administration expenses. There were $1.3 million of these recoverable costs in Q4/20. The increases were also
somewhat offset by a decline in recruitment costs, pension expenses, travel and entertainment expenses,
consulting fees and occupancy costs, and a $0.2 million reduction in commodity tax provision in Q4/20. Lastly, we
recovered Strategic re-alignment expenses of approximately $0.9 million in Q4/19 with no similar recovery in
Q4/20.
40 Earnings per share information is based on net income.
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TMX Group Limited
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•
•
Income from operations increased from Q4/19 to Q4/20 largely due to higher revenue somewhat offset by higher
operating expenses.
Net income in Q4/20 was $71.8 million, or $1.27 per common share on a basic and $1.26 on a diluted basis,
compared with a net income of $47.5 million, or $0.85 per common share on a basic and $0.84 on a diluted basis,
for Q4/19. The increase in net income and earnings per share from Q4/19 to Q4/20 was largely driven by an
increase in revenue and a $18.0 million (32 cents per basic and diluted common share) non-cash impairment
charge related to Shorcan in 2019. These increases were somewhat offset by an increase in operating expenses.
There was a decrease in our share of income from BOX driven by an increase of approximately $5.1 million (7
cents per basic and diluted share) in our share of long term employee performance incentive plan costs for the
full year 2020.
Q4/20 compared with Q3/20
•
Revenue was $219.5 million in Q4/20, up $11.9 million or 6% from $207.6 million in Q3/20 largely attributable to
increases in revenue from Capital Formation, Equities and Fixed Income Trading, CDS, Derivatives Trading &
Clearing, and GSIA partially offset by lower Other revenue.
• Operating expenses in Q4/20 were $113.4 million, up $6.2 million or 6%, from $107.2 million in Q3/20. The
increase reflected higher severance costs of $3.4 million, increased short term employee performance incentive
plan costs, higher software license and information technology professional services costs, the write-off of costs
related to discontinued initiatives and increased marketing costs. In addition, the recovery in a commodity tax
provision, which reduced operating expenses, was $0.2 million in Q4/20 compared with $1.3 million in Q3/20.
These increases were somewhat offset by decreases in long term employee performance incentive plan costs and
lower COVID-19 pandemic related costs. Transaction related costs pertaining to the proposed AST Canada
acquisition declined by $1.1 million from Q3/20 to Q4/20.
•
•
Income from operations increased from Q4/20 to Q3/20 largely due to the higher revenue somewhat offset by
higher operating expenses.
Net income in Q4/20 was $71.8 million, or $1.27 per common share on a basic and $1.26 on a diluted basis,
compared with a net income of $70.0 million, or $1.24 per common share on a basic and $1.23 on a diluted basis,
for Q3/20. The increase in net income and earnings per share was driven by the higher income from operations in
Q4/20 compared with Q3/20. This increase was partially offset by a loss of $0.9 million in equity accounted
investees in Q4/20 compared to a gain of $2.9 million in Q3/20. This was driven by an expense of approximately
$5.1 million representing our share of BOX's long term employee performance incentive plan costs for 2020 which
were recorded in Q4/20.
Q3/20 compared with Q2/20
•
Revenue was $207.6 million in Q3/20, down $10.1 million or 5% from $217.7 million in Q2/20 largely attributable
to decreases in revenue from Equities and Fixed Income Trading and Clearing, Derivatives Trading and Clearing,
and GSIA, excluding Trayport, largely offset by increases in revenue from both Capital Formation and Trayport.
• Operating expenses in Q3/20 were $107.2 million, down $12.1 million or 10%, from $119.3 million in Q2/20. The
decrease was largely attributable to a decline in Selling, general and administration expenses, which included
$12.4 million of net litigation settlement costs in Q2/20. Increases in short term employee performance
incentive plan costs, severance, consulting fees and transaction related costs of $1.4 million were largely offset by
decreases in long term employee performance incentive plan costs, bad debt expense, the reversal of a
commodity tax provision of $1.3 million and lower COVID-19 pandemic related costs.
•
•
Income from operations increased from Q2/20 to Q3/20 largely due to the lower operating expenses largely offset
by lower revenue.
Net income in Q3/20 was $70.0 million, or $1.24 per common share on a basic and $1.23 on a diluted basis,
compared with a net income of $67.8 million, or $1.20 per common share on a basic and $1.19 on a diluted basis,
for Q2/20. The increase in net income and earnings per share was driven by the higher income from operations in
Q3/20 compared with Q2/20.
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Q2/20 compared with Q1/20
•
Revenue was $217.7 million in Q2/20, down $2.6 million or 1% from $220.3 million in Q1/20 largely attributable
to decreases in revenue from Derivatives Trading and Clearing, CDS, Trayport, as well as Other revenue, largely
offset by increases in Capital Formation, Equities and Fixed Income Trading and GSIA, excluding Trayport.
• Operating expenses in Q2/20 were $119.3 million, up $10.0 million or 9%, from $109.3 million in Q1/20. The
increase was largely related to net litigation settlement costs. There were also higher short term employee
performance incentive plan, recruitment and COVID-19 pandemic related costs, which were offset by lower salary
and benefits costs and reduced travel and entertainment expenses from Q1/20 to Q2/20.
•
•
Income from operations decreased from Q1/20 to Q2/20 largely due to the lower revenue and higher operating
expenses.
Net income in Q2/20 was $67.8 million, or $1.20 per common share on a basic and $1.19 on a diluted basis,
compared with a net income of $70.1 million, or $1.25 per common share on a basic and $1.24 on a diluted basis,
for Q1/20. The decrease in net income and earnings per share was driven by the lower income from operations in
Q2/20 compared with Q1/20. During Q1/20, there was a change in the expected U.K. corporate income tax rate.
This resulted in an increase in deferred income tax liabilities and a corresponding increase in income tax expense
of $7.4 million, which reduced net income for Q1/20. The decrease in basic and diluted earnings per share was
also due to an increase in the number of weighted-average common shares outstanding in Q2/20 compared with
Q1/20.
Q1/20 compared with Q4/19
•
Revenue was $220.3 million in Q1/20, up $17.5 million or 9% from $202.8 million in Q4/19 largely attributable to
increases in revenue from Equities and Fixed Income Trading, Derivatives Trading and Clearing, GSIA, including
Trayport, as well as Other revenue, somewhat offset by decreases in Capital Formation and CDS revenue. Certain
recoverable costs related to CDS's clearing operation, previously netted, are now included in both CDS revenue
and Selling, general and administration expenses. The amount reclassified to CDS revenue in Q4/19 was $5.3
million compared with $1.1 million in Q1/20.
• Operating expenses in Q1/20 were $109.3 million, up $3.0 million or 3%, from $106.3 million in Q4/19. The
increase in costs was largely related to higher short term and long term employee performance incentive plan
costs of $8.1 million. There was also an increase in payroll taxes of $3.0 million. Offsetting these increases,
certain recoverable costs related to CDS's clearing operation, previously netted, are now included in both CDS
revenue and Selling, general and administration expenses. The amounts reclassified to Selling, general and
administration expenses were $5.3 million for Q4/19 compared with only $1.1 million in Q1/20. In addition, there
was also a decrease in travel and entertainment expenses as well as in recruitment costs from Q4/19 to Q1/20.
•
•
Income from operations increased from Q4/19 to Q1/20 largely due to the higher revenue somewhat offset by
higher operating expenses.
Net income in Q1/20 was $70.1 million, or $1.25 per common share on a basic and $1.24 on a diluted basis,
compared with a net income of $47.5 million, or $0.85 per common share on a basic and $0.84 on a diluted basis,
for Q4/19. The increase in net income and earnings per share was driven by the higher income from operations in
Q1/20 compared with Q4/19. In addition, there was a non-cash impairment charge of $18.0 million related to
Shorcan in Q4/19 and no similar charge in Q1/20. However, during Q1/20, there was a change in the expected
U.K. corporate income tax rate. This resulted in an increase in deferred income tax liabilities and a corresponding
increase in income tax expense of $7.4 million, which reduced net income for Q1/20. The increase in basic and
diluted earnings per share was also somewhat reduced by an increase in the number of weighted-average
common shares outstanding in Q1/20 compared with Q4/19.
Q4/19 compared with Q3/19
•
Revenue was $202.8 million in Q4/19, up $6.5 million from Q3/19 reflecting increases increases in CDS and Global
Solutions, Insights and Analytics revenue. Certain recoverable costs related to CDS's clearing operation,
previously netted, are now included in both CDS revenue and Selling, general and administration expenses. The
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amount reclassified to CDS revenue in Q4/19 was $5.3 million. The increases were partially offset by decreases in
Capital Formation, and Equities and Fixed Income Trading revenue.
• Operating expenses increased from Q3/19 to Q4/19. Certain recoverable costs related to CDS's clearing
operation, previously netted, are now included in both CDS revenue and Selling, general and administration
expenses. The amount reclassified to Selling, general and administration expenses in Q4/19 was $5.3 million.
There was also an increase in operating costs related to Selling, general and administration expenses, including
project spending and fees, as well as staffing costs. These increases were largely offset by a decrease in short
term and long term employee performance incentive plan costs of approximately $2.3 million and approximately
$8.0 million, respectively. The latter costs decreased by approximately $4.0 million due to the decrease in our
share price between Q3/19 and Q4/19 as well as the reversal of an accrual of approximately $4.0 million relating
to long term employee performance incentives that were forfeited upon the execution of an agreement on
January 10, 2020 in respect of the CEO's retirement.
•
•
Income from operations increased from Q3/19 to Q4/19 due to the higher revenue, which was partially offset by
the higher operating expenses.
Net income in Q4/19 was $47.5 million, or $0.85 per common share on a basic and $0.84 on a diluted basis,
compared with net income of $61.7 million, or $1.10 per common share on a basic and $1.09 on a diluted basis in
Q3/19. The decrease in net income was largely driven by impairment charges of $18.0 million in Q4/19 related to
Shorcan.
Q3/19 compared with Q2/19
•
Revenue was $196.3 million in Q3/19, down $14.0 million from Q2/19 reflecting decreases in all segments
including Capital Formation driven by lower additional listing fees, Equities and Fixed Income Trading & Clearing,
and Global Solutions, Insights and Analytics.
• Operating expenses decreased in Q3/19 compared with Q2/19 reflecting a reduction in Strategic re-alignment
expenses, a decrease in project spending and fees as well as increased recoverable expenses. The decreases were
somewhat offset by an increase of approximately $3.9 million in long term employee performance incentive plan
costs driven by the increase in our share price.
•
•
Income from operations decreased from Q2/19 to Q3/19 due to lower revenue partially offset by lower operating
expenses.
Net income in Q3/19 was $61.7 million, or $1.10 per common share on a basic and $1.09 on a diluted basis,
compared with net income of $77.2 million, or $1.38 per common share on a basic and $1.37 on a diluted basis in
Q2/19. There were lower revenues in Q3/19 compared with Q2/19 partially offset by lower operating expenses.
Q2/19 compared with Q1/19
•
Revenue was $210.3 million in Q2/19, up $12.8 million from Q1/19 reflecting increases in Capital Formation
driven by higher additional listing fees, Derivatives Trading & Clearing, and Global Solutions, Insights and Analytics
driven by Trayport.
• Operating expenses were down in Q2/19 compared with Q1/19 reflecting lower strategic re-alignment costs,
reduced payroll taxes and pension adjustments as well as lower Deprecation and Amortization costs. The
decreases were largely offset by higher severance costs, project spending, long-term employee performance
incentive plan costs as well as expenses and transaction costs related to VisoTech (acquired May 15, 2019).
•
•
Income from operations increased from Q1/19 to Q2/19 largely reflecting the higher revenue and also the lower
operating expenses.
Net income in Q2/19 was $77.2 million, or $1.38 per common share on a basic and $1.37 on a diluted basis,
compared with net income of $61.2 million, or $1.10 per common share on a basic and $1.09 on a diluted basis in
Q1/19. There were significantly higher revenues and also lower operating expenses in Q2/19 compared with
Q1/19. There was also a gain on sale of interest in Bermuda Stock Exchange of approximately $2.0 million after
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tax (4 cents per basic and diluted share) and a deferred income tax recovery of $4.3 million related to a decrease
in the Alberta corporate income tax rate (8 cents per basic and diluted share) in Q2/19.
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ENTERPRISE RISK MANAGEMENT
Executive Summary
TMX Group provides essential services to the Canadian capital and global commodity markets and effectively managing
risks and objective certainty41 is fundamental to our ability to execute on our enterprise and business strategies. The
purpose of enterprise risk management (ERM) is to facilitate and support the businesses in their pursuit of their
objectives to ensure the outcomes of these activities are transparent and understood, consistent with our risk appetite,
appropriately balance risk and reward, and serve as inputs into the enterprise strategy formulation process.
We have identified a number of principles which guide our management of risks, including the following:
• We promote and maintain an enterprise-wide ethical culture that values the importance of effective risk
management in day-to-day business activities and decision making, and encourages frank and open
communication.
• Our business units and corporate functions own the objectives, and therefore risks, assumed in their
activities and are accountable for the effective management of those risks, supported by the risk
management and internal audit functions. TMX uses Five Lines of Accountability (see below) which
enhances the Three Lines of Defence model while recognizing the role of senior management and the
Board in risk management. We define these roles and responsibilities and associated levels of authority
for risk-taking across the enterprise.
• We employ effective and consistent risk management processes across the enterprise to ensure that
objectives and risks are transparent, well understood, and remain within an accepted and approved level
of risk appetite.
• We employ sufficient resources and effective tools, methods, models and technology to support our risk
management processes.
• Our ERM framework reflects industry standards and legal and regulatory requirements, and is regularly
reassessed.
The management of risk is essential to the successful execution of our Strategic Plan. Consequently, we have adopted
an Objective Centric Risk Management (“OCRM”) approach to risk management. Rather than managing our risks in
isolation, we use OCRM to address opportunities, uncertainties and threats to the successful achievement of our
objectives. An OCRM approach to risk management does not change the risks faced by our organization. Instead, it
anchors the risk management process to our objectives which supports the proper allocation of resources across the
enterprise. As illustrated in the diagram below, using OCRM requires senior management, under the supervision of the
Board, to (i) clearly define roles across the businesses; (ii) explicitly specify risk and assurance requirements; and (iii)
determine the business objectives that warrant more formal and visible risk assessment processes. This ensures the
integration of the enterprise's objectives, risks, risk treatments, and performance. The Board has established a set of
enterprise objectives and the Strategy and Risk Committee (“SRC”), a management committee of TMX Group,
determines the key risks to the successful achievement of our objectives, identifies new or emerging risks, evaluates
our execution strategy and allocates resources as required.
41 TMX has adopted an Objective Centric Risk Management ("OCRM") approach where the emphasis is on Objective
Certainty rather than risk registers. OCRM is an approach to managing risks that is anchored in objectives through an
integrated approach that aligns risk activities to strategies, objectives and performance. It reaffirms responsibility for
risk to individuals who are responsible for achieving the objectives.
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Key risks identified are:
Market and Macroeconomic Risk: A significant portion of our revenue comes from trading revenue. Similar to other
exchanges, this is highly sensitive to macroeconomic conditions. Canada is our largest geographic concentration of
revenue. Given the majority of business is conducted domestically, macroeconomic factors such as GDP growth,
regulations, interest rates, volatility, and market activity, can impact our business.
Cyber Risk: Our processes and networks and those of our third-party service providers may be vulnerable to
information risks, including unauthorized access, computer viruses, denial of service attacks, and other security issues.
Remote working necessitated by the COVID-19 pandemic has placed a greater emphasis on the integrity and capacity
of our networks. Attempted cyber attacks were on the rise in 2020 and a successful cyber scam or attack could
adversely impact our business.
Pandemic Risk: The economic and market conditions in Canada, the United States, Europe, China and the rest of the
world impact different aspects of our business and our revenue drivers. The COVID-19 pandemic has created significant
volatility, uncertainty and economic disruption, which may adversely affect our business, financial condition, liquidity,
results of operations and long-term financial objectives. Listing, trading and clearing activities can be significantly
affected by economic, political and market conditions as well as the overall level of investor confidence. These factors
can impact the level of initial public offerings, secondary financings, market capitalization of our issuers, transfer agent
and trustee services, trading volumes, energy data and network connectivity, client hosting revenue, and sales of
market data across our markets. We have witnessed high levels of volatility which, when coupled with prolonged
negative economic conditions, can cause dramatic fluctuations in trading volumes, equity financings and demand for
market data. This can also lead to slower collections of accounts receivable as well as increased counterparty risk
which, in turn, could adversely affect our business. Additionally, if we are required to suspend trading for a prolonged
period of time or shorten trading hours, our business, operating results, long term financial objectives, cash flows, or
financial condition could be materially adversely affected.
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While key initiatives continue, some could be delayed or postponed indefinitely due to lack of client availability for
effective engagement and business development. Although we continue to plan and engage with new and prospective
clients, their level of readiness and commitment is outside of our control; therefore, revenues could be lower than
anticipated.
In response to COVID-19, the vast majority of our staff are working remotely, which may increase our exposure to cyber
security and operational risks. The impacts of the pandemic could also materially interrupt our business operations and
cause material financial loss, human resource constraints, result in adverse regulatory actions, lead to delays in
obtaining regulatory or government approvals, interrupt services received from third parties or provided to clients,
result in reputational harm or legal liability. This in turn could materially adversely affect our business, cash flows,
financial condition, operating results and long-term financial objectives. While all our business units and corporate
functions have business continuity plans to support critical operations and mitigate such risks, a prolonged interruption
in our key services could materially adversely affect our reputation, business, operating results, long term financial
objectives, cash flows, and financial condition.
Competition Risk: We compete with other exchanges domestically and internationally on listings, cash equities and
equity option trading. Muted capital markets activity may result in lower revenue related to capital raising activities.
Execution Risk: We are exposed to the risk that we lack capabilities or fail to prioritize initiatives to deliver against our
strategy and objectives in an efficient and effective manner.
Concentration Risk: A large portion of the Canadian economy is based in natural resources and energy related business
and as such, we are exposed to downturns in these sectors as they can impact capital formation business and the
trading and clearing activity.
Key Person Risk: Should key senior management positions become vacant there could be a loss of knowledge and
expertise resulting in risk to executing our strategy.
These risks and uncertainties are further expanded upon below. The risks and uncertainties discussed in this section
are not the only ones facing TMX Group. Additional risks and uncertainties not presently known to us or that we
currently believe to be 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 adversely affected.
Competition Risk
We are exposed to the risk that established and new competitors, including disruptive technology providers, will
challenge our business model and objectives.
Our Capital Formation business competes with other exchanges and other financing platforms
We compete for listings with North American exchanges in a broad range of sectors and also internationally,
particularly for resource companies and small and medium sized enterprises. We also face competition from North
American and international exchanges for Canadian listings. Domestically, we currently compete for listings with two
other exchanges.
While some Canadian issuers seek a listing on another major North American or international exchange, historically,
the vast majority of these issuers who qualify also list on TSX or TSXV and do not bypass our markets. We also compete
with institutions and various market participants that offer alternative forms of financing including private equity,
venture capital and various forms of debt financing. Many of these alternative forms of financing may subject issuers to
different regulatory rules and oversight and different obligations from those associated with being listed on our
markets.
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TSX, TSXV and TSX Alpha Exchange face competition from other exchanges, other marketplaces and
trading mechanisms
We face competition for business from other exchanges, especially those in the U.S. as investing becomes more global.
In particular, these competitors could look to attract Canadian issuers that are listed on one of our exchanges. For
example, two of our U.S.-based competitors operate a Canadian market. It is possible that these competitors could, in
addition to competing for listing and trading of Canadian issuers, enter into other business areas in which we currently
operate.
In addition, the variety of other marketplaces and trading venues in the U.S. that trade Canadian securities, including
dark markets and internalization facilities, places increasing competitive pressure on our business. For example, some
market participants in the U.S., known as wholesalers, are currently able to pay our customers for order flow under U.S.
securities laws and regulations. This practice is not permitted in Canada, and therefore puts us at a competitive
disadvantage. IIROC published guidance and a technical notice to clarify the requirements for investment dealers when
orders in Canadian-listed securities are executed away from Canadian markets, an important step in IIROC’s approach
to addressing concerns about the routing of orders to the U.S. If we are unable to continue to provide competitive
trade execution, the volume traded in all interlisted issuers on our equity exchanges could decrease in the future and
adversely affect our operating results. Our combined market share (including TSX, TSXV, and Alpha) of the total volume
traded in Canadian based interlisted issues was approximately 31% in 2020, unchanged from 2019. Our cash equities
sales team is focused on attracting more foreign participants and order flow by raising the level of awareness of the
benefits of trading on TSX, TSXV and Alpha.
Domestic competition in our cash equities trading business has intensified since the establishment of ATSs in Canada.
Technological advances have lowered barriers to entry and have created a multiple marketplace environment for
trading TSX and TSXV listed securities. There are currently 15 Canadian equity marketplaces which trade TSX and/or
TSXV listed securities, including dark and visible trading venues. There are also sophisticated mechanisms to internalize
order flow, liquidity aggregators and smart order routers that facilitate trading on other venues. New market entrants
have fragmented domestic equities market share and we continue to face significant competitive pressure from
existing venues, and potential new entrants. Excluding intentional crosses, in the issues we trade, our combined
domestic equities trading market share was 67%42 in 2020, up from 65% 2019. We only trade securities that are listed
on TSX or TSXV. Excluding intentional crosses, in all listed issues in Canada, our combined domestic equities trading
market share was 59% in 2020, up from 57% 2019.
These trading venues may, among other things, respond more quickly to competitive pressures, develop similar or
alternative products and services to those that TSX, TSXV and Alpha offer that are preferred by customers, develop and
expand their network infrastructures and offerings more efficiently, adapt more swiftly to new or emerging
technologies and changes in customer requirements, and adopt better, more user friendly and reliable technology. If
these trading venues attract significant order flow, or other market structure changes occur in the marketplace which
negatively impacts our ability to effectively compete, our listing, trading and GSIA revenue could be materially
adversely affected.
There is also intense price competition in the cash equities markets where competitors may price their trading and data
products more attractively. 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 and/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.
42 Source: IIROC
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MX and CDCC face competition from other venues and OTC markets
While MX is the only Canadian financial derivatives exchange offering standardized products and CDCC the only
clearing house headquartered in Canada clearing such products, their various component activities are exposed. MX
already competes with, among others, options and other derivatives exchanges as well as the OTC market. This
competition from other exchanges exists particularly in the US, but also in Europe and Asia. For example, in the U.S.,
MX competes for market share of trading single stock options on Canadian-based inter-listings, or dual listings.
However, options traded in the U.S. are not fungible with those traded in Canada. In addition, OTC regulatory reform
that is underway in Canada could encourage the entry of new competition within the Canadian clearing space. OTC
inter-dealer and dealer-to-client trading platforms represent increased competitive risk to MX with their lookalike and
substitute products. We may, in the future, also face competition from other Canadian marketplaces. These
competitors may, among other things, respond more quickly to competitive pressures, develop similar products to
those MX offers that are preferred by customers or they may develop alternative competitive products. Furthermore,
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
products which could materially adversely affect our business and operating results.
The Canadian clearing services market may become more competitive as some competitors receive recognition or
exemption orders from regulators to operate as clearing agencies. Provincial regulators have also exempted from
recognition in their respective province a number of foreign clearing agencies, allowing those exempted clearing
agencies to provide clearing services to participants in the province under the terms of the applicable exemption
orders, including Eurex Clearing AG and Chicago Mercantile Exchange Inc.
Increasing regulatory requirements imposed upon banks through higher capital requirements imposed under the Basel
regulatory framework, which increase the costs of acting as a futures clearing agent on behalf of end customers may
make clearing services more challenging for end customers to obtain, which could limit growth in the futures clearing
business. Other major competitors may gain some of this business as they have started to offer clearing services
directly to end customers, attenuating challenges end customers may face in obtaining clearing agent services from
banks.
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 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.
Shorcan faces 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 business and operating results.
Global Solutions, Insights and Analytics faces competition in bringing products to market
We face competition in market data and analytics, from other trading venues and vendors. Market data is generated
from trading activity and the success of certain data products is linked to maintaining order flow. There is a risk that
products may not meet market needs that may impact revenue.
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Trayport faces competition from other trade matching and execution vendors
Trayport has competition from other vendors who offer matching and execution tools for brokers, exchanges and
traders in its core European energy markets and in new global markets and asset classes Trayport looks to enter.
Success of these competitor vendors could reduce the number of Trayport venue customers and total subscribers, and
limit the ability for Trayport to enter new markets.
Trayport’s venue customers face competition from other venues or trading platforms and a reduction in Trayport’s
customers market share or liquidity could lead to a reduction in Trayport subscriber numbers.
Economic Risk
We are exposed to the risk that the macroeconomic and industry conditions (among others, the commodity cycle and
economic growth) will challenge our business model and objectives.
We depend on the economy of Canada
Our financial results are, and continue to be affected by the Canadian economy, including by commodity prices in the
resource sector. Any prolonged economic downturn, could have a significant negative impact on our business. We
have increased our focus on the innovation sector. However, capital raised in this sector is often lower than that raised
in the resource sectors. 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. A prolonged economic downturn may have a negative impact on investment
performance, which could materially adversely affect the number of issuers and new listed issuers, the market
capitalization of our listed issuers, additional securities being listed or reserved, trading volumes across our markets,
the number of transactions related to our equity and fixed income clearing and settlement, depository, custodial and
entitlement services and market data sales.
Our operating results may be adversely impacted by global economic conditions
The economic and market conditions in Canada, the United States, Europe, China and the rest of the world impact the
different aspects of our business and our revenue drivers. In particular, lower commodity prices, can, and has,
negatively impacted our business. Changes in the economic and political climate in the United States and Asia Pacific,
including changes relating to trade agreements, could impact our business. In addition, increased uncertainty in
Europe, including the impact of Brexit and the possibility of sovereign defaults on debt, may also impact our business,
including Trayport. Political and civil uncertainty in Hong Kong as well as tensions over trade deficits and technology
companies between China and the United States may impact growth plans in Asia in the short term. Because listing,
initial and additional financing, trading and clearing activities are significantly affected by economic, political and
market conditions and the overall level of investor confidence, they impact the level of listing activity (including IPOs),
the market capitalization of our issuers, trading and clearing volumes and sales of data across our markets. In addition,
our clearing customers face higher credit costs associated with complying with margining regimes which could result in
lower volumes.
Global market and economic conditions have fluctuated in recent years, and we have witnessed both high and low
levels of volatility. While higher volatility in markets can generate increased transaction volume, when coupled with
prolonged negative economic conditions higher volatility can adversely affect trading volumes and the demand for
market data and can lead to slower collections of accounts receivable as well as increased counterparty risk which, in
turn, could adversely affect our business, financial condition, and operating results. A low-volatility environment can
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result in lower levels of trading and clearing, particularly for derivative products, placing downward pressure on
operating results.
We depend on market activity that is outside of our control
Our revenue is highly dependent upon the level of activity on our exchanges and clearing houses, 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 markets; the number and market capitalization of listed issuers; the number of new listings;
the number of active traders and brokerage firms; the number of transactions related to our equity and fixed income
clearing and settlement, depository services; and the number of subscribers to market data and Trayport services.
We do not have direct control over these variables. Among other things, these variables depend upon the relative
attractiveness of securities listed and traded on our exchanges and the relative attractiveness of our exchanges as a
place to list and trade those securities as compared to other exchanges and other trading mechanisms. Those variables
are in turn influenced by:
•
•
•
•
•
•
•
•
•
the overall economic conditions and monetary policies in Canada, the United States, Europe, China, and in the
world in general (especially growth levels, political stability and debt crisis);
broad trends in business and corporate finance, including trends in the exchange industry, capital market
trends and the mergers and acquisitions environment;
the economic health of the resource sector;
the level and volatility of interest rates and resulting attractiveness of alternative asset classes;
the regulatory environment for investment in securities and derivatives, including the regulation of
marketplaces and other market participants, both in Canada and other jurisdictions;
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 or
derivatives, or listing in certain countries.
We may be able to indirectly influence the volume of trading and clearing by providing efficient, reliable and cost
effective trading and clearing; maximizing the availability of timely, reliable information upon which research, advice
and investment decisions can be based; and maximizing the ease of access to listings, trading and clearing facilities.
However, those activities may not have a positive effect on or effectively counteract the factors that are outside of our
control. We face a risk that regulators may impose higher burdens on our clients that could impinge on their ability to
invest.
Strategic Risk
We are exposed to the risk of attaining sub-optimal enterprise business performance due to:
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Opportunity Cost Risk: failure to develop, assess and select optimal pathways for portfolio-level success in context of
enterprise capabilities, resources, and the external environment
Implementation Risk: failure to commit to chosen pathways and translate them into clear actions and goals
Execution and Change Management Risk: failure to execute committed plans, identify changes in the strategic context
of the business with sufficient foresight, and to develop, select and execute effective responses
Our strategic planning processes may not enable us to identify and properly respond to opportunities or
threats resulting in our inability to develop new products and services that meet clients’ evolving needs
Our strategic planning process includes a thorough analysis of the business context in which we operate as well as
significant peer and competitive analysis. While we regularly test the key assumptions underlying our strategic plan, it
is possible that we may not identify or respond to opportunities or threats in our industry despite the investment of
time and resources in this process.
Execution Risk
We are exposed to the risk that we lack capabilities or fail to prioritize initiatives to deliver against our strategy and
objectives in an efficient and effective manner. It is possible that our capital allocation decisions may not be optimal.
We may not be successful in executing our strategy
We invest significant resources in the development and execution of our corporate strategy to grow profitability and
maximize shareholder value. We may not succeed in executing our strategies effectively because of, among other
things, increased global competition, inability to mobilize or co-ordinate internal resources on a timely basis, difficulty
developing and introducing products or regulatory restrictions. In addition, we may have difficulty obtaining financing
for new business opportunities, due to financial restrictions that currently or may in the future be placed on TMX
Group under our Commercial Paper Program, Debentures, Credit Facility, Recognition Orders and under our regulatory
oversight agreements. While we have established process and tools for effective and rigourous oversight of our key
initiatives, any of these factors could materially adversely affect the successful execution of our strategies. Inadequate
succession planning could slow the successful execution of our strategy. The execution of our strategy could also be
impacted if we failed to respond quickly to a changing landscape.
New business activities may adversely affect income
We may enter new business activities which, while they could provide opportunities for us, may also impose
restrictions on us and/or 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 unique challenges that we may not be able to meet
We continue to expand our operations internationally, including making acquisitions, opening offices and acquiring
distribution, technology and other systems in foreign jurisdictions, and obtaining regulatory authorizations or
exemptions to allow remote access to our markets by approved participants outside Canada. 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 businesses. These risks include, but are not limited to:
•
restrictions on the use of trading terminals direct connectivity to our marketplace or the contracts that may be
traded;
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•
•
•
•
•
•
geopolitical unrest;
reduced protection for intellectual property rights;
difficulties in staffing and managing foreign operations;
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 need to obtain authorizations or exemptions for remote access to our markets. These may
include laws, rules and regulations relating to any aspect of the business. In many cases, the additional costs related to
compliance can be substantial, and could outweigh the potential benefits. International expansion may expose TMX
Group to geographic regions that may be subject to greater political, economic and social uncertainties than countries
with developed economies.
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.
Integration/Divestitures Risk
We are exposed to the risk that we fail to integrate acquisitions to achieve the planned economics or divest under-
performing businesses effectively.
We face risks associated with integrating the operations, systems, and personnel of 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. In addition,
pursuant to the Final Recognition Orders43, prior regulatory approval is required before TMX Group can implement
significant integration, combination or reorganization of businesses, operations or corporate functions among TMX
Group entities. The requirement to obtain these approvals may restrict or delay TMX Group’s ability to make planned
changes to these aspects of its operations in the future which could have a material adverse effect on TMX Group’s
business, financial condition and results of operations. If an investment, acquisition or other transaction does not fulfill
expectations, we may have to write down its value in the future and/or sell at a loss.
We face risks associated with not being able to divest under-performing businesses
As part of our normal course of operations and strategic review processes, we may from time to time identify under
performing assets or businesses that we choose to divest.
Similar to integration risks, we also face the risks of not divesting under-performing businesses in a timely and effective
manner to enable better utilization of our capital and other resources.
43 Recognition orders issued by the securities regulators with respect to the Maple Transaction.
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Operational Risks
Technology Risk
We are exposed to the risk that our technology and underlying IT processes do not enable us to develop and/or deliver
our products and services effectively.
We depend heavily on information technology, which could fail or be subject to disruptions
We are extremely dependent on our information technology systems. Trading and data on our cash equities markets,
data on energy markets, trading, clearing and data on our derivatives markets and clearing, settlement and depository
activity for equities and fixed income securities are conducted exclusively on an electronic basis.
We have incident and disaster recovery and contingency plans as well as back-up procedures to mitigate the risk of an
interruption, failure or disruption, including those due to cyber attacks on our critical information technology including
that of TSX, TSXV, Alpha, MX, Trayport, CDCC and CDS. We also test and exercise our disaster recovery plans. However,
depending on an actual failure or disruption, 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, delays or other interruptions.
The current technological architecture for our cash equities, derivatives trading and clearing, and market data
information technology systems may not effectively or efficiently support our changing business requirements. We are
heavily invested in a Post Trade Modernization project; the significant delay or failure of which may impact participant
confidence and expose us to system reliability issues.
We are continually improving our information technology systems so that we can accommodate increases and changes
in our trading, clearing, settlement and depository activities and market data volumes to respond to customer demand
for improved performance. This requires ongoing analysis and expenditures, and may require us to expend significant
amounts of resources in the future. System changes, including the introduction of new technologies, may introduce
risk; while we have and follow, standard deployment processes for managing and testing these changes, we cannot
entirely eliminate the risk of a system failure or interruption.
If the TMX Quantum XA trading enterprise, the SOLA derivatives trading enterprise, the SOLA Clearing platform, or
CDS's CDSX system fail to perform in accordance with expectations, our business, financial condition and operating
results may be materially adversely affected.
Information Security and Privacy Risk
We are exposed to the risk that information security breaches will adversely affect the operations, intellectual property
and reputation of TMX Group.
Our processes and networks and those of our third-party service providers may be vulnerable to data
security risks, including cyber attack
Our processes and networks and those of our third-party service providers, our POs, approved participants, clearing
members and our customers may be vulnerable to information risks, including unauthorized access, computer viruses,
theft of data, denial of service attacks, and other security issues. Persons who circumvent security measures could
wrongfully use our information or cause interruptions or malfunctions in our operations which could damage the
integrity of our markets and data provision, 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
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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.
Geopolitical & External Disruption Risks
We are exposed to the risks that geopolitical upheavals (e.g. a terrorist attack) or non-political external events (e.g.
extreme weather, pandemics) will affect the provision of our critical services.
Geopolitical, climate change 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 and political, or other types of external disruptions, including pandemics, human error, climate change, natural
disasters, extreme weather, power loss, telecommunication failures, theft, sabotage and vandalism. Given our position
in the Canadian capital markets, we may be more likely than other companies to be a target of such activities.
Our Business Resilience program consists of a series of integrated crisis management, disaster recovery, pandemic and
business continuity plans for critical business functions to mitigate the risk of an interruption. Within these plans,
leaders and managers have identified critical roles and critical processes that we are ready to maintain should a
situation worsen.
All critical operations maintain a split operation for both data centres and office space, to provide redundancy and
back-up in terms of technology, facilities and staffing to reduce the risk and maintain recovery time objectives in the
event of a disruption. Any interruption to our key services could impair our reputation, damage our brand name, and
negatively impact our financial condition and operating results.
Talent Management Risk
We are exposed to the risk that we are unable to attract and/or retain talented employees, which adversely affects the
achievement of our objectives.
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 share options and other 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 and managerial personnel. We have a commitment to diversity, equity and inclusion to ensure we have
recruiting practices that support diverse talent pools and that we are responsive to evolving social conditions in
alignment with our organizational values. A changing work environment due to a pandemic presents additional risks
including: (i) a potential decline in performance or productivity for some personnel who cannot adapt to remote work
conditions, (ii) an inability to drive and support our desired corporate culture without co-located personnel, and (iii) a
rapid shift in the need for new skills that we cannot acquire quickly. Each of these risks could negatively affect our
business and operational results. To mitigate these risks, we are investing in new training programs to support
personnel in adapting to remote / hybrid working conditions and are regularly surveying staff on their needs and
preferences.
Given that COVID-19 and the shift to a largely remote workforce has prompted a review our of future workforce model,
we are exposed to the risk that existing high caliber or future personnel will not be aligned with the model or may not
perform to the best of their abilities under new workforce conditions. We have established an enterprise committee to
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gather employee feedback/preferences and evaluate the strategic costs and benefits of various workforce models to
reduce the risk that the future model is misaligned with employee expectations
Insider Threat Risk
We may be exposed to a threat where an authorized employee may take bad faith actions towards our employee base,
technology, information or operations. We conduct background checks prior to the offer of employment and
throughout the individual's employment; the frequency of which is based on their level of access. Access levels are
reviewed on a regular basis and all access changes/terminations are communicated in a timely manner. All access is
monitored by Security on a continuous basis.
Our trading, clearing and depository businesses could be exposed to loss due to operational
failures
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 clearing services, CDS’ clearing, settlement and depository services;
cause delays in settlement; cause us to lose data; corrupt our trading and clearing operations, data and records; or
disrupt our business operations, or BOX’s operations for the period in which we provide transition services. This could
undermine confidence in our exchanges and clearinghouses, materially adversely affect our reputation or operating
results, and may lead to customer claims, litigation and regulatory sanctions. Failure of CDS’ systems could also affect
other systemically important financial infrastructures such as the Large Value Transfer System operated by Payments
Canada.
CDS holds securities on behalf of its participants in safe keeping. A small portion of this securities inventory is held in
physical form. This risk is mitigated through layers of physical security arrangements as well as insurance coverage.
However, CDS may be exposed to the risk of the loss or theft of these securities.
The operational processes at CDS and CDCC which provide clearing and central-counterparty services, are subject to
the risk of failure for which they may be held liable. These process failures may result in material financial losses. To
mitigate this risk, CDS and CDCC have instituted a comprehensive set of internal controls, which are audited by an
external party on at least an annual basis. CDS and CDCC are the sole clearers for the transactions they process.
Operations Risk relating to Transfer Agent and Corporate Trust, and Registered Plan Trustee Services
Business
Our transfer agent and corporate trust services business could be exposed to losses due to operational
risks
The principal risks associated with the services and products offered by TSX Trust are operational in nature as TSX Trust
is not involved in deposit taking and lending activities, nor does it trade in marketable securities. The most significant
operational risks include securities issuance and transfers, corporate actions processing, disbursements, escrows,
corporate trust and segregated accounts reconciliation activities. To mitigate these risks, its management has instituted
a comprehensive set of internal controls, which are audited by an external party on at least an annual basis.
Model Risk
We are exposed to the risk that our clearing and settlement risk models used within our clearing houses are not
designed or operating effectively, thereby exposing us to systemic failure.
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We are dependent on the accuracy and effective implementation of risk models
CDS and CDCC use financial models to estimate risk exposures and the value of margin and collateral to mitigate those
exposures. These models are subject to risks including the incorrect use of variables input into the models, the
misspecification of the model or errors in the implementation and/or use of models and their results which could result
in the risks resulting from a clearing member failure being inadequately collateralized. The model risks are mitigated
through model testing prior to implementation and the existence of a risk management framework with necessary
governance to regularly assess the adequacy of the models. In addition, our clearinghouse risk models are subject to
independent vetting and validation thereby ensuring that those models continue to perform as they were originally
designed to do. Failure of the models may result in under or over estimation of financial risk exposures and may create
systemic risks.
Third Party Risk
We are exposed to the risk that the use of third party vendors or outsourcing service providers for technology and/or
business processes will result in loss of critical business data and/or compromise controls.
We depend on third-party suppliers and service providers
We depend on a number of third parties, such as IIROC, cloud services, data processors, software and hardware
suppliers, communication and network suppliers, suppliers of electricity, and many other vendors, for elements of our
businesses including trading, clearing, routing, providing market data and other products and services. These third
parties may not be able to provide their services without interruption, or in an efficient, cost-effective manner. In
addition, we may not be able to renew our agreements with these third parties on favourable terms or at all. These
third parties also may not be able to adequately expand their services to meet our needs. We have established a
central procurement function focused on vendor selection and management. However, if a third party suffers an
interruption in or stops providing services and we cannot make suitable alternative arrangements, or if we fail to renew
certain of our agreements on favourable terms or at all, our business, financial condition or operating results could be
materially adversely affected.
Client Concentration Risk
We depend on an adequate number of clients
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. If trading on our exchanges is interrupted or ceases, it could materially
adversely affect our equity or derivatives operations, our financial condition and our operating results.
Our trading and clearing operations depend primarily on a small number of clients
During 2020, approximately 81% of our trading and related revenue, net of rebates, on TSX and approximately 68% of
our trading and related revenue on TSXV were accounted for by the top ten POs on each exchange based on volumes
traded.
Approximately 59% of CDS’s revenue, net of rebates, in 2020 was accounted for by the top ten customers (excluding
securities regulators).
Approximately 71% of MX and CDCC’s trading and clearing revenue, net of rebates, in 2020 was accounted for by the
top ten participants based on volume of contracts traded.
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If there was a significant decrease in revenue from several of these customers, there would be a negative impact on our
business.
Legal & Regulatory Risk
Regulatory Climate & Compliance
We are exposed to the risks that are associated with the complexity and unpredictability of our legal and regulatory
environment, including legislation and regulations that impact our listed issuers. Our response to regulatory
requirements could result in higher operating costs. Moreover, we are also exposed to the risk that we fail to comply
with laws and regulations, resulting in financial and reputational loss.
Cost of Regulation
We incur costs to comply with the regulatory requirements that are imposed pursuant to the Recognition Orders.
For more information on the regulatory impact on our business, please see the TMX Group Annual Information Form,
dated March 24, 2020.
We operate in a highly regulated industry and are subject to extensive regulation and could be subject to
increased regulatory scrutiny in the future
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. Regulators in
Canada, as well as regulators in other jurisdictions where we do business, such as the U.S., regulate us, our exchanges,
our clearing houses and certain of our other businesses. Regulators in other jurisdictions may regulate our future
operations. Canadian regulators propose changes, including amendments to National Instruments, on an ongoing
basis.
Our regulators have broad powers over the entities they regulate to audit, investigate and enforce compliance with
applicable regulations and impose sanctions for non-compliance.
Our regulators are vested with broad powers to prohibit us from engaging in certain business activities and to suspend
or revoke existing approval to engage in certain business activities, including exchange, clearing agency and SRO related
activities. In the case of actual or alleged non-compliance with legal or regulatory requirements, our regulated entities
could be subject to investigations and administrative or judicial proceedings that may result in substantial penalties,
including the suspension or revocation of approval to act as an exchange, clearing agency or 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.
The regulation of our businesses may impose barriers or constraints which limit our ability to build an efficient,
competitive organization and may also limit our ability to expand global operations. Securities and other regulators also
impose financial and corporate governance restrictions on us and our equity and derivatives exchanges and clearing
agencies and operations. Some of our regulators must approve or review our regulated entities’ listing rules, trading
rules, clearing, settlement and depository 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. 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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We could be subject to increased regulatory scrutiny in the future. The multi-market environment in Canada and the
impact of global economic conditions continue to lead to more aggressive regulation of our businesses by securities
and other regulatory agencies in Canada, the U.S. and abroad and could extend to areas of our businesses that to date
have not been regulated.
There may be a conflict of interest, real or perceived, between our regulatory responsibilities and our own business
activities. While we have implemented stringent governance measures and have and will continue to put into place
policies and procedures to manage such conflicts, any failure to diligently and fairly manage such conflicts may
significantly harm our reputation, prompt regulatory action and could materially adversely affect our business, financial
condition and results of operations.
New regulatory requirements may make it more costly to comply with relevant regulation, to operate our
existing businesses or to enter into new business areas
A number of regulatory initiatives and changes have been identified or proposed or are being implemented by
regulators, including in Canada, the U.S. and Europe. We cannot be certain whether, or in what form, regulatory
changes will take place, and cannot predict with certainty the impact of such changes on our businesses and
operations. Changes in, and additions to, the rules affecting our exchanges and clearing houses could require us to
change the manner in which we and our customers conduct business or govern ourselves. Failure to make the required
changes and comply on a timely basis could result in material reductions to activity or revenue, sanctions and/or
restrictions by the applicable regulatory authorities.
Unexpected and new regulatory requirements could make it more costly to comply with relevant regulations and for
affected entities to operate their existing businesses or to enter into new business areas. In addition, high levels of
regulation may stifle growth and innovation in capital markets generally and may adversely affect our business,
financial condition and results of operations.
CDS Clearing and CDCC operate financial market infrastructures, including as central counterparties for cash and
derivative markets, a securities settlement system and a central securities depository, that are subject to the CPMI-
IOSCO Principles for Financial Market Infrastructure (PFMIs) for these types of services. The PFMIS are reflected in the
requirements of such entities’ regulators and applicable securities law including National Instrument 24-102 Clearing
Agency Requirements. Adherence to the PFMIs by these businesses will continue to impact the cost of regulatory
compliance.
European energy market regulatory changes could potentially affect the structure of these markets and hence the
number of trading venues supported by Trayport.
Our Recognition Orders impose significant regulatory constraints
Under the Recognition Orders, we are subject to extensive regulation and regulatory oversight with respect to, among
other things, fees, fee models, discounts and incentives. The Recognition Orders also impose significant regulatory
constraints on our ongoing business. The additional regulatory and oversight provisions provided for in the Recognition
Orders provide the applicable regulators with broad powers that could, depending on how such powers are exercised
in the future, impose barriers or constraints that limit our ability to build an efficient, competitive organization, which
could have a material adverse effect on our business, financial condition and results of operations.
With respect to the fees charged by all of our equity exchanges (TSX, Alpha, and TSXV), the Recognition Orders impose
restrictions or prohibitions on certain types of fee discounts or incentives that such exchanges may provide, including
discounts or incentives that are accessible only to a particular marketplace participant or class of marketplace
participants. Such prohibitions and restrictions may limit the ability of our equity exchanges to introduce new products
in the future or to introduce them on a timely basis, which could materially adversely affect the success of our future
strategies, financial condition and results of operations. In addition, under the Recognition Orders the OSC has the right
to require TSX and Alpha to submit a fee, fee model or incentive that has previously been approved by the OSC for re-
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approval. In such circumstances, if the OSC decides not to re-approve the fee, fee model or incentive, it must be
revoked.
We incur costs to comply with the regulatory requirements that are imposed pursuant to the Recognition Orders. In
addition, we and certain of our businesses are subject to participation and activity fees imposed by provincial securities
regulators. The overall scope of the additional regulatory costs may have a material adverse effect on our business,
financial condition, and results of operations.
Pursuant to certain of the Recognition Orders, prior regulatory approval is also required before we can implement
changes to a number of aspects of our operations. This includes prior regulatory approval of (a) changes to internal cost
allocation models and any transfer pricing between affiliated entities, (b) significant integration, combination or
reorganization of businesses, operations or corporate functions between TMX Group entities, (c) non-ordinary course
changes to TSXV’s operations, and (d) any outsourcing of key services or systems by a clearing agency or by Montreal
Exchange. The requirement to obtain approvals may restrict or delay our ability to make planned changes to these
aspects of our operations in the future which could have a material adverse effect on our business, financial condition
and results of operations.
Our Recognition Orders impose ownership restrictions on our voting shares
Under the OSC and AMF Recognition Orders, 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 TMX Group without prior approval of the OSC and the AMF. Should a person or combination of persons, acting
jointly or in concert, beneficially own or exercise control or direction over more than 10% of any class or series of
voting shares of TMX Group without prior approval of the OSC and the AMF, in accordance with the contrasting
documents of TMX Group, their respective voting rights may be limited to no more than 10% until such time as
approval has been granted by the OSC and the AMF in accordance with the contrasting documents of TMX Group, their
respective voting rights may be limited to no more than 10% until such time as approval has been granted by the OSC
and the AMF.
Litigation/Legal Proceedings Risk
We are exposed to the risk that litigation or other legal proceedings are launched against us.
We are subject to risks of litigation and other legal proceedings
Some aspects of our business involve risks of litigation. Dissatisfied customers or vendors, among others, may make
claims with respect to, among other things, the manner in which we operate or they may challenge our regulatory
actions, decisions or jurisdiction. Although we may benefit from certain contractual indemnities and limitations on
liabilities, these rights may not be sufficient. In addition, with civil liability for misrepresentations in our continuous
disclosure documents and statements and for the failure to make timely disclosures of material changes in Ontario and
certain other jurisdictions, dissatisfied shareholders have a statutory right to 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.
Intellectual Property Risk
We are exposed to the risk that we fail to protect our intellectual property resulting in material financial loss to us. We
are exposed to the risk that an infringement claim may be asserted against us.
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We may be unable to protect our intellectual property
To protect our intellectual property rights, we rely on a combination of trademark 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 rights. We may not be able to detect the unauthorized use of, or take adequate steps to enforce, our
intellectual property rights. If we are unable to protect our intellectual property adequately, it could harm our brand,
affect our ability to compete effectively and may limit our ability to maintain or increase revenue. 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 are subject to risks of intellectual property claims
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. We may also be subject to claims alleging that
we are infringing on a third party's intellectual property rights without 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 we are successful.
Financial Risks
Operational Risk
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. We are exposed to the risk that we fail to
develop, implement and maintain the appropriate corporate finance model and capital structure. The Trust Indentures
governing the Debentures impose various restrictions on TMX Group and its subsidiaries, including restrictions on the
ability of TMX Group and each of its material subsidiaries (as defined in the Trust Indentures) to create a lien on these
entities’ assets, limitations on the ability of material subsidiaries of TMX Group to enter into certain types of
indebtedness, and requirements to repurchase outstanding Debentures on change of control of TSX Inc. or MX coupled
with a triggering event (i.e., rating of the Debentures is lowered to below investment grade). Notwithstanding our
treasury and capital allocation programs which include leverage ratio and dividend payout ratio analysis, some, or all,
of these restrictions could limit our flexibility to change our capital structure.
Our Credit Agreement requires us to satisfy and maintain an interest coverage ratio and a leverage ratio, among other
covenants, including the timely payment of principal and interest when due. It is important that we meet all of the
terms under our Credit Facility since it provides a 100% backstop to our Commercial Paper Program. Based on the
current level of operations and anticipated growth, we believe that our cash flows from operations and our available
cash are adequate to meet our current liquidity needs. However, we cannot guarantee that our businesses will
generate sufficient earnings or cash flows from operations or that anticipated growth will be realized or that we will be
able to control our expenses in an amount sufficient to enable us to satisfy the financial ratios and other covenants, or
pay our indebtedness or fund our other liquidity needs. If we do not have sufficient funds, we may be required to
renegotiate the terms of, restructure, or refinance all or a portion of our indebtedness on or before our stated
maturity, reduce or delay capital investments and acquisitions, reduce or eliminate our dividends, or sell assets. Our
ability to renegotiate, restructure, or refinance our indebtedness would depend on the condition of the financial
markets and our financial condition at that time. Failure to comply with the financial ratios as well as covenants of the
Credit Agreement could result in a default under the Trust Indentures, which, if not cured or waived, could result in
TMX Group being required to repay outstanding borrowings under both the Credit Agreement and the Debentures
before their due dates. In addition, an event of default under the Trust Indentures governing the Debentures that
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would result in an acceleration of maturity of the applicable series of Debentures could lead to an acceleration of the
maturity of the Credit Agreement.
In addition, if we fail to comply or are reasonably likely to fail to comply with any financial covenant or ratio contained
in any Final Recognition Order, such failure could result in a default under the Credit Agreement as well, if a
governmental authority issues a decision or orders restrictions on us or any of our subsidiaries as a result of the non-
compliance where a requisite majority of the lenders determine that the restrictions have or will have a material
adverse effect as defined in the Credit Agreement. It will also be a default under the Credit Agreement if a
governmental authority issues a decision or orders restrictions on our or any of our subsidiaries’ ability to move cash or
cash equivalents among TMX Group and our subsidiaries, where a requisite majority of the lenders determine that the
restrictions have or will have a material adverse effect. If these events of default under the Credit Agreement were to
result in an acceleration of maturity under the Credit Agreement, the event(s) could constitute an event of default
under the Trust Indentures, which in turn would result in the acceleration of maturity of the outstanding Debentures. If
we are forced to refinance these borrowings on less favourable terms or cannot refinance these borrowings, our
business, results of operations, and financial condition would be adversely affected. Borrowings under the Commercial
Paper Program and Credit Agreement incur interest at variable rates and expose us to interest rate risk. If interest rates
increase, our debt service obligations on our variable rate indebtedness would increase even though the amount
borrowed remained the same, and our net income and cash flows, including cash available for servicing the
indebtedness, would correspondingly decrease. TMX Group has an issuer rating of A (high) from DBRS with a Stable
trend. Our Debentures have the same credit rating from DBRS with a Stable trend. The Commercial Paper has been
assigned a rating of “R-1 (low)” with a Stable trend by DBRS.
DBRS regularly evaluates and monitors the rating of our Commercial Paper and the rating of our Debentures
outstanding. A downgrade from our existing rating could adversely affect our cost of borrowing and/or our ability to
access sources of liquidity and capital and reduce financing options available to us.
Credit Risk
Credit risk is the risk of loss due to the failure of a borrower, counterparty, clearing member or participant to honour
their financial obligations. It arises principally from the clearing operations of CDS Clearing and CDCC, the operations of
TSX Trust, the brokerage operations of Shorcan, cash and cash equivalents, restricted cash and cash equivalents,
marketable securities, trade receivables, and total return swaps.
Credit Risk – Clearing Houses
Credit Risk - CDS
CDS Clearing is exposed to the risk of loss due to the failure of a Participant in CDS Clearing’s clearing and settlement
services to honour its financial obligations. To a lesser extent, CDS Clearing is exposed to credit risk through the
performance of services in advance of payment.
Through the clearing and settlement services operated by CDS Clearing, credit risk exposures are created. During the
course of each business day, transaction settlements can result in a net payment obligation of a Participant to CDS
Clearing or the obligation of CDS Clearing to pay a Participant. The potential failure of the Participant to meet its
payment obligation to CDS Clearing results in payment risk, a specific form of credit risk. Payment risk is a form of credit
risk in securities settlement whereby a seller will deliver securities and not receive payment, or that a buyer will make
payment and not receive the purchased securities. Payment risk is mitigated by delivery payment finality in CDSX, CDS'
multilateral clearing and settlement system, as set out in the CDS Participant Rules.
In the settlement services offered by CDS Clearing, payment risk is transferred entirely from CDS Clearing to
Participants who accept this risk pursuant to the contractual rules for the settlement services. This transfer of payment
risk occurs primarily by means of Participants acting as extenders of credit to other Participants through lines of credit
managed within the settlement system or, alternatively, by means of risk-sharing arrangements whereby groups of
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Participants cross-guarantee the payment obligations of other members of the group. Should a Participant be unable to
meet its payment obligations to CDS Clearing, these surviving Participants are required to make the payment. Payment
risk is mitigated on behalf of Participants through the enforcement of limits on the magnitude of payment obligations
of each Participant and the requirement of each Participant to collateralize its payment obligation. Both of these
mitigants are enforced in real time in the settlement system.
The risk exposure of CDS Clearing in its central counterparty services is mitigated through a daily mark-to-market of
each Participant’s obligations as well as risk-based collateral requirements calculated daily. These mitigants are
intended to cover the vast majority of market changes and are tested against actual price changes on a regular basis.
This testing is supplemented with analysis of the effects of extreme market conditions on a collateral valuation and
market risk measurements which are used to determine additional collateral requirements of Participants to a default
fund established in 2015. Should the collateral of a defaulter in a central counterparty service be insufficient, either
because the value of the collateral has declined or the loss to be covered by the collateral exceeded the collateral
requirement, the surviving participants in the service are required to cover any residual losses.
Credit Risk – CDCC
CDCC is exposed to loss in the event that Clearing Members fail to satisfy any of the contractual obligations as
stipulated within CDCC’s rules.
CDCC is exposed to the credit risk of its Clearing Members since it acts as the central counterparty for all transactions
carried out on MX’s markets and on certain OTC markets which are serviced by CDCC. As such, in the event of a
Clearing Member default, the obligations of those defaulting counterparties would become the responsibility of CDCC.
The first line of defense in CDCC's credit risk management process is the adoption of strict membership criteria which
include both financial and regulatory requirements. In addition, CDCC performs on-going monitoring of the financial
viability of its Clearing Members against the relevant criteria as a means of ensuring the on-going compliance of its
Clearing Members. In the event that a Clearing Member fails to continue to satisfy any of its membership criteria, CDCC
has the right through its rules, to impose various sanctions on such Clearing Members.
One of CDCC’s principal risk management practices with regard to counterparty credit risk 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
settlements and/or daily margin calls or otherwise not honour its obligations under open futures, options contracts and
REPO agreements, margin deposits would be seized and would then be available to apply against the potential losses
incurred through the liquidation of 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. 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% and is meant to ensure that Clearing Member leverage in the clearing activities does not exceed the
value of the firm. CDCC also has additional margin surcharges to manage the risk exposures associated with certain
idiosyncratic risks. These include: concentration charges for Clearing Members that are overly concentrated in certain
positions, wrong-way risk charges for those Clearing Members holding positions which are highly correlated with their
own credit risk profile, mismatched settlement surcharges which are meant to mitigate the risk of cherry-picking by a
potential defaulter in the settlement process.
Credit Risk – Shorcan
Shorcan is exposed to credit risk in the event that customers fail to settle on the contracted settlement date. This 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 has the right to withdraw its normal policy of anonymity and advise the two
counterparties to settle directly.
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Credit Risk – All Other
We manage our exposure to credit risk on our cash and cash equivalents and restricted cash and cash equivalents by
holding the majority of our cash and cash equivalents with major Canadian chartered banks or in Government of
Canada and provincial treasury bills and US treasury bills. We manage exposure to credit risk arising from investments
in marketable securities by holding high-grade individual fixed income securities with credit ratings of A/R1-low or
better.
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. We invoice our customers on a regular basis and
maintain a collections team to monitor customer accounts and minimize the amount of overdue receivables. Due to
the bilateral nature of the TRSs, we are exposed to the counterparty credit risk. To manage this credit risk, we only
enter into the TRSs with major Canadian chartered banks.
TSX Trust is exposed to credit risk on foreign exchange transactions processed for clients in the event that either the
client or the financial counterparty fails to settle contracts for which foreign exchange rates have moved unfavourably.
The risk of a financial counterparty failing to settle a transaction is considered remote as TSX Trust deals only with
reputable financial institutions comprised of major Canadian chartered banks.
Market Risk
Market risk is the risk of loss due to changes in market prices and rates such as equity prices, interest rates and foreign
exchange rates. We are exposed to market risk relating to equity prices when we grant DSUs, RSUs and PSUs to our
directors and employees, as our obligation under these arrangements are partly based on our share price. We have
entered into TRSs as a partial fair value hedge to the share appreciation rights of RSUs and DSUs.
We are exposed to market risk on interest earned on our cash, cash equivalents and marketable securities. This risk is
partially mitigated by having variable interest rates on our short-term debt (Commercial Paper). We are exposed to
market risk relating to interest paid on our Commercial Paper.
Other Market Price Risk – CDS, CDCC, TSX, TSX Venture Exchange and Shorcan
We are exposed to market risk factors from the activities of CDS Clearing, CDCC, and Shorcan if a Participant, Clearing
Member, or Client, as the case may be, fails to take or deliver either securities or derivatives products on the
contracted settlement or delivery date where the contracted price is less favourable than the current market price.
CDS
CDS is exposed to market risk through its CCP function in the event a participant defaults as it becomes the legal
counterparty to all of the defaulters' novated transactions and must honor the financial obligations that arise from
those novated transactions. Adverse changes to market prices and rates would expose CDS to credit risk losses.
The principal mitigation of this credit risk exposure post default is the default management process. CDS has developed
default management processes that would enable it to neutralize the market exposures via open market operations
within prescribed time periods. Any losses from such operations would be set-off against the collateral contributions of
the defaulting participant to the Participant Fund and Default Fund for the CCP service, thereby minimizing credit
losses.
CDCC
CDCC is exposed to market risk through its CCP functions in the event of a Clearing Member default as it becomes the
legal counterparty to all of the defaulter's novated transactions and must honor the financial obligations that arise from
those novated transactions. Adverse changes to market prices and rates would expose CDCC to credit risk losses.
The principal mitigation of this credit risk exposure post default is the default management process. CDCC has
developed detailed default management processes that would enable it to neutralize the market exposures through
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either its auction process or via open market operations within prescribed time periods. Any losses from such
operations would be set-off against the margin and clearing fund (if necessary) collateral that are pre-funded by all
Clearing Members for these purposes, thereby minimizing the credit losses.
TSX and TSX Venture Exchange
We are exposed to market price risk on a portion of our sustaining services revenue, which is based on quoted market
values of listed issuers as at December 31 of the previous year.
Shorcan
Shorcan’s risk is limited by its status as an agent, in that it does not purchase or sell securities for its 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.
Foreign Currency Risk
We are exposed to foreign currency market risk on revenue and expenses where we invoice or procure in a foreign
currency, principally in U.S. dollars and GBP.
We do not currently employ currency hedging strategies with respect to our operating activities, and therefore
significant moves in exchange rates, specifically a strengthening of the Canadian dollar against the U.S. dollar and GBP
can have an adverse effect on the value of our revenue or assets in Canadian dollars.
Settlements in the clearing and settlement services offered by CDS occur in both Canadian and U.S. dollars. Market risk
relating to foreign exchange rates could be created if there is a default and the currency of the payment obligation is
different from the currency of the collateral supporting that payment obligation. This risk is mitigated by discounting
the collateral value of securities where these mismatches occur.
Based on 2020 revenue and operating expenses, the approximate impact of a 10% rise or a 10% decline in the Canadian
dollar compared with the U.S. dollar on revenue, net of operating expenses, is approximately $7.7 million. Based on
Trayport's 2020 revenue and operating expenses, the approximate impact of a 10% rise or a 10% decline in the
Canadian dollar compared with Great British Pounds (GBP) on revenue, net of operating expenses, is approximately
$5.5 million.
We are also exposed to market risk relating to foreign currency rates applicable to our cash and cash equivalents, trade
receivables and trade payables, principally denominated in U.S. dollars. At December 31, 2020, cash and cash
equivalents and trade receivables, net of current liabilities, include US$10.0 million, which are exposed to changes in
the US-Canadian dollar exchange rate (2019 – US$15.8 million), £0.8 million which are exposed to changes in the GBP-
Canadian dollar exchange rate (2019 - £0.7 million), and less than €0.1 million to changes in the Euro-Canadian dollar
exchange rate (2019 - €0.1 million). The approximate impact of a 10% rise or a 10% decline in the Canadian dollar
compared with the U.S. dollar, GBP and Euro on these balances as at December 31, 2020 is a $1.4 million decrease or
increase in income before income taxes, respectively.
Liquidity Risk - Operations
Liquidity risk is the risk of loss due to the inability of TMX Group or its borrowers, counterparties, Clearing Members, or
Participants to meet their financial obligations in a timely manner or at reasonable prices. We manage liquidity risk
through the management of our cash and cash equivalents and marketable securities, all of which are held in short
term instruments, and our Debentures, Commercial Paper as well as credit and liquidity facilities. In clearing and
depository services, liquidity risk results from the requirement to convert collateral to cash in the event of the default
of a participant/customer.
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Cash and cash equivalents and restricted cash and cash equivalents consist of cash and highly liquid investments. Our
investment policy will only allow excess cash to be invested within money market securities or fixed income securities.
Individual fixed income securities held have credit ratings of A/R1-low or better and are highly liquid.
Liquidity Risk - Clearing Houses
The margin deposits of CDCC and CDS and clearing fund margins of CDCC are held in liquid instruments. Cash margin
deposits and cash clearing fund deposits from Clearing Members, which are recognized on the consolidated balance
sheet, are held by CDCC with the Bank of Canada. Non-cash margin deposits and non-cash clearing fund deposits
pledged to CDCC under irrevocable agreements are in government securities and other securities and are held with
approved depositories. Cash collateral from CDS’ participants, which is recognized on the consolidated balance sheet, is
held by CDS at the Bank of Canada and commercial banks with a minimum credit rating of A/R1-low or better and are
highly liquid and NSCC/DTC. Non-cash collateral, which is not recognized on the consolidated balance sheet, pledged by
participants under Participant Rules is held by CDS in liquid government and fixed income securities.
CDS
The design of CDS' New York Link service does not apply strict limits to a Participant's end-of-day payment obligation,
creating the potential for unlimited liquidity risk exposure if a user of the service were to default on its obligation. CDS
manages this risk through active monitoring of payment obligations and a committed liquidity facility which covers the
vast majority of potential Participant default scenarios.
CDS maintains two secured standby liquidity facilities that can be drawn in either U.S. or Canadian currency. These
arrangements are available to support processing and settlement activities in the event of a participant default in
either the CNS or NYL service lines. Borrowings under the secured facilities are obtained by pledging securities that are
settled through CNS or NYL services or providing collateral pledged by participants primarily in the form of debt
instruments issued or guaranteed by federal, provincial and/or municipal governments in Canada or U.S. treasury
instruments. As a designated FMI, CDS has access to the Emergency Lending Assistance (ELA) program offered by the
Bank of Canada and is meant to provide emergency funding in the event of liquidity shortfalls at CDS that may occur
under market stress events. The ELA is offered at the full discretion of the Bank of Canada and is meant to be fully
collateralized by SLF-eligible assets.
CDCC
The syndicated revolving standby liquidity facility for a total of $320.0 million is also in place to provide end of day
liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero as well as to provide a source of
overnight funding for securities that are not eligible to be pledged at the Bank of Canada or for emergency liquidity
needs in the event of a Clearing Member default. Advances under the facility will be secured by collateral in the form of
securities that have been received by CDCC. The syndicated REPO facility is also in place to provide end of day liquidity
in the event that CDCC is unable to clear the daylight liquidity facilities to zero or for emergency liquidity needs in the
event of a Clearing Member default. It will provide liquidity in exchange for securities that have been pledged to or
received by CDCC. As a designated FMI CDCC has access to the Emergency Lending Assistance (ELA) program offered by
the Bank of Canada and is meant to provide emergency funding in the event of liquidity shortfalls at CDCC that may
occur under market stress events. The ELA is offered at the full discretion of the Bank of Canada and is meant to be
fully collateralized by SLF-eligible assets.
Commercial Paper Program
We rely on our Commercial Paper Program, Debentures and Credit Facility as a source of financing. The specific
liquidity risk related to Commercial Paper is that we are unable to borrow under a new Commercial Paper issuance in
order to pay for Commercial Paper that is coming due because of a lack of liquidity or demand for our Commercial
Paper in the market. To mitigate this risk, we maintain a Credit Agreement that provides 100% coverage or backstop to
the Commercial Paper Program.
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Accounting and Control Matters
Changes in accounting policies
The following amendments were effective for TMX Group from January 1, 2020:
•
•
•
IFRS 3, Business Combinations;
IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimate and
Errors; and
Amendments to conceptual framework.
• We adopted the amendment to the leasing standard IFRS 16, COVID-19 Related Rent Concessions issued on
March 28, 2020. The amendment introduces an optional practical expedient for lessees to account for rent
concessions that are a direct consequence of the COVID-19 pandemic as variable lease payments as opposed to
lease modifications.
There was no significant impact on the financial statements as a result of their adoption.
Future changes in accounting policies
The following new standards and amendments to standards and interpretations are not yet effective for the year ending
December 31, 2020, and have not been applied in the preparation of the financial statements. These new and amended
standards and interpretations are required to be implemented for financial years beginning on or after January 1, 2021,
unless otherwise noted:
•
•
•
IAS 1 Presentation of Financial Statements – Amendments clarify that liabilities are classified as either current or non-
current, depending on the rights that exist at the end of the reporting period. The amendments also clarify what IAS 1
means when it refers to the ‘settlement’ of a liability. Classification is unaffected by the expectations of the entity or
events after the reporting date. The amendments apply for annual reporting periods beginning on or after January 1,
2023. We do not expect the amendments to have a material impact on our financial statements.
IAS 37, Provisions, Contingent Liabilities and Contingent Assets – Amendments clarify that the direct costs of fulfilling a
contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to
fulfilling contracts. Before recognizing a separate provision for an onerous contract, the entity recognizes any
impairment loss that has occurred on assets used in fulfilling the contract. The amendments apply for annual
reporting periods beginning on or after January 1, 2022 to contracts existing at the date when the amendments are
first applied. We do not expect the amendments to have a material impact on our financial statements.
Reference to the Conceptual Framework – Amendments to IFRS 3, Business Combinations – Minor amendments were
made to IFRS 3 to update the references to the Conceptual Framework for Financial Reporting and add an exception
for the recognition of liabilities and contingent liabilities within the scope of IAS 37 Provisions, Contingent Liabilities
and Contingent Assets and Interpretation 21 Levies. The amendments also confirm that contingent assets should not
be recognized at the acquisition date. The amendments apply for annual reporting periods beginning on or after
January 1, 2022. We do not expect the amendments to have a material impact on our financial statements.
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Disclosure Controls and Procedures and Internal Control over Financial Reporting
Disclosure Controls and Procedures
TMX Group’s disclosure controls and procedures (DCP), as defined in National Instrument 52-109 – Certification of
Disclosure in Issuers’ Annual and Interim Filings (NI 52-109) are designed to provide reasonable assurance that
information required to be disclosed in our filings under securities legislation 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 Chief Executive Officer (CEO) and Chief Financial Officer (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 interim CFO, conducted an evaluation of the effectiveness of our DCP as of
December 31, 2020. Based on this evaluation, the CEO and interim CFO have concluded that our DCP were effective as
of December 31, 2020.
Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (ICFR),
as defined in NI 52-109. ICFR 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 IFRS, 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 IFRS, 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 ICFR can only provide reasonable assurance
and may not prevent or detect misstatements due to error or fraud.
Our management, including the CEO and interim CFO, conducted an evaluation of the effectiveness of our ICFR as of
December 31, 2020 using the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework
(2013). Based on this evaluation, the CEO and interim CFO have concluded that our ICFR were effective as of December
31, 2020.
Changes in Internal Control over Financial Reporting
There were no changes to internal control over financial reporting (ICFR) during the quarter and year ended December
31, 2020 that materially affected, or are reasonably likely to materially affect, our ICFR.
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Related Party Relationships and Transactions
Parent
The shares of TMX Group are widely held and, as such, there is no ultimate controlling party of TMX Group. Under the
OSC and AMF Recognition Orders, 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 TMX
Group without prior approval of the OSC and the AMF.
Key management personnel (KMP) compensation
Compensation for key management personnel, including TMX Group’s Board of Directors, was as follows for the year:
(in millions of dollars)
Salaries and other short-term employee benefits, and termination
benefits
Post-employment benefits
Share-based payments
2020
$10.4
0.6
12.9
23.9
2019
$9.7
0.6
17.0
27.3
There was a decrease of $3.4 million related to key management personnel compensation driven by lower share-based
payments. This decrease reflects lower share price appreciation in 2020 compared with 2019, and also reduced share-
based payments due to certain KMP roles transitioning during 2020.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This MD&A of 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 forward-looking information in this MD&A include, but are not limited to, growth objectives; our target
dividend payout ratio; the ability of TMX Group to de-leverage and the timing thereof; the modernization of clearing
platforms, including the expected cash expenditures related to the modernization of our clearing platforms and the
timing of the modernization; other statements related to cost reductions; the impact of the market capitalization of
TSX and TSXV issuers overall (from 2019 to 2020) on TMX Group's revenue; future changes to TMX Group's anticipated
statutory income tax rate for 2020; factors relating to stock, and derivatives exchanges and clearing houses and the
business, strategic goals and priorities, market conditions, pricing, proposed technology and other business initiatives
and the timing and implementation thereof, the proposed timing for the completion of the acquisition of AST Canada,
including the ability to obtain the required regulatory approvals and financing required to complete this acquisition, the
composition of AST Canada's client base and the products and services it will provide, the anticipated benefits and
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synergies of the AST Canada acquisition, including the expected impact on TMX Group's earnings and adjusted earnings
per share and the timing thereof, financial results or financial condition, operations and prospects of TMX Group which
are subject to significant risks and uncertainties.
These risks include, but are not limited to: 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 conditions (including COVID-19) or uncertainties including
changes in business cycles that impact our sector; failure to retain and attract qualified personnel; geopolitical and
other factors which could cause business interruption (including COVID-19); dependence on information technology;
vulnerability of our networks and third party service providers to security risks, including cyber-attacks; failure to
properly identify or implement our strategies; regulatory constraints; constraints imposed by our level of indebtedness,
risks of litigation or other proceedings; dependence on adequate numbers of customers; failure to develop, market or
gain acceptance of new products; failure to close and effectively integrate acquisitions to achieve planned economics,
or divest underperforming businesses; currency risk; adverse effect of new business activities; adverse effects from
business divestitures; not being able to meet cash requirements because of our holding company structure and
restrictions on paying dividends; dependence on third-party suppliers and service providers; dependence of trading
operations on a small number of clients; risks associated with our clearing operations; challenges related to
international expansion; restrictions on ownership of TMX Group common shares; inability to protect our intellectual
property; adverse effect of a systemic market event on certain of our businesses; risks associated with the credit of
customers; cost structures being largely fixed; the failure to realize cost reductions in the amount or the time frame
anticipated; dependence on market activity that cannot be controlled; the regulatory constraints that apply to the
business of TMX Group and its regulated subsidiaries, costs of on exchange clearing and depository services, trading
volumes (which could be higher or lower than estimated) and revenues; future levels of revenues being lower than
expected or costs being higher than expected.
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 exchange rates from
Canadian dollars to the U.S. dollar or GBP), commodities prices, the level of trading and activity on markets, and
particularly the level of trading in TMX Group’s key products; business development and marketing and sales activity;
the continued availability of financing on appropriate terms for future projects, including the acquisition and
integration of AST Canada; the amount of revenue and cost synergies resulting from the AST Canada acquisition;
productivity at TMX Group, as well as that of TMX Group’s competitors; market competition; research and
development activities; the successful introduction and client acceptance of new products; successful introduction of
various technology assets and capabilities; 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.
In addition to the assumptions outlined above, forward looking information related to long term revenue cumulative
average annual growth rate (CAGR) objectives, and long term adjusted earnings per share CAGR objectives are based
on assumptions that include, but not limited to:
•
•
•
•
•
•
TMX Group's success in achieving growth initiatives and business objectives;
continued investment in growth businesses and in transformation initiatives including next generation
post-trade systems;
no significant changes to our effective tax rate, recurring revenue, and number of shares outstanding;
moderate levels of market volatility;
level of listings, trading, and clearing consistent with historical activity;
economic growth consistent with historical activity;
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•
•
•
•
•
no significant changes in regulations;
continued disciplined expense management across our business;
continued re-prioritization of investment towards enterprise solutions and new capabilities;
free cash flow generation consistent with historical run rate; and
a limited impact from the COVID-19 pandemic on our plans to grow our business over the long term
including on the ability of our listed issuers to raise capital.
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 the section “Enterprise Risk Management” of this MD&A.
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Financial
Statements
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Management
Statement
Management is responsible for the preparation, integrity and fair
presentation of the consolidated financial statements (the financial
statements), management’s discussion and analysis, and other
information in this annual report. The financial statements were
prepared in accordance with International Financial Reporting
Standards and, in the opinion of management, fairly reflect the
financial position, financial performance and changes in the
financial position of TMX Group Limited. Financial information
contained throughout this annual report is consistent with the
financial statements, unless otherwise specified.
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 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 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.
John McKenzie
Chief Executive Officer
TMX Group Limited
February 8, 2021
Frank Di Liso
Interim Chief Financial Officer
TMX Group Limited
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KPMG LLPBay Adelaide Centre333 Bay Street, Suite 4600Toronto, ON M5H 2S5CanadaTel 416-777-8500Fax 416-777-8818 KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG Canada provides services to KPMG LLP. INDEPENDENT AUDITORS’REPORTTothe Shareholders of TMX Group LimitedOpinionWe have audited the consolidatedfinancial statements of TMX Group Limited (the Entity), which comprise:•the consolidatedbalance sheets as at December 31, 2020 and 2019;•the consolidatedincome statements for the years then ended;•the consolidated statements of comprehensive income for the years then ended;•the consolidatedstatements of changes in equity for the years then ended;•the consolidatedstatements of cash flows for the years then ended; and•and notes to the consolidatedfinancial statements, including a summary of significant accounting policies(Hereinafter referred to as the “financial statements”).In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidatedfinancial position of the Entity as at December 31, 2020 and 2019, and its consolidatedfinancial performance and its consolidatedcash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).Basis for OpinionWe conducted our audit in accordance with Canadian generally accepted auditing standards. Ourresponsibilitiesunderthose standards are further described in the 2020 Annual Report
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TMX Group Limited
Independent Auditors’ Report “Auditors’Responsibilities for the Audit of the Financial Statements” section of our auditors’report. We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Key Audit MattersKey audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements for the year ended December 31, 2020.These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and wedo not provide a separate opinion on these matters.We have determined the matters described below to be the key audit matters to be communicated in our auditors’ report.Evaluation of the impairment analysis for goodwill and indefinite life intangible assetsDescription of the matter We draw attention to Note 2(c) and Note 17(c) to the financial statements. The Entity has recorded goodwill and indefinite life intangible assets of $1,653.7million and $2,323.1million respectively as of December 31, 2020. The Entity performs impairment testing for goodwill and indefinite life intangible assets on an annual basis or more frequently when there is an indication of impairment. An impairment is recognized if the carrying amount of an asset, or its cash generating unit (CGU), exceeds its estimated recoverable amount. The recoverable amount of an asset is the greater of its value-in-use and its fair value less costs of disposal. In determining the estimated recoverableamounts using a discounted cash flow model, the Entity’s assumptions include future cash flows, long-term growth rates and pre-tax discount rates.Why the matter is a key audit matterWe identified the evaluation of the impairment analysis for goodwill and indefinite life intangible assets as a key audit matter. This matter represented an area of significant risk of material misstatement requiring specialized skills and knowledge to evaluate the Entity’s estimated recoverable amounts for goodwill and indefinite life intangible assets. Significant auditor judgment was required in evaluating the results of our audit procedures due to the high degree of sensitivity of the estimated recoverable amounts to changes inassumptions. 2020 Annual Report
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TMX Group Limited
Independent Auditors’ Report How the matter was addressed in the audit The primary procedures we performed to address this key audit matter included the following: We evaluated the appropriateness of future cash flowsby:Comparing the Entity’s prior year expected future cash flows to the actual results to assess the Entity’s budgeting processAssessing future cash flows by comparing them to historical performance and against key new initiatives in the Board-approved plan.We assessedthe long-term growth rates by comparing them to available market information and historical performance.We involved valuation professionals with specialized skills and knowledge, who assisted inevaluating theappropriateness of thepre-tax discount rates by:Comparing the Entity’s Weighted Average Cost of Capital (WACC) against publicly available market dataAssessing the CGU-specific risk adjustments applied by the Entity to the WACC by considering the historic, current and future financial performance of each CGU.Other InformationManagement is responsible for the other information. Other information comprises:•the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions; and•the information, other than the financial statements and the auditors’report thereon, included in a document likely to be entitled “Annual Report”.Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, considerwhether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit and remain alert for indications that the other information appears to be materially misstated. 2020 Annual Report
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TMX Group Limited
Independent Auditors’ Report We obtained the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities Commissions as atthe date of this auditors’report. If, based on the work we have performed on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact in the auditors’ report.We have nothing to report in this regard.The information, other than the financial statements and the auditors’report thereon, included in a document likely to be entitled “Annual Report” is expected to be made available to us after the date of this auditors’report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance.Responsibilities of Management and Those Charged with Governance for the Financial StatementsManagement is responsible for the preparation and fair presentation of thefinancial statementsin accordance with IFRS,and for such internal control as management determines is necessary to enable the preparation of financial statementsthat arefree from material misstatement, whether due to fraud or error.In preparing the financial statements, management is responsible for assessing the Entity’sability to continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate theEntityor to cease operations, or hasno realistic alternative but to do so.Those charged with governance are responsible for overseeing the Entity’s financial reporting process.Auditors’Responsibilities for the Audit of the Financial StatementsOur objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standardswill always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of thefinancial statements. 2020 Annual Report
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Independent Auditors’ Report As part of anaudit in accordance with Canadian generally accepted auditing standards,we exercise professional judgment and maintain professional skepticism throughout theaudit. We also:•Identify and assess the risks of material misstatement of the financial statements,whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.•Obtain an understanding of internal control relevant to theaudit 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 Entity'sinternal control. •Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.•Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt onthe Entity'sability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’report. However, future events or conditions may cause the Entityto cease to continue as a going concern.•Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.•Communicate with those charged with governanceregarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during ouraudit.•Provide those charged with governancewith a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.•Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group Entityto express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. 2020 Annual Report
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TMX Group Limited
Independent Auditors’ Report•Determine, from the matters communicated with those charged with governance,those matters that were of most significance in the audit of the financial statementsof the current period and are therefore the key audit matters. We describe thesematters in our auditors’report unless law or regulation precludes public disclosureabout the matter or when, in extremely rare circumstances, we determine that amatter should not be communicated in our auditors’report because the adverseconsequences of doing so would reasonably be expected to outweigh the publicinterest benefits of such communication.Chartered Professional Accountants, Licensed Public AccountantsThe engagement partner on the audit resulting in this auditors’report is Abhimanyu Verma. Toronto,CanadaFebruary 8, 2021 TMX GROUP LIMITED
Consolidated Balance Sheets
(In millions of Canadian dollars)
Assets
Current assets:
Cash and cash equivalents
Restricted cash and cash equivalents
Marketable securities
Trade and other receivables
Balances of Participants and Clearing Members
Other current assets
Non-current assets:
Goodwill and intangible assets
Right-of-use assets
Deferred income tax assets
Other non-current assets
Total Assets
Liabilities and Equity
Current liabilities:
Trade and other payables
Participants’ tax withholdings
Balances of Participants and Clearing Members
Debt
Credit and liquidity facilities drawn
Other current liabilities
Non-current liabilities:
Debt
Lease liabilities
Deferred income tax liabilities
Other non-current liabilities
Total Liabilities
Equity:
Share capital
Contributed surplus
Retained earnings
Accumulated other comprehensive income
Total Equity
Commitments and contingent liabilities
Total Liabilities and Equity
Note
December 31, 2020
December 31, 2019
15 $
15
15
16
10
23
17
22
9
23
$
19 $
15
10
12
12
23
12
22
9
23
26
24
222.1 $
153.3
55.8
108.0
30,270.4
29.9
30,839.5
5,047.7
82.1
22.5
106.8
36,098.6 $
132.4 $
153.3
30,270.4
160.0
4.3
60.7
30,781.1
747.5
86.2
805.1
67.2
32,487.1
2,943.6
11.1
636.2
20.6
3,611.5
149.0
151.5
80.4
105.3
26,588.9
30.1
27,105.2
5,041.2
93.0
23.6
96.7
32,359.7
102.7
151.5
26,588.9
239.6
8.2
62.1
27,153.0
747.1
95.4
801.0
64.1
28,860.6
2,965.1
12.1
512.9
9.0
3,499.1
21 & 22
$
36,098.6 $
32,359.7
See accompanying notes which form an integral part of these consolidated financial statements.
Approved on behalf of the Board of Directors on February 8, 2021:
/s/ Charles Winograd Chair
/s/ William Linton Director
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103
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9
TMX GROUP LIMITED
Consolidated Income Statements
(In millions of Canadian dollars, except per share amounts)
Consolidated Financial Statements
For the year ended December 31
Revenue
REPO and collateral interest:
Interest income
Interest expense
Net REPO and collateral interest
Total revenue
Compensation and benefits
Information and trading systems
Selling, general and administration
Depreciation and amortization
Strategic re-alignment expenses
Total operating expenses
Income from operations
Share of income from equity accounted investees
Impairment charges
Other income
Finance income (costs):
Finance income
Finance costs
Net finance costs
Income before income tax expense
Income tax expense
Net income
Earnings per share:
Basic
Diluted
Note
2020
5 $
865.1 $
160.6
(160.6)
—
865.1
226.6
57.6
84.7
80.3
—
449.2
415.9
5.7
—
—
2.1
(34.9)
(32.8)
388.8
109.1
279.7 $
4.96 $
4.91 $
17 & 22
4
18
17
7
7
9
$
8 $
8 $
2019
806.9
353.2
(353.2)
—
806.9
207.9
51.9
81.4
79.6
3.7
424.5
382.4
3.8
(18.0)
2.3
4.1
(39.7)
(35.6)
334.9
87.3
247.6
4.42
4.38
See accompanying notes which form an integral part of these consolidated financial statements.
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10
TMX GROUP LIMITED
Consolidated Statements of Comprehensive Income
(In millions of Canadian dollars)
Consolidated Financial Statements
For the year ended December 31
Net income
$
279.7 $
Note
2020
Other comprehensive income (loss):
Items that will not be reclassified to the
consolidated income statements:
Actuarial loss on defined benefit pension and other post-retirement
benefit plans (net of tax benefit of $0.9, 2019 - tax benefit of $0.9)
25
Total items that will not be reclassified to the
consolidated income statements
Items that may be reclassified subsequently to the consolidated income
statements:
Unrealized gain (loss) on translating financial statements of foreign
operations
Total items that may be reclassified subsequently to the consolidated
income statements
Total comprehensive income
$
(2.8)
(2.8)
11.6
11.6
288.5 $
See accompanying notes which form an integral part of these consolidated financial statements.
2019
247.6
(2.4)
(2.4)
(12.5)
(12.5)
232.7
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11
Consolidated Financial Statements
TMX GROUP LIMITED
Consolidated Statements of Changes in Equity
(In millions of Canadian dollars)
Note
Share
capital
Contributed
surplus
For the year ended December 31, 2020
Accumulated
other
comprehensive
income
Retained
earnings
Total
equity
Balance at January 1, 2020
$
2,965.1 $
12.1 $
9.0 $
512.9 $ 3,499.1
Net income
—
—
—
279.7
279.7
Other comprehensive income (loss):
Foreign currency translation differences
Actuarial losses on defined benefit pension
and other post-retirement benefit plans, net
of taxes
Total comprehensive income
Dividends to equity holders
Proceeds from exercised share options
Cost of exercised share options
Cost of share option plan
Shares repurchased under normal course
issuer bid
—
—
11.6
—
11.6
25
28
24
—
—
—
31.7
3.6
—
—
—
—
—
(3.6)
2.6
26
(56.8)
—
—
(2.8)
(2.8)
11.6
276.9
288.5
—
—
—
—
—
(153.6)
(153.6)
—
—
—
31.7
—
2.6
—
(56.8)
Balance at December 31, 2020
$
2,943.6 $
11.1 $
20.6 $
636.2 $ 3,611.5
See accompanying notes which form an integral part of these consolidated financial statements.
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106
TMX Group Limited
12
Consolidated Financial Statements
TMX GROUP LIMITED
Consolidated Statements of Changes in Equity
(In millions of Canadian dollars)
Note
Share
capital
Contributed
surplus
For the year ended December 31, 2019
Accumulated
other
comprehensive
income
Retained
earnings
Total
equity
Balance at January 1, 2019
$ 2,938.0 $
12.3 $
21.5 $
409.0 $ 3,380.8
Net income
—
—
—
247.6
247.6
Other comprehensive income (loss):
Foreign currency translation differences
—
—
(12.5)
—
(12.5)
Actuarial losses on defined benefit pension
and other post-retirement benefit plans, net
of taxes
25
Total comprehensive (loss) income
Dividends to equity holders
28
Proceeds from exercised share options
Cost of exercised share options
Cost of share option plan
24
—
—
—
24.4
2.7
—
—
—
—
—
(2.7)
2.5
—
(2.4)
(2.4)
(12.5)
245.2
232.7
—
—
—
—
(141.3)
(141.3)
—
—
—
24.4
—
2.5
Balance at December 31, 2019
$ 2,965.1 $
12.1 $
9.0 $
512.9 $ 3,499.1
See accompanying notes which form an integral part of these consolidated financial statements.
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13
TMX GROUP LIMITED
Consolidated Statements of Cash Flows
(In millions of Canadian dollars)
Cash flows from (used in) operating activities:
Income before income taxes
Adjustments to determine net cash flows:
Depreciation and amortization
Impairment charges
Net finance costs
Share of income from equity accounted investees
Cost of share option plan
Unrealized foreign exchange losses
Other income
Changes in:
Trade and other receivables, and prepaid expenses
Trade and other payables
Provisions
Deferred revenue
Other assets and liabilities
Income taxes paid
Cash flows from (used in) financing activities:
Interest paid
Net settlement on derivative instruments
Repayment of lease liabilities
Proceeds from exercised options
Shares repurchased under normal course issuer bid
Dividends paid to equity holders
Net movement of Commercial Paper
Credit and liquidity facilities drawn, net
Cash flows from (used in) investing activities:
Interest received
Dividends received
Additions to premises and equipment and intangible assets
Acquisition of subsidiary, net of cash
Proceeds from sales
Marketable securities, net
Increase in cash and cash equivalents
Cash and cash equivalents, beginning of the period
Unrealized foreign exchange gain (loss) on cash and cash equivalents held in
foreign currencies
Cash and cash equivalents, end of the period
See accompanying notes which form an integral part of these consolidated financial statements.
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TMX Group Limited
Consolidated Financial Statements
For the year ended December 31
Note
2020
2019
$
388.8 $
334.9
17 & 22
17
18
24
7
22
26
28
12
12
3
15
15 $
80.3
—
32.8
(5.7)
2.6
0.9
—
(4.0)
17.4
(6.9)
1.4
1.8
(98.5)
410.9
(33.9)
1.3
(8.3)
31.7
(56.8)
(153.6)
(79.6)
(3.9)
(303.1)
2.3
5.4
(67.1)
—
—
24.6
(34.8)
73.0
149.0
0.1
222.1 $
79.6
18.0
35.6
(3.8)
2.5
1.5
(2.3)
(0.2)
(14.1)
(4.2)
(2.4)
9.2
(110.3)
344.0
(38.4)
0.4
(8.2)
24.4
—
(141.3)
(79.9)
8.2
(234.8)
4.1
2.8
(57.6)
(23.6)
3.8
(24.8)
(95.3)
13.9
135.3
(0.2)
149.0
14
TMX GROUP LIMITED
Notes to the Consolidated Financial Statements
(In millions of Canadian dollars, except per share amounts)
NOTE 1 – GENERAL INFORMATION
TMX Group Limited is a company domiciled in Canada and incorporated under the Business Corporations Act (Ontario). The
registered office is located at 100 Adelaide Street West, Toronto, Ontario, Canada.
The audited annual consolidated financial statements as at and for the year ended December 31, 2020 and 2019 (the
“financial statements”), comprise the accounts of TMX Group Limited and its subsidiaries (collectively referred to as the
“Company”), and the Company’s interests in equity accounted investees.
TMX Group Limited controls, directly or indirectly, a number of entities which operate exchanges, markets, and
clearinghouses primarily for capital markets in Canada and provides select services globally, including:
•
TSX Inc. (“TSX”), which operates Toronto Stock Exchange, a national stock exchange serving the senior equities market;
TSX Venture Exchange Inc. (“TSX Venture Exchange”), which operates TSX Venture Exchange, a national stock exchange
serving the public venture equity market; and Alpha Exchange Inc. ("Alpha"), which also operates an exchange for the
trading of securities;
• Montréal Exchange Inc. ("MX"), which operates the Montréal Exchange, Canada’s national derivatives exchange, and its
subsidiaries, including Canadian Derivatives Clearing Corporation (“CDCC”), the clearing house for options and futures
contracts traded at MX and certain over-the-counter (“OTC”) products and fixed income repurchase (“REPO”)
agreements. MX also holds an investment in BOX Holdings Group LLC ("BOX Holdings"), which wholly-owns BOX Options
Market LLC (“BOX”). BOX provides a market for the trading of United States ("US") equity options. The Company accounts
for its investment in BOX Holdings using the equity method (note 18);
•
•
•
•
The Canadian Depository for Securities Limited and its subsidiaries ("CDS"), including CDS Clearing and Depository
Services Inc. (“CDS Clearing”), which operates the automated facilities for the clearing and settlement of equities and
fixed income transactions and custody of securities in Canada;
Trayport Holdings Limited and its subsidiaries, and Trayport Inc. (collectively "Trayport"), a world-leading provider of
technology solutions for energy traders, brokers and exchanges based in London, UK. On May 15, 2019, Trayport Limited
completed the acquisition of Vienna-based VisoTech, a leading provider of European short-term energy trading solutions
(note 3);
Shorcan Brokers Limited ("Shorcan"), a fixed income inter-dealer broker and registered exempt market dealer; and
TSX Trust Company ("TSX Trust"), a provider of corporate trust, registrar, transfer agency and foreign exchange services.
NOTE 2 – BASIS OF PREPARATION
(A) BASIS OF ACCOUNTING
The financial statements have been prepared by management in accordance with International Financial Reporting Standards
(“IFRS”) and IFRS Interpretations Committee (“IFRIC”) interpretations, as issued by the International Accounting Standards
Board (“IASB”). The financial statements were approved by the Company’s Board of Directors on February 8, 2021.
The Company's significant accounting policies have been applied consistently to all periods presented in the financial
statements, unless otherwise indicated. Similarly, the accounting policies have been applied consistently by all the Company's
entities. The Company has applied its judgement in presenting its significant accounting policies together with related
information in the notes to the consolidated financial statements. The Company has also ordered its notes to the consolidated
financial statements to emphasize the areas that are most relevant to the Company's financial performance and financial
position, as viewed by management.
(B) BASIS OF MEASUREMENT
The financial statements have been prepared on the historical cost basis except for the following items which are measured at
fair value:
•
•
Certain financial instruments (note 14); and
Liabilities arising from share-based payment plans (note 24).
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15
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
The Company uses a fair value hierarchy to determine disclosure and to categorize the inputs used in its valuation of assets
and liabilities carried at fair value. Fair values are categorized into: Level 1 – to the extent of the Company’s use of unadjusted
quoted market prices; Level 2 – valuation using observable market information as inputs; and Level 3 – valuation using
unobservable market information.
(C) JUDGEMENTS AND ESTIMATES
The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting period. The estimates and associated
assumptions are based on historical experience and other factors that management considers to be relevant. Actual results
could differ from these estimates and assumptions.
Judgements, estimates and underlying assumptions are reviewed on an ongoing basis, and revisions to accounting estimates
are recognized in the period in which the estimates are revised and in any future periods affected.
Judgements made in applying accounting policies that have the most significant effects on the amounts recognized in these
financial statements are included in the following notes:
•
•
•
Revenue recognition - Identification of performance obligations and determination of the timing of when performance
obligations are satisfied, either at a point in time or over time, requires judgement (note 5).
Valuation of goodwill and indefinite life intangible assets - Purchased intangibles are valued as at the acquisition date
using established methodologies and amortized over their estimated useful economic lives, except in those cases where
intangibles are determined to have indefinite lives, where there is no foreseeable limit over which these intangibles
would generate net cash flows. These valuations and lives are based on management's best estimates of future
performance and periods over which value from the intangible assets will be derived (note 17).
Classification of financial assets - the Company has exercised judgment in the assessment of the business model within
which the assets are held and in the assessment of whether the contractual terms of the financial asset are solely
payments of principal and interest on the principal amounts outstanding to determine the classification of financial assets
(note 14).
Information about assumptions and estimate uncertainties that have a significant risk of resulting in a material adjustment in
these financial statements is included in the following notes:
•
•
Fair values of assets acquired and liabilities assumed – for the acquisition of VisoTech, the fair values under the
acquisition method are based on management’s best estimates using established methodologies of the fair value of the
assets and liabilities acquired and disposed (note 3);
Impairment of goodwill and indefinite life intangible assets – impairment tests are completed using the higher of fair
value less costs of disposal, where available, and value-in-use calculations, determined using management’s best
estimates of future cash flows, long-term growth rates and appropriate discount rates (note 17);
• Measurement of defined benefit obligations for pensions, other post-retirement and post-employment benefits – the
valuations of the defined benefit assets and liabilities are based on actuarial assumptions made by management with
advice from the Company’s external actuary (note 25);
•
•
•
•
Provisions and contingencies – management judgement is required to assess whether provisions and/or contingencies
should be recognized or disclosed, and at what amount. Management bases its decisions on past experience and other
factors it considers to be relevant on a case by case basis (note 21);
Leases – management uses judgment to determine whether the Company is reasonably certain to exercise extension
options (note 22)
Share-based payments – the liabilities associated with the Company’s share-based payment plans are measured at fair
value using a recognized option pricing model based on management’s assumptions. Management’s assumptions are
based on historical share price movements, dividend policy and past experience for the Company (note 24); and
Income taxes – the accounting for income taxes requires estimates to be made, such as the recoverability of deferred tax
assets and assessment of tax uncertainties. Where differences arise between estimated income tax provisions and final
income tax liabilities, an adjustment is made when the difference is identified (note 9).
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16
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(D) 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. Balances and transactions between the Company’s subsidiaries have been
eliminated on consolidation. On loss of control of a subsidiary, the Company derecognizes the assets and liabilities of the
entity. Any gain or loss is recognized in the consolidated income statement and any retained interests measured at fair value
at the date of loss of control. Changes in the Company's interest that do not result in a loss of control are accounted for as
equity transactions.
Equity accounted investees are entities in which the Company has determined it 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.
(E) FUNCTIONAL AND PRESENTATION CURRENCY
Items included in the financial statements of each of the Company’s entities are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The financial statements are presented in
Canadian dollars, which is the Company’s functional and presentation currency.
The assets and liabilities of the Company’s foreign operations for which the Canadian dollar is not the functional currency are
translated at the rate of exchange in effect at the balance sheet date. Revenue and expenses are translated at the relevant
daily exchange rates. The resulting unrealized exchange gain or loss is included in accumulated other comprehensive income
within equity.
Revenues earned, expenses incurred and assets purchased in foreign currencies are translated into the functional currency at
the prevailing exchange rate on the transaction date. Monetary assets and liabilities denominated in foreign currencies are
translated at the period end rate or at the transaction rate when settled. Resulting unrealized and realized foreign exchange
gains and losses are recognized within other revenue in the consolidated income statement for the period.
NOTE 3 – ACQUISITION OF SUBSIDIARY
(A) VisoTech
On May 15, 2019, the Company completed the acquisition of all the shares of VisoTech for €17.2 ($25.9). The acquisition has
been accounted for as a business combination with the Company consolidating 100% of the results of its operations from the
date of acquisition. VisoTech is included in the Global Solutions, Insights & Analytics operating segment (note 6).
The final purchase price allocation is as follows:
Goodwill
Intangible assets
Other assets and liabilities, net
Deferred tax liabilities on identifiable intangible assets
Fair value of net assets acquired
$
$
21.8
5.8
(0.3)
(1.4)
25.9
The total purchase price was allocated to VisoTech's tangible and identifiable intangible assets and liabilities based on their
estimated fair values as of May 15, 2019. In determining the purchase price allocation, the Company considered, among other
factors, the intended future use of acquired assets, analysis of historical financial performance and the expected future
performance of VisoTech's business. The excess of the purchase price over the net tangible and identifiable intangible assets
was recorded as goodwill and assigned to the Global Solutions, Insights & Analytics reportable segment. The goodwill
recorded reflects expected revenue synergies from combining VisoTech with the Company's existing businesses.
(B) Proposed acquisition of AST Canada
On September 25, 2020, the Company announced it has entered into an agreement to acquire AST Investor Services Inc.
(Canada) and its subsidiary AST Trust Company (Canada) for $165.0 in cash consideration, which includes $30.0 of cash in their
businesses, subject to customary closing conditions and working capital adjustments. The transaction is expected to close
within 12 months of entering into the agreement, subject to regulatory approval. Through December 31, 2020, the Company
incurred $1.7 in acquisition costs.
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TMX Group Limited
17
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
NOTE 4 – STRATEGIC RE-ALIGNMENT EXPENSES
For the year ended December 31, 2019, the Company incurred costs of $3.7, related to onerous contracts, as well as
severance as a result of certain organizational changes. No strategic re-alignment expenses were incurred in 2020.
NOTE 5 – REVENUE
Revenue is recognized when performance obligations have been satisfied. The identification of performance obligations and
the determination of the timing of when performance obligations are satisfied, either at a point in time or over time, require
judgement.
Substantially all of the Company's revenues are considered to be revenues from contracts with customers. The related
accounts receivable balances are recorded in the balance sheets as trade receivables and generally have terms of 30 days. The
majority of deferred revenue represents contract liabilities related to initial listing fees and sustaining fees.
The majority of the Company's contracts are short–term in nature and therefore the Company has elected to apply the
practical expedient to not disclose the remaining performance obligations in contracts with an expected duration of 12
months or less. Contracts that have an expected duration of 12 months or longer are recognized on an 'as–invoiced' basis and
the Company has chosen to apply the practical expedient to not disclose revenue related to the remaining performance
obligations in these contracts. These contracts also include variable consideration related to usage that are constrained and
not included in the transaction price and thus not included in the remaining performance obligation disclosure.
The Company's primary contracts from customers are disaggregated by major products and service lines below, and
categorized by operating segments as identified and disclosed in note 6.
For the year ended December 31,
Global Solutions, Insights & Analytics
Trayport
Subscribers and usage
Other
Capital Formation
Initial listing fees
Additional listing fees
Sustaining fees
Other issuer services
Derivatives Trading & Clearing
Equities and Fixed Income Trading & Clearing
Equities and fixed income trading
Equities and fixed income clearing, settlement, depository and other services (CDS)
Other
Total Revenue
$
2020
136.7 $
98.9
88.1
323.7
10.1
81.8
69.3
27.8
189.0
126.2
127.0
99.2
226.2
—
$
865.1 $
2019
119.6
94.0
86.1
299.7
11.0
72.7
68.9
28.1
180.7
133.2
98.0
95.5
193.5
(0.2)
806.9
(A) GLOBAL SOLUTIONS, INSIGHTS AND ANALYTICS
Global solutions, insights and analytics revenue includes real time data, other market data products, data delivery solutions
and technology solutions.
Real time market data revenue is recognized at the point in time the performance obligation is satisfied, based on estimated
usage as reported by customers and vendors. The Company conducts periodic audits of the information provided to
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TMX Group Limited
18
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
determine any adjustments to estimated revenue. However, the amounts owing from the audits cannot be estimated as they
are dependent on factors outside of the Company's control, and the results of each audit have limited predictive value for
future audits.
Trayport revenue includes subscriber fees, which are paid on a monthly basis for access to the platform. Subscriber revenue is
recognized over time as the performance obligation is satisfied.
Performance obligations for other global solutions, insights and analytics contracts are satisfied, and revenue is recognized,
when the services are provided.
(B) CAPITAL FORMATION
Capital formation revenue includes revenue from listings services and other issuer services. Listings services revenue includes
revenue generated from initial listings, additional listings and sustaining services.
Revenue from new issuers include the initial listing fee and the first-year sustaining fee. These fees, either billed upfront or
when the listing occurs, contain a single performance obligation. When the initial fee creates a material right, it is deferred
and recognized over 12 months. Sustaining services for new issuers are recognized on a straight-line basis over the remainder
of the year as those services are provided. Performance obligations for additional listings are satisfied at a point in time, and
revenue is recognized when the additional listing occurs, which is also when the fee is billed. Sustaining services for existing
issuers are billed during the first quarter of the year and the related performance obligation is satisfied on a straight-line basis
over the year.
Other issuer services include revenue from registrar and transfer agency services and corporate trust services which is
recognized as the services are provided. Margin income from funds held and administered on behalf of clients is also included
in other issuer services revenue. Other issuer services have separate performance obligations that are satisfied at a point in
time, which is when the services are provided to the customer.
(C) DERIVATIVES TRADING AND CLEARING
Derivatives trading and clearing revenue includes revenue from trading and clearing activities.
Trading and related revenues for derivatives markets contain one performance obligation related to trade execution, which
mostly occurs instantaneously. Revenue is recognized in the month in which the trades are executed or when the related
services are provided. Performance obligations associated with derivatives clearing are satisfied within a short period of time.
Trade execution and novation occur either instantaneously, or within a short period of time.
Rebates are allocated and recorded as a reduction in revenue in the consolidated income statement in the period to which
they relate.
As part of its REPO clearing service, CDCC earns interest income and incurs interest expense on all REPO transactions that
clear through CDCC. The interest income and interest expense are equal; however as CDCC does not have a legal right to
offset these amounts, they are recognized separately on the consolidated income statement. The interest income is earned,
and the interest expense incurred, over the term of the REPO agreements.
(D) EQUITIES AND FIXED INCOME TRADING AND CLEARING
Equities and fixed income trading and clearing revenue includes revenue from equities and fixed income trading, clearing,
settlement, and depository services.
Trading and related revenues for equities and fixed income contain one performance obligation related to trade execution,
which occurs instantaneously. Revenue is recognized in the month in which the trades are executed or when the related
services are provided.
Revenues related to equities and fixed income clearing, settlement and depository services are recognized as follows:
•
Clearing services include the reporting and confirmation of all trade types within the multilateral clearing and settlement
system referred to as CDSX. Clearing services also include the netting and novation of exchange trades through CDS’s
Continuous Net Settlement (“CNS”) service prior to settlement. The Company has identified two performance
obligations related to clearing and settlement and allocates the transaction price on the basis of relative stand–alone
selling prices. These are generally satisfied at a point in time and recognized in the month in which the services are
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TMX Group Limited
19
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
provided. Clearing services and the related settlement occur within a short period of time. Other clearing related fees
are recognized when services are performed.
Depository fees are charged for custody of securities, depository related activities and processing of entitlement and
corporate actions and are recognized when the services are performed.
Under the CDS recognition orders granted by the Ontario Securities Commission (“OSC”) and the Autorité des marchés
financiers (“AMF”), CDS is required to share any annual revenue increases on clearing and other core CDS Clearing
services, as compared to revenues for the twelve-month period ended October 31, 2012, on a 50:50 basis with
Participants. Beginning January 1, 2015 and subsequent years, CDS also shares with Participants, on a 50:50 basis, any
annual increases in revenue applicable to the New York Link/Depository Trust Company Direct Link Liquidity Premium.
These amounts are calculated and recorded on a monthly basis as a reduction of revenue, which results in the
recognition of revenue at the amount to which the Company is entitled.
On behalf of Participants, CDS Clearing incurs certain facility fees, which are reimbursed by the Participants. Since CDS
acts as the principal, offsetting revenue and expense amounts related to these facility fees are recognized upon
satisfaction of performance obligations.
The Company records an equal amount of interest income and interest expense on Participant cash collateral balances.
As the Company does not have a legal right to offset these amounts, they are recognized separately on the consolidated
income statement.
Rebates are allocated and recorded as a reduction in revenue in the consolidated income statement in the period to
which they relate.
•
•
•
•
•
NOTE 6 – SEGMENT INFORMATION
The Company has four operating segments. An operating segment is a component of the Company that engages in business
activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions
with any of the Company’s other components and for which discrete financial information is available. Operating segments
are reported in a manner consistent with the internal reporting provided to the Chief Operating Decision Maker (“CODM”).
The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the Chief Executive Officer.
(A) INFORMATION ABOUT REPORTABLE SEGMENTS
The Company has four reportable segments:
•
•
•
•
Global Solutions, Insights & Analytics: We deliver equities data, index data as well as integrated data sets to fuel high-
value proprietary and third party analytics which help clients make better trading and investment decisions. We also
provide solutions to European and global wholesale energy markets for price discovery, trade execution, post-trade
transparency and straight through processing. The Company's operations included in the Global Solutions, Insights &
Analytics segment are TMX Datalinx, TMX Insights, Trayport and VisoTech.
Capital Formation: Our exchanges are integral to the efficient operation of the capital markets. We continually support
the capital markets community by providing companies of all types and at all stages of development with access to equity
capital, while also providing market oversight to ensure market integrity. The Company's operations included in the
Capital Formation segment are: Toronto Stock Exchange, a national stock exchange serving the senior equities market;
TSX Venture Exchange, a national stock exchange serving the public venture equity market, and TSX Trust, a provider of
corporate trust, registrar, transfer agency and foreign exchange services.
Derivatives Trading & Clearing: We are accelerating new product creation and leverage our unique market position to
benefit from increasing demand for derivatives products both in Canada and globally. The Company's operations included
in the Derivatives Trading and Clearing segment are Montréal Exchange, a national derivatives exchange; and Canadian
Derivatives Clearing Corporation ("CDCC"), a clearinghouse for options and futures contracts and certain over-the-counter
products and fixed income repurchase agreements.
Equities and Fixed Income Trading & Clearing: We operate fair and transparent markets, with innovative, efficient, and
reliable platforms for equities and fixed income trading and clearing. The Company's operations included in the Equities
and Fixed Income Trading & Clearing segment are the trading operations of Toronto Stock Exchange, TSX Venture
Exchange, and TSX Alpha Exchange; CDS Clearing and Depository Services Inc. ("CDS Clearing"), an automated facility for
the clearing and settlement of equities and fixed income transactions and custody of securities in Canada and Shorcan
Brokers Limited, a fixed income inter-dealer broker.
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TMX Group Limited
20
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
The Company has certain revenue and corporate costs not allocated to the operating segments. Revenue related to foreign
exchange gains and losses and other services are presented in the other segment. Costs and expenses related to the
amortization of purchased intangibles, along with certain consolidation and elimination adjustments, are also presented in the
other segment.
Information related to each reportable segment is as follows:
For the year ended
December 31, 2020
Revenue (external)
Inter-segment revenue
Total revenue
Income from operations
Selected items:
Depreciation and amortization
Impairment charges
$
$
$
$
$
Global
Solutions
Insights &
Analytics
Capital
Formation
Derivatives
Trading &
Clearing
Equities and
Fixed Income
Trading &
Clearing
Other
323.7 $
189.0 $
126.2 $
226.2 $
— $
0.3
0.2
—
1.9
(2.4)
324.0 $
189.2 $
126.2 $
228.1 $
(2.4) $
207.8 $
100.0 $
60.0 $
119.0 $
(70.9) $
7.7 $
— $
0.1 $
— $
1.1 $
— $
0.5 $
70.9 $
— $
— $
Total
865.1
—
865.1
415.9
80.3
—
For the year ended
December 31, 2019
Revenue (external)
Inter-segment revenue
Total revenue
Income from operations
Selected items:
Depreciation and amortization
Impairment charges
$
$
$
$
$
Global
Solutions
Insights &
Analytics
Capital
Formation
Derivatives
Trading &
Clearing
Equities and
Fixed Income
Trading &
Clearing
Other
299.7 $
0.3
300.0 $
180.7 $
—
180.7 $
133.2 $
—
133.2 $
193.5 $
1.6
195.1 $
(0.2) $
(1.9)
(2.1) $
Total
806.9
—
806.9
193.0 $
96.8 $
59.3 $
85.8 $
(52.5) $
382.4
8.2 $
— $
— $
— $
0.8 $
— $
0.5 $
18.0 $
70.1 $
— $
79.6
18.0
The CODM assesses the performance of the operating segments based on income from operations, which is not a term
defined within IFRS. This measure of profit excludes share of income from equity accounted investees, impairment charges,
and other costs and expenses that relate to individual events of an infrequent nature.
Income from operations is an important indicator of the Company's ability to generate liquidity through operating cash flow
to fund future working capital needs, service outstanding debts, and fund future capital expenditures. Impairment charges
includes impairment of goodwill and intangibles originating from acquisitions and is not considered an operating item. The
intent of this performance measure is to provide additional useful information to investors and analysts; however, it should
not be considered in isolation.
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TMX Group Limited
21
(B) INFORMATION ABOUT GEOGRAPHICAL AREAS
The Company’s revenue by geography is as follows:
For the year ended
Canada
US
UK
Other
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
December 31, 2020
582.6 $
112.6
67.7
102.2
865.1 $
$
$
December 31, 2019
542.4
115.9
62.4
86.2
806.9
Revenue is allocated based on the country to which customer invoices are addressed.
No single customer generates revenues greater than ten percent of the Company's total revenues.
The Company’s non-current assets by geography is as follows:
As at
Canada
UK
US
Other
December 31, 2020
4,168.7 $
1,021.3
39.4
0.8
5,230.2 $
$
$
December 31, 2019
4,166.5
1,014.1
45.0
0.9
5,226.5
Non-current assets above are primarily comprised of goodwill and intangible assets, investments in equity accounted
investees, right-of-use assets and other assets and excludes both accrued employee benefit assets and deferred income tax
assets.
NOTE 7 – FINANCE INCOME AND FINANCE COSTS
Finance income comprises interest income on funds invested and changes in the fair value of marketable securities. Finance
costs comprise interest expense on borrowings and lease liabilities.
Net finance costs for the year is as follows:
For the year ended
Finance income
Interest income on funds invested
Finance costs
Interest expense on borrowings, including foreign exchange and
amortization of financing fees (note 12)
Interest expense on lease liabilities (note 22)
Other expenses
December 31, 2020 December 31, 2019
$
2.1 $
2.1
(31.4)
(3.3)
(0.2)
(34.9)
4.1
4.1
(35.9)
(3.5)
(0.3)
(39.7)
(35.6)
Net finance costs
$
(32.8) $
NOTE 8 – EARNINGS PER SHARE
Basic earnings per share is determined by dividing net income by the weighted average number of common shares
outstanding during the reporting period. Diluted earnings per share is determined by dividing the net income by the weighted
average number of common shares outstanding during the reporting period, adjusted for the effects of all potential dilutive
common shares arising from share options granted to employees.
Basic and diluted earnings per share for the period are as follows:
TMX GROUP LIMITED
2020 Annual Report
116
TMX Group Limited
22
For the year ended
Net income
Weighted average number of common shares outstanding – basic
Effect of dilutive share options
Weighted average number of common shares outstanding – diluted
Basic earnings per share
Diluted earnings per share
NOTE 9 – INCOME TAXES
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
December 31, 2020
December 31, 2019
$
$
$
279.7 $
247.6
56,425,302
524,988
56,950,290
4.96 $
4.91 $
56,045,211
525,458
56,570,669
4.42
4.38
(A) INCOME TAX EXPENSE RECOGNIZED IN THE CONSOLIDATED INCOME STATEMENT
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in the consolidated income
statement except to the extent that it relates to items recognized directly in equity or in other comprehensive income.
Income tax expense recognized in the consolidated income statement for the period is as follows:
For the year ended
December 31, 2020 December 31, 2019
Current income tax expense:
Income tax for the current period
Adjustments in respect of prior years
Deferred income tax expense:
Origination and reversal of temporary differences
Adjustments in respect of prior years
Changes in substantively enacted income tax rates
Total income tax expense
$
$
$
105.5 $
(0.4)
(3.0) $
(0.4)
7.4
109.1 $
97.9
0.3
(6.2)
(0.4)
(4.3)
87.3
Current income tax is the expected income tax payable or receivable on the taxable income or loss for the period using
income tax rates enacted or substantively enacted at the reporting date in the countries where the Company operates and
any adjustments to income tax payable in respect of previous years.
The Company maintains provisions for uncertain tax positions that it believes appropriately reflect the risk of the tax positions
and the probability of acceptance of the tax treatment by the relevant authorities. Uncertain income tax positions are
recognized in the financial statements using management’s best estimate of the amount expected to be paid.
Deferred income tax is recognized in respect of certain temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred income tax is measured at
the income tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that
have been enacted or substantively enacted at the reporting date.
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2020 Annual Report
117
TMX Group Limited
23
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
Income tax expense attributable to income differs from the amounts computed by applying the combined federal and
provincial income tax rate of 26.5% (2019 – 26.5%) to income before income taxes as a result of the following:
For the year ended
December 31, 2020
December 31, 2019
Income before income tax expense
Computed expected income tax expense
Non-deductible expenses
Rate differential due to various jurisdictions
Adjustments in respect of prior years
Changes in substantively enacted income tax rates
Impairment charges (note 17)
AST Canada acquisition costs (note 3)
Share of income from equity accounted investees
Other
Income tax expense
$
$
$
388.8 $
334.9
103.0 $
1.1
(4.4)
(0.8)
7.4
—
0.4
1.5
0.9
109.1 $
88.7
1.5
(4.8)
(0.1)
(4.3)
4.8
—
0.2
1.3
87.3
During the year ended December 31, 2020, there was an increase in deferred income tax liabilities and a corresponding
increase in income tax expense of $7.4 relating to the UK corporate income tax rate. Changes to the UK corporate income tax
rate from 20% to 19% (effective April 1, 2017) and then to 17% (effective April 1, 2020) were substantively enacted on
September 6, 2016. However, the rate decrease to 17% was reverted in the 2020 Finance Bill (enacted on July 22, 2020) and
as such the UK corporate income tax rate remains at 19% as of April 1, 2020 and onwards.
During the year ended December 31, 2019, the Alberta general corporate income tax rate decreased to 11% from 12%
(effective July 1, 2019). The Alberta general corporate tax rate was also previously expected to decrease to 10% effective
January 1, 2020, 9% effective January 1, 2021, and 8% effective January 1, 2022. The Company recognized a decrease in net
deferred income tax liabilities and a corresponding decrease in income tax expense of $4.3 as a result of the anticipated rate
changes, which became substantively enacted on May 28, 2019. On October 20, 2020, it was substantively enacted that the
rate decrease to 8% would be accelerated (effective on July 1, 2020). This rate change did not have a material impact on the
Company's tax expense.
(B) DEFERRED INCOME TAX ASSETS AND LIABILITIES
The Company recognizes a deferred income tax asset only to the extent that it is probable that future taxable income will be
available against which it can be utilized. Deferred income tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets (liabilities) as of December 31 are attributable to the following:
Premises and equipment
Cumulative eligible capital / intangible
assets
Tax loss carry-forwards
Employee future benefits
Share-based payments
Other
Deferred income tax assets (liabilities)
Set off of tax
Net deferred income tax
assets (liabilities)
$
$
$
2020
2.7 $
14.1
16.6
5.3
16.6
6.5
61.8 $
(39.3)
Assets
2019
4.1 $
16.8
17.5
4.8
13.5
7.6
64.3 $
(40.7)
2020
(0.8) $
(841.5)
—
(1.6)
—
(0.5)
(844.4) $
39.3
Liabilities
2019
(0.6) $
(839.7)
—
(1.1)
—
(0.3)
(841.7) $
40.7
2020
1.9 $
(827.4)
16.6
3.7
16.6
6.0
(782.6) $
—
Net
2019
3.5
(822.9)
17.5
3.7
13.5
7.3
(777.4)
—
22.5 $
23.6 $
(805.1) $
(801.0) $
(782.6) $
(777.4)
Income tax assets and liabilities are offset in the financial statements if there is a legally enforceable right to offset them and
they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different taxable entities
but the Company intends to settle them on a net basis or where the income tax assets and liabilities will be realized
simultaneously.
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TMX Group Limited
24
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
Movements in the deferred income tax balances in the year are as follows:
Premises and
equipment
Cumulative
eligible capital/
intangible assets
Tax loss carry-
forwards
Employee
future
benefits
Share-based
payments
Other
Total
Balance at January 1, 2019
Recognized in net income
$
Recognized in other comprehensive loss
Effect of movements in exchange rates
Balance at December 31, 2019
Recognized in net income
Recognized through acquisition of VisoTech
Recognized in other comprehensive loss
Effect of movements in exchange rates
5.0 $
(1.6)
—
0.1
3.5
(1.6)
—
—
(833.7) $
16.9 $
2.8 $
11.2 $
8.4 $
(789.4)
10.5
—
0.3
(822.9)
(2.3)
(1.5)
—
(0.6)
0.7
—
(0.1)
17.5
(0.8)
—
—
(0.1)
—
0.9
—
3.7
(1.0)
—
0.9
—
2.3
—
—
13.5
3.1
—
—
—
(1.0)
10.9
—
(0.1)
0.9
0.2
7.3
(777.4)
(1.4)
—
—
0.1
(4.0)
(1.5)
0.9
(0.6)
Balance at December 31, 2020
$
1.9 $
(827.3) $
16.6 $
3.6 $
16.6 $
6.0 $
(782.6)
As at December 31, 2020, $12.5 and $4.1 of the above deferred income tax assets related to tax losses and credits incurred in
Canada and the US, respectively (2019 – $10.9 and $6.6, respectively). Recoverability of these assets is dependent upon the
availability of future taxable profits within these legal entities. The Company believes that these losses will be recoverable.
Deferred income tax assets have not been recognized in respect of the following temporary differences:
As at
Tax losses
Other deductible temporary differences
December 31, 2020
37.2 $
$
$
172.4
209.6 $
December 31, 2019
36.0
178.4
214.4
At December 31, 2020 and December 31, 2019, $27.1 of the above income tax losses will expire by 2037 with the remainder
not subject to expiry. Deferred income tax assets have not been recognized in respect of these items as it is not probable that
future taxable profit will be available against which the Company can utilize the tax losses. The Company will however
continue to pursue tax planning strategies to utilize the tax losses where possible.
At December 31, 2020, deferred income tax liabilities for temporary differences of $0.7 (2019 - $0.4) relating to investments
in certain foreign subsidiaries were not recognized as the Company is able to control the timing of the reversal of the
temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future. Temporary
differences relating to the remaining domestic subsidiaries have not been recognized as the temporary difference can be
settled without tax consequences.
NOTE 10 – BALANCES OF PARTICIPANTS AND CLEARING MEMBERS
Balances of Participants and Clearing Members on the consolidated balance sheets are comprised of:
As at
December 31, 2020
December 31, 2019
Balances of Participants
Balances of Clearing Members
Clearing Members cash collateral
Balances of Participants and Clearing Members
$
$
5,218.1 $
19,050.3
6,002.0
30,270.4 $
658.6
24,333.6
1,596.7
26,588.9
There is no net impact on the consolidated net assets as an equivalent amount is recognized in both assets and liabilities.
(A) CDS CLEARING, SETTLEMENT AND PARTICIPANT BALANCES
Balances of Participants includes the cash collateral pledged and deposited with CDS Clearing and cash dividends, interest and
other cash distributions awaiting distribution (“entitlements and other funds”) on securities held under custody in the
depository. Cash collateral is held by CDS Clearing at the Bank of Canada, with commercial banks with a minimum credit rating
of A/R1-low or better, and National Securities Clearing Corporation (“NSCC”)/Depository Trust Company (“DTC”) and is
recognized as an asset and an equivalent and offsetting liability is recognized as these amounts are ultimately owed to the
Participants.
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TMX Group Limited
25
Entitlements and other funds
Participants cash collateral
Balances of Participants
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
December 31, 2020
$
$
10.1 $
5,208.0
5,218.1 $
December 31, 2019
13.9
644.7
658.6
During 2020, the increase in above participants' cash collateral is driven by the Bank of Canada requiring participants to post
substantially more collateral (to address Cover 1 liquidity risk under Principles of Financial Market Infrastructure (PFMI)).
The margin deposits of CDS Clearing are held in liquid instruments. CDS Clearing's New York Link ("NYL") service does not
apply strict limits to a Participant's end-of-day payment obligation, creating the potential for unlimited liquidity risk exposure
if a user of the service were to default on its obligation. CDS Clearing manages this risk through active monitoring of payment
obligations and a committed liquidity facility which covers the vast majority of potential Participant default scenarios. Residual
liquidity risk in excess of CDS Clearing’s liquidity facility is transferred to surviving Participant users of the NYL service and as a
result CDS Clearing’s liquidity risk exposure is limited to a maximum of its available liquidity facility.
At December 31, 2020, as a result of calculations of Participants’ exposure, the total amount of collateral required by CDS
Clearing was $8,835.2 (2019 – $5,568.6). The actual collateral pledged to CDS Clearing at December 31 is summarized below:
Cash (included within Balances of Participants on the consolidated balance sheet)
Treasury bills and fixed income securities
Total collateral pledged
$
$
5,208.0 $
5,814.8
11,022.8 $
644.7
6,021.1
6,665.8
Treasury bills and fixed income securities collateral are not included in the Company’s consolidated balance sheets.
December 31, 2020
December 31, 2019
(B) CDCC CLEARING, SETTLEMENT AND CLEARING MEMBER BALANCES
Balances of Clearing Members includes balances of clearing members of CDCC (“Clearing Members”) as follows:
•
•
Daily settlements due from, and to, Clearing Members – These balances result from marking open futures positions to
market and settling option transactions each day. These amounts are required to be collected from and paid to Clearing
Members prior to the commencement of trading the next day. There is no net impact on the consolidated net assets as
an equivalent amount is recognized in both assets and liabilities.
At December 31, 2020, the gross amount of daily settlements due from, and to, Clearing Members was $235.5 and
$235.5, respectively (2019 – $105.8 and $105.8). These balances are then netted by Clearing Member at the balance
sheet date, for cash to be paid or received on mark-to-market on futures, options premium and cash margin shortage or
excess.
Net amounts receivable/payable on open REPO agreements – OTC REPO agreements between buying and selling Clearing
Members are novated to CDCC whereby the rights and obligations of the Clearing Members under the REPO agreements
are cancelled and replaced by new agreements with CDCC. Once novation occurs, CDCC becomes the counterparty to
both the buying and selling Clearing Member. As a result, the contractual right to receive and return the principal amount
of the REPO as well as the contractual right to receive and pay interest on the REPO is thus transferred to CDCC.
These balances represent outstanding balances on open REPO agreements. At December 31, 2020, the gross amount of
open REPO contracts receivable and payable was $66,217.2 and $66,217.2 (2019 – $67,791.4 and $67,791.4). These
contracts when broken down by Clearing Member give rise to gross receivable and gross payable positions. As allowed
under CDCC rules, receivable and payable balances outstanding with the same Clearing Member are offset when they are
in the same currency and are to be settled on the same day, as CDCC has a legally enforceable right to offset and the
intention to net settle. The balances include both the original principal amount of the REPO and the accrued interest,
both of which are carried at amortized cost. As CDCC is the central counterparty, an equivalent amount is recognized in
both the Company’s assets and liabilities.
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TMX Group Limited
26
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
The following table sets out the carrying amounts of Balances of Clearing Members that are subject to offsetting, enforceable
master netting arrangements and similar arrangements:
As at
December 31, 2020
Asset/(Liability)
Financial assets
Daily settlements due from Clearing Members
Net amounts receivable on open REPO agreements
Financial liabilities
Daily settlements due to Clearing Members
Net amounts payable on open REPO agreements
Net amount
As at
Asset/(Liability)
Financial assets
Daily settlements due from Clearing Members
Net amounts receivable on open REPO agreements
Financial liabilities
Daily settlements due to Clearing Members
Net amounts payable on open REPO agreements
Net amount
Gross asset or (liability)
for counterparties in a
net asset / (net liability)
position
Liabilities / (assets) offset
against net assets/(net
liabilities) by
counterparties
Net amounts presented
in the consolidated
balance sheet
$
$
233.7 $
42,080.6
42,314.3
(235.2)
(42,953.6)
(43,188.8)
(874.5) $
(0.4) $
(23,263.6)
(23,264.0)
1.9
24,136.6
24,138.5
874.5 $
233.3
18,817.0
19,050.3
(233.3)
(18,817.0)
(19,050.3)
—
Gross asset or (liability)
for counterparties in a net
asset / (net liability)
position
Liabilities / (assets) offset
against net assets/(net
liabilities) by
counterparties
Net amounts presented
in the consolidated
balance sheet
December 31, 2019
$
$
91.3 $
43,511.5
43,602.8
(96.7)
(48,531.2)
(48,627.9)
(5,025.1) $
(9.0) $
(19,260.2)
(19,269.2)
14.4
24,279.9
24,294.3
5,025.1 $
82.3
24,251.3
24,333.6
(82.3)
(24,251.3)
(24,333.6)
—
For the year ended December 31, 2020, the largest daily settlement amount due from a Clearing Member was $1,651.0 (2019
– $168.3), and the largest daily settlement amount due to a Clearing Member was $1,240.8 (2019 – $164.2). These settlement
amounts do not reflect net amounts from open REPO agreements, which are also due from Clearing Members.
Clearing Members’ cash collateral are comprised of cash margin deposits and cash clearing fund deposits from Clearing
Members which are held by CDCC with the Bank of Canada. Cash collateral, either as margin against open positions or as part
of the clearing fund, are held by CDCC and are recognized as an asset and an equivalent and offsetting liability is recognized as
these amounts are ultimately owed to the Clearing Members. There is no net impact on the consolidated net assets as an
equivalent amount is recognized in both assets and liabilities.
The actual collateral pledged to CDCC at December 31 is summarized below:
Cash collateral held:
Clearing Members’ cash margin deposits
Clearing fund cash deposits
December 31, 2020
December 31, 2019
$
$
3,624.3 $
2,377.7
6,002.0 $
1,359.0
237.7
1,596.7
During 2020, the increase in above clearing members' cash collateral is driven by the Bank of Canada requiring clearing
members to post substantially more collateral (to address Cover 1 liquidity risk under PFMI).
Non-cash margin deposit and non-cash clearing fund deposit collateral pledged to CDCC under irrevocable agreements is held
in government securities, put letters of guarantee and equity securities with approved depositories. Clearing Members may
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27
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
also pledge escrow receipts directly with CDCC. The non-cash collateral pledged to CDCC at December 31 is summarized
below:
Non-cash collateral pledged:
Non-cash margin deposits
Non-cash clearing fund deposits
December 31, 2020
December 31, 2019
$
$
12,680.8 $
—
12,680.8 $
9,495.0
1,431.9
10,926.9
Non-cash collateral is not included in the Company’s consolidated balance sheets.
(C) TSX TRUST ASSETS UNDER ADMINISTRATION
TSX Trust administers various segregated funds, representing amounts held on behalf of clients in connection with corporate
trust and similar services. The actual assets under administration by TSX Trust at December 31 are summarized below:
Cash
Treasury bills and fixed income securities
Total assets under administration
December 31, 2020
December 31, 2019
$
$
676.8 $
804.8
1,481.6 $
150.9
587.7
738.6
Since these amounts are not controlled by TSX Trust or by the Company, assets under administration are not included in the
consolidated balance sheet.
NOTE 11 – FINANCIAL RISK MANAGEMENT
The Company is exposed to a number of financial risks as a result of its operations, which are discussed below. It seeks to
monitor and minimize adverse effects from these risks through its risk management policies and processes.
(A) GENERAL BUSINESS RISK
General business risk refers to the risks and potential losses arising from the Company’s administration and operation as a
business enterprise that are unrelated to participant default. General business risk includes any potential impairment of the
Company’s financial position (as a business concern) as a consequence of a decline in its revenues or an increase in its
expenses. Such impairment can be caused by a variety of business factors, including poor execution of business strategy,
negative cash flows, or unexpected and excessively large operating expenses.
(B) CREDIT RISK
Credit risk is the risk of loss due to the failure of a borrower, counterparty, Clearing Member, or Participant to honour their
financial obligations. It arises principally from the Company’s clearing operations of CDS Clearing and CDCC, the operations of
TSX Trust, the brokerage operations of Shorcan, cash and cash equivalents, restricted cash and cash equivalents, marketable
securities, trade receivables, and total return swaps ("TRSs").
(i) Clearing and/or brokerage operations
The Company is exposed to credit risk in the event that Participants, in the case of CDS Clearing; Clearing Members, in the
case of CDCC; and clients, in the case of TSX Trust and Shorcan, fail to fulfill their financial obligations.
CDS Clearing
CDS Clearing is exposed to the risk of loss due to the failure of a Participant in CDS Clearing’s clearing and settlement
services to honour its financial obligations. To a lesser extent, CDS Clearing is exposed to credit risk through the
performance of services in advance of payment.
Through the clearing and settlement services operated by CDS Clearing, credit risk exposures are created. During the
course of each business day, transaction settlements can result in a net payment obligation of a Participant to CDS
Clearing or the obligation of CDS Clearing to pay a Participant. The potential failure of the Participant to meet its payment
obligation to CDS Clearing results in payment risk, a specific form of credit risk. Payment risk is a form of credit risk in
securities settlement whereby a seller will deliver securities and not receive payment, or that a buyer will make payment
and not receive the purchased securities. Payment risk is mitigated by delivery payment finality in CDSX, CDS Clearing’s
multilateral clearing and settlement system, as set out in the CDS Clearing Participant Rules.
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28
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
In the settlement services offered by CDS Clearing, payment risk is transferred entirely from CDS Clearing to Participants
who accept this risk pursuant to the contractual rules for the settlement services. This transfer of payment risk occurs
primarily by means of Participants acting as extenders of credit to other Participants through lines of credit managed
within the settlement system or, alternatively, by means of risk-sharing arrangements whereby groups of Participants
cross-guarantee the payment obligations of other members of the group. Should a Participant be unable to meet its
payment obligations to CDS Clearing, these surviving Participants are required to make the payment. Payment risk is
mitigated on behalf of Participants through the enforcement of limits on the magnitude of payment obligations of each
Participant and the requirement of each Participant to collateralize their payment obligation. Both of these mitigants are
enforced in real time in the settlement system.
Through NYL and DTC Direct Link (“DDL”), credit risk exposures at CDS Clearing are created. During the course of each
business day, settlement transactions by the NSCC/DTC can result in a net payment obligation from NSCC/DTC to CDS
Clearing or the obligation of CDS Clearing to make a payment to NSCC/DTC. As a corollary result, CDS Clearing has a legal
right to receive the funds from sponsored Participants in a debit position or has an obligation to pay the funds to
sponsored Participants in a credit position.
The potential failure of a Participant to meet its payment obligation to CDS Clearing in the NYL or DDL services results in a
payment risk. To mitigate the risk of default, CDS Clearing has in place default risk mitigation mechanisms to minimize
losses to the surviving Participants as set out in the CDS Clearing Participant Rules. The process includes Participants
posting collateral with CDS Clearing and NSCC/DTC (note 10).
The risk exposure of CDS Clearing in these central counterparty services is mitigated through a daily mark-to-market of
each Participant’s obligations as well as risk-based collateral requirements calculated daily. These mitigants are intended
to cover the vast majority of market changes and are tested against actual price changes on a regular basis. This testing is
supplemented with analysis of the effects of extreme market conditions on a collateral valuation and market risk
measurements which are used to determine additional collateral requirements of Participants to a Default Fund
established in 2015. Should the collateral of a defaulter in a central counterparty service be insufficient, either because
the value of the collateral has declined or the loss to be covered by the collateral exceeded the collateral requirement,
the surviving Participants in the service are required to cover any residual losses. Cash collateral is held by CDS Clearing at
the Bank of Canada, with commercial banks with a minimum credit rating of A/R1-low or better, and NSCC/DTC and non-
cash collateral pledged by Participants under Participant Rules is held by CDS Clearing (note 10).
CDS Clearing also holds $1.0 of its cash and cash equivalents and marketable securities to contribute pre-funded
resources to its CNS default waterfall. This Default Fund of $1.0 would be accessed following the exhaustion of a
suspended Participant's CNS Participant Fund and Default Fund contribution.
CDS Clearing may receive payment from securities issuers for entitlements, for example, maturity or interest payments,
prior to the date of payment to the Participants holding those securities. In rare circumstances, due to the timing of
receipt of these payments or due to market conditions, these funds may be held with a major Canadian chartered bank.
As a result, CDS Clearing could be exposed to the credit risk associated with the potential failure of the bank.
CDCC
CDCC is exposed to risk of loss in the event that Clearing Members fail to satisfy any of the contractual obligations as
stipulated within CDCC’s rules.
CDCC is exposed to the credit risk of its Clearing Members since it acts as the central counterparty for all transactions
carried out on MX’s markets and on certain OTC markets which are serviced by CDCC. As such, in the event of a Clearing
Member default, the obligations of those defaulting counterparties would become the responsibility of CDCC.
The first line of defence in CDCC's credit risk management process is the adoption of strict membership criteria which
include both financial and regulatory requirements. In addition, CDCC performs on-going monitoring of the financial
viability of its Clearing Members against the relevant criteria as a means of ensuring the on-going compliance of its
Clearing Members. In the event that a Clearing Member fails to continue to satisfy any of its membership criteria, CDCC
has the right through its rules, to impose various sanctions on such Clearing Members.
One of CDCC’s principal risk management practices with regard to counterparty credit risk is the collection of risk-based
margin deposits in the form of cash, equities, liquid government securities and escrow receipts. Should a Clearing
Member fail to meet settlements and/or daily margin calls or otherwise not honour its obligations under open future,
option contracts and REPO agreements, margin deposits would be seized and would then be available to apply against
the potential losses incurred through the liquidation of the Clearing Member’s positions.
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TMX Group Limited
29
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
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. 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% and is meant to ensure that Clearing Member leverage in the clearing activities does not exceed the value of
the firm. CDCC also has additional margin surcharges to manage the risk exposures associated with specific business
related risks. These include: concentration charges for Clearing Members that are overly concentrated in certain
positions, wrong-way risk charges for those Clearing Members holding positions which are highly correlated with their
own credit risk profile, mismatched settlement surcharges which are meant to mitigate the risk of cherry-picking by a
potential defaulter in the settlement process.
Global regulatory requirements for central-counterparties (CCPs), like CDCC, have highlighted the need for CCPs to have a
component of their capital at risk in the default management process. CDCC holds $10.0 of its cash and cash equivalents
and marketable securities to cover the potential loss incurred due to Clearing Member defaults. This $10.0 would be
accessed in the event that a defaulting Clearing Members’ margin and clearing fund deposits are insufficient to cover the
loss incurred by CDCC. The $10.0 is allocated into two separate tranches. The first tranche of $5.0 is intended to cover the
loss resulting from the first defaulting Clearing Member. If the loss incurred is greater than $5.0, and as such the first
tranche is fully depleted, CDCC will fully replenish the first tranche using the second tranche of $5.0. This second tranche
is in place to ensure there is $5.0 available in the event of an additional Clearing Member default.
CDCC’s cash margin deposits and cash clearing fund deposits are held at the Bank of Canada thereby alleviating the credit
risk CDCC would face with deposits held at commercial banks. CDCC’s non-cash margin deposits and non-cash clearing
fund deposits are pledged to CDCC under irrevocable agreements and are held by approved depositories (note 10). This
collateral may be seized by CDCC in the event of default by a Clearing Member.
TSX Trust
TSX Trust is exposed to credit risk on foreign exchange transactions processed for clients in the event that either the
client or the financial counterparty fails to settle contracts for which foreign exchange rates have moved unfavourably.
The risk of a financial counterparty failing to settle a transaction is considered remote as TSX Trust deals only with
reputable financial institutions comprised of Canadian major chartered banks.
Shorcan
Shorcan is exposed to credit risk in the event that customers fail to settle on the contracted settlement date. This 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 has the right to withdraw its normal policy of anonymity and advise the two
counterparties to settle directly.
(ii) Cash and cash equivalents and restricted cash and cash equivalents
The Company manages its exposure to credit risk on its cash and cash equivalents and restricted cash and cash
equivalents by holding the majority of its cash and cash equivalents with major Canadian chartered banks or in
Government of Canada and provincial treasury bills and US treasury bills.
(iii) Marketable securities
The Company manages its exposure to credit risk arising from investments in marketable securities by holding high-grade
individual fixed income securities or term deposits with credit ratings of A/R1-low or better. In addition, when holding
individual fixed income securities, the Company will limit its exposure to any non-government security. The investment
policy of the Company will only allow excess cash to be invested in money market securities or fixed income securities;
however the majority of the portfolio is held within bank deposits, notes, Government of Canada and provincial treasury
bills, and US treasury bills.
(iv) Trade receivables
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 trade receivables from a single customer. In addition, customers that
fail to maintain their account in good standing risk loss of listing, trading, clearing, or data access privileges and other
services.
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TMX Group Limited
30
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(v) Total return swaps
The Company limits its exposure to counterparty credit risk on its total return swaps by contracting with major Canadian
chartered banks.
(C) INVESTMENT RISK
In the clearing operations of its business, the Company manages both securities and cash collateral and uses custody banks
for the latter. The investment management process governing the investable cash follows industry practice and is in line with
the Company’s regulatory obligations. However, as with all investment strategies, the risk of loss on participant assets remains
a possibility. The potential for these adverse outcomes is accounted for in the contractual framework embedded in the CDS
Rules, which ensure that if investment losses are realized, they are transferred to participants, thereby eliminating any
possible impacts to the Company’s financial position.
(D) MARKET RISK
Market risk is the risk of loss due to changes in market prices and rates, such as foreign exchange rates, interest rates,
commodity prices and equity prices.
(i) Foreign currency risk
The Company is exposed to foreign currency risk on revenue and expenses where it invoices or procures in a foreign
currency. It is also exposed to foreign currency risk on cash and cash equivalents, trade receivables and trade payables
denominated in foreign currencies, principally in US dollars. As at December 31, 2020, cash and cash equivalents and
trade receivables, net of current liabilities, include US$10.0, which are exposed to changes in the US-Canadian dollar
exchange rate, £0.8, which are exposed to changes in the British Pound Sterling-Canadian dollar exchange rate, and less
than €0.1, which are exposed to changes in the Euro-Canadian dollar exchange rate (2019 – US$15.8, £0.7 and €0.1). In
addition, net assets related to Trayport and other foreign operations are denominated in US dollars, Euros (“EUR”) and
British Pound Sterling ("GBP"), and the effect of foreign exchange rate movements on the Company’s share of these net
assets is included in accumulated other comprehensive income in the consolidated balance sheet.
The Company does not currently employ currency hedging strategies with respect to its operating activities, and
therefore significant moves in exchange rates, specifically a strengthening of the Canadian dollar against the US dollar
could have an adverse effect on the value of the Company's net income or net assets in Canadian dollars.
Settlements in the clearing and settlement services offered by CDS Clearing occur in both Canadian and US dollars.
Foreign exchange risk could be created if there is a default and the currency of the payment obligation is different from
the currency of the collateral supporting that payment obligation. This risk is mitigated by discounting the collateral value
of securities where these mismatches occur.
(ii) Interest rate risk
The Company is exposed to interest rate risk on its marketable securities, credit and liquidity facilities, debentures and
Commercial Paper.
At December 31, 2020, the Company held $55.8 in marketable securities, all of which were held in treasury bills (2019 –
$80.4, all of which were held in treasury bills).
The Company also has $160.0 of Commercial Paper (note 12) outstanding at December 31, 2020.
(iii) Equity price risk
The Company is exposed to equity price risk arising from its share-based payments, as the Company’s obligation under
these arrangements are partly based on the price of the Company’s shares. The Company has entered into TRSs as a
partial economic hedge to the share appreciation rights of these share-based payments.
(iv) Other market price risk
The Company is exposed to market risk factors from the activities of CDCC, CDS Clearing and Shorcan, if a Clearing
Member, Participant or client, as the case may be, fails to take or deliver either derivative products or securities on the
contracted settlement date where the contracted price is less favourable than the current market price.
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TMX Group Limited
31
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
CDCC
CDCC is exposed to market risk through its CCP function in the event of a Clearing Member default as it becomes the legal
counterparty to all of the defaulters’ novated transactions and must honor the financial obligations that arise from those
novated transactions.
The principal mitigation of the market risk exposure post default is the default management process. CDCC has developed
detailed default management processes that would enable it to neutralize the market exposures through either its
auction process or via open markets operations within prescribed time periods. Any losses from such operations would
be set-off against the margin and clearing fund (if necessary) collateral that are pre-funded by all Clearing Members for
these purposes.
CDS Clearing
CDS Clearing is exposed to market risk through its CCP function in the event of a Participant default as it becomes the
legal counterparty to all of the defaulters’ novated transactions and must honor the financial obligations that arise from
those novated transactions.
The principal mitigation of the market risk exposure post default is the default management process. CDS Clearing has
developed detailed default management processes that would enable it to neutralize the market exposures via open
market operations within prescribed time periods. Any losses from such operations would be set-off against the collateral
contributions of the defaulting participant to the Participant Fund and Default Fund for the CCP service.
Replacement cost risk exposure of CDS Clearing in these central counterparty services is mitigated through a daily mark-
to-market of each participant’s obligations as well as risk-based collateral requirements calculated daily. These mitigants
are intended to cover the vast majority of market changes and are tested against actual price changes on a regular basis.
This testing is supplemented with analysis of the effects of extreme market conditions on collateral valuation and market
risk measurements which are used to determine additional collateral requirements of Participants to a Default Fund
established in 2015. Should the collateral of a defaulter in a central counterparty service be insufficient, either because
the value of the collateral has declined or the loss to be covered by the collateral exceeded the collateral requirement,
the surviving participants in the service are required to cover any residual losses.
Settlements in the clearing and settlement services occur in both Canadian and US dollars. Foreign exchange risk is
created when the currency of the payment obligation is different from the valuation currency of the collateral supporting
that payment obligation. This risk is mitigated by discounting the collateral value of securities where these mismatches
occur.
TSX and TSX Venture Exchange
The Company is exposed to market price risk on a portion of its sustaining services revenue, which is based on quoted
market values of listed issuers as at December 31 of the previous year.
Shorcan
Shorcan's risk is limited by their status as an agent, in that they do not purchase or sell securities 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.
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TMX Group Limited
32
(v) Market risk sensitivity summary
Foreign currency
USD, EUR and GBP currency
USD, EUR and GBP currency
Interest rates
Marketable securities
Marketable securities
Commercial Paper
Commercial Paper
Debentures
Debentures
Equity price
PSUs, RSUs and DSUs
PSUs, RSUs and DSUs
TRS
TRS
(E) LIQUIDITY RISK
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
Change in underlying
factor
Impact on income
before income taxes
Impact on equity
+10% $
-10%
+1% $
-1%
+1%
-1%
+1%
-1%
+25% $
-25%
+25%
-25%
1.4 $
(1.4)
91.5
(91.5)
(0.1)
0.1
(0.1)
0.1
n/a
n/a
(15.4)
17.5
12.2
(12.2)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Liquidity risk is the risk of loss due to the inability of the Company to meet its, or of the Company's borrowers, counterparties,
Clearing Members, or Participants to meet their obligations in a timely manner or at reasonable prices. The Company
manages liquidity risk through the management of its cash and cash equivalents and marketable securities, all of which are
held in short-term instruments, and its debentures, credit and liquidity facilities and Commercial Paper (note 12) and capital
(note 13).
The contractual maturities of the Company’s financial liabilities are as follows:
$
As at
Participants’ tax withholdings*
Accrued interest payable
Other trade and other payables
Provisions
Lease liabilities
Balances of Participants and Clearing Members*
Total return swaps
Commercial Paper
Debentures
Less than 1 year
Between 1 and 5 years
153.3 $
3.8
71.8
1.1
8.1
30,270.4
2.4
160.0
—
— $
—
—
8.0
32.1
—
—
—
548.5
December 31, 2020
Greater than 5 years
—
—
—
—
54.1
—
—
—
199.0
*The above financial liabilities are covered by assets that are restricted from use in the ordinary course of business.
TMX GROUP LIMITED
2020 Annual Report
127
TMX Group Limited
33
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(F) COVID-19 RISK
The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which may adversely affect
our business, financial condition, liquidity, results of operations and long-term financial objectives. Economic, political and
market conditions can impact the level of initial public offerings, secondary financings, market capitalization of our issuers,
transfer agent and trustee services, trading volumes, energy data and network connectivity, client hosting revenue, and sales
of market data across our markets.
The Company has witnessed high levels of volatility which, when coupled with prolonged negative economic conditions, can
cause dramatic fluctuations in trading volumes, equity financings and demand for market data. This can lead to slower
collections of accounts receivable as well as increased counterparty risk which, in turn, could adversely affect our business.
Additionally, if the Company is required to suspend trading for a prolonged period of time or shorten trading hours, our
business, operating results, long term financial objectives, cash flows, or financial condition could be materially adversely
affected.
While key initiatives continue, some could be delayed or postponed indefinitely due to lack of client availability for effective
engagement and business development. Although the Company continues to plan and engage with new and prospective
clients, their level of readiness and commitment is outside of our control; therefore, revenues could be lower than
anticipated.
NOTE 12 – DEBT, CREDIT AND LIQUIDITY FACILITIES
The Company is exposed to liquidity risk through its clearing operations and capital structure (note 11). To manage this risk,
the Company has arranged various liquidity and credit facilities, Commercial Paper and debentures as a source of financing. If
the Company is unable to meet its covenants under the trust indentures, the terms of the Commercial Paper program or the
credit facilities, the Company may be required to seek potentially less favourable sources of financing.
(A) DEBT
The Company has the following debt outstanding at December 31:
Interest rate Maturity date(s)
Principal/
Authorized
Carrying
amount
Carrying
amount
2020
2019
4.461 %
2.997 %
3.779 %
Oct 3, 2023
Dec 11, 2024
June 5, 2028
250.0 $
300.0
200.0
0.24% - 0.25%
Jan 4 - Jan 29,
2021
500.0
1 month B.A./LIBOR + 107.5 bps
May 2, 2021
500.0
$
249.8 $
298.7
199.0
747.5
160.0
160.0
—
—
907.5
(160.0)
747.5 $
249.6
298.6
198.9
747.1
239.6
239.6
—
—
986.7
(239.6)
747.1
Series B Debentures
Series D Debentures
Series E Debentures
Debentures
Commercial Paper
Commercial Paper
TMX Group Limited credit facility
Credit facility
Total debt
Less: current portion of debt
Non-current debt
(i) Debentures
The Company maintains debentures, which are direct, senior, unsecured and unsubordinated obligations of the Company
and rank equally with all other senior unsecured and unsubordinated indebtedness. The debentures have received a
rating of A (high) with Stable trend from DBRS Limited ("DBRS").
The Company has the right, at its option, to redeem, in whole or in part, each of the Series B, Series D and Series E
Debentures at any time prior to their respective maturities. The redemption price is equal to the greater of the applicable
Canada Yield Price (as defined in the relevant Indenture) and 100% of the principal amount of the debentures being
redeemed, together with accrued and unpaid interest to the date fixed for redemption. If redeemed on or after the date
TMX GROUP LIMITED
2020 Annual Report
128
TMX Group Limited
34
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
that is three months prior to the maturity date for the Series B and Series E, or two months prior to the maturity date for
the Series D Debentures, the redemption price is equal to 100% of the aggregate principal amount outstanding on the
series being redeemed, together with accrued and unpaid interest to the date fixed for redemption.
The debentures are carried at amortized cost and are measured using the effective interest rate method.
For the year ended December 31, 2020, the Company recognized interest expense on its Series B, Series D and Series E
debentures of $11.3, $9.1 and $7.6, respectively (2019 – $11.3, $9.2 and $7.6, respectively).
(ii) Commercial paper
The Company has a commercial paper program to offer potential investors up to $500 (or the equivalent US$) of
Commercial Paper to be issued in various maturities of no more than one year. The Commercial Paper bears interest
rates based on the prevailing market conditions at the time of issuance.
The Commercial Paper issued are unsecured obligations of TMX Group Limited and rank equally with all other senior
unsecured obligations of the Company. The Commercial Paper has been assigned a rating of R-1 (low) with Stable trend
by DBRS.
The Commercial Paper is carried at amortized cost and measured using the effective interest rate method.
During the year ended December 31, 2020, the Company issued and repaid Commercial Paper with a cumulative amount
of $2,008.2 and $2,087.8, respectively (2019 – $1,858.6 and $1,938.5, respectively).
(iii) TMX Group Limited credit facility
The Company has entered into a credit agreement (the “TMX Group Limited credit facility”) with a syndicate of lenders to
provide 100% backstop to the commercial paper program as well as for general corporate purposes. The credit
agreement is to mitigate the Company's exposure to specific liquidity risk should it be unable to borrow under a new
Commercial Paper issuance in order to pay for Commercial Paper that is coming due because of a lack of liquidity or
demand for the Company's Commercial Paper in the market.
The amount available to be drawn under the TMX Group Limited credit facility is limited to $500 less the aggregate
amount of: (i) Commercial Paper outstanding (December 31, 2020 – $160.0); and (ii) inter-company notes payable to CDS
Clearing, CDCC and Shorcan Brokers Limited (December 31, 2020 – $45.0).
MX has an outstanding letter of guarantee for $0.5 issued against the TMX Group Limited credit facility. This letter of
guarantee has been issued as a guarantee to the trustee under the MX supplementary pension plan in respect of accrued
future employee benefits (note 25).
(B) OTHER CREDIT AND LIQUIDITY FACILITIES
The Company has the following other credit and liquidity facilities drawn and outstanding at December 31:
2020
Carrying amount
—
—
CDS Limited operating demand loan
CDS Clearing unsecured overdraft
Interest rate† Maturity date(s)
n/a
n/a
5.0
5.0
Authorized
–
–
CDS Clearing operating demand loan
–
n/a
15.0
CDS Clearing secured standby liquidity
facility
CDS Clearing overnight loan facility
CDS Clearing secured standby liquidity
facility
CDCC syndicated revolving standby
liquidity facility
CDCC daylight liquidity facilities
CDCC syndicated REPO facility
Shorcan overdraft facility
Total credit and liquidity facilities
– March 23, 2021
–
n/a
2,000.0
US$5.5
–
March 23, 2021
US$720.0
February 26, 2021
–
n/a
– February 26, 2021
n/a
–
320.0
975.0
27,012.0
50.0
$
—
—
—
—
4.3
—
—
—
4.3 $
2019
Carrying amount
—
—
—
—
—
—
8.2
—
—
—
8.2
†The interest rate charged on borrowings under the credit and liquidity facilities vary as the actual rate will be based on the
prevailing market rates at the time of draw.
TMX GROUP LIMITED
2020 Annual Report
129
TMX Group Limited
35
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(i) CDS facilities
CDS maintains unsecured operating demand loans totaling $5.0 to support short-term operating requirements. To
support processing and settlement activities of Participants, an unsecured overdraft facility of $5.0, demand loan of $15.0
and an overnight facility of US$5.5 are available. The borrowing rates for these facilities, if drawn, are the Canadian prime
or the US base rate, depending on the currency drawn.
CDS Clearing maintains a secured standby liquidity facility of US$720.0, or Canadian dollar equivalent, that can be drawn
in either United States or Canadian currency. On March 24, 2020, CDS Clearing extended the maturity date to March 23,
2021. The facility is available to support processing and settlement activities in the event of a Participant default with the
New York Link Service and The Depository Trust Company Direct Link Service. The facility will allow the Company to
increase the amount available by an additional US$600, or Canadian equivalent, with approval of the lenders. Borrowings
under the secured facility are obtained by pledging or providing collateral pledged by Participants primarily in the form of
debt instruments issued or guaranteed by federal, provincial and/or municipal governments in Canada, or US treasury
instruments and equity instruments. Depending upon the currency drawn, the borrowing rate for the secured standby
liquidity facility is the US base rate plus 150 bps or the Canadian prime rate plus 150 bps.
CDS Clearing also has a secured standby liquidity facility of $2,000, or US equivalent, that can be drawn in either Canadian
or US currency. On March 24, 2020, CDS Clearing extended the maturity date to March 23, 2021. This arrangement is
available to support settlement activities in the event of a Participant default with CDS Clearing’s Continuous Net
Settlement service. The facility will allow the Company to increase the amount available by an additional $500, or US
equivalent, with approval of the lenders. Borrowings under the secured facility are obtained by pledging or providing
collateral pledged by Participants primarily in the form of debt and equity instruments. Depending upon the currency
drawn, the borrowing rate for the secured standby liquidity facility is the Canadian prime rate plus 150 bps or the US base
rate plus 150 bps.
In addition, CDS has signed agreements that would allow the Bank of Canada to provide emergency last-resort liquidity to
CDS at the discretion of the Bank of Canada. This liquidity facility is intended to provide end of day liquidity for payment
obligations arising from CDSX, and only in the event that CDS Clearing is unable to access liquidity from its standby
liquidity facility or in the event that the liquidity under such facilities is insufficient. Use of this facility would be on a fully
collateralized basis.
(ii) CDCC facilities
CDCC maintains daylight liquidity facilities for a total of $975.0 to provide liquidity on the basis of collateral in the form of
securities that have been received by, or pledged to, CDCC. The daylight liquidity facilities must be cleared to zero at the
end of each day.
CDCC maintains a $27,012.0 REPO uncommitted facility (December 31, 2019 - $18,102.0) that is in place to provide end of
day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero. On February 28, 2020, CDCC
extended this facility to February 26, 2021. The facility would provide liquidity in exchange for securities that have been
received by, or pledged to, CDCC.
CDCC also maintains a $320.0 syndicated revolving standby liquidity facility to provide end of day liquidity in the event
that CDCC is unable to clear the daylight liquidity facilities to zero. Advances under the facility are secured by collateral in
the form of securities that have been received by, or pledged to, CDCC. The borrowing rate on this facility is prime rate
less 1.75%. On February 28, 2020, CDCC extended this facility to February 26, 2021.
As at December 31, 2020, CDCC had drawn $4.3 to facilitate a failed REPO settlement. The amount is fully collateralized
by liquid securities included in cash and cash equivalents and was fully repaid subsequent to the reporting date.
In addition, CDCC has signed an agreement that would allow the Bank of Canada to provide emergency last-resort
liquidity to CDCC at the discretion of the Bank of Canada. This liquidity facility is intended to provide end of day liquidity
only in the event that CDCC is unable to access liquidity from the revolving standby liquidity facility and the syndicated
REPO facility or in the event that the liquidity under such facilities is insufficient. Use of this facility would be on a fully
collateralized basis.
(iii) Shorcan facility
Shorcan maintains an overdraft facility with a major chartered bank to provide end of day liquidity to cover any shortfalls
due to timing of payments and receipts associated with the brokerage of trades. Use of this facility is secured by collateral
in the form of securities.
TMX GROUP LIMITED
2020 Annual Report
130
TMX Group Limited
36
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(iv) TMX Group Limited Support Agreement
In compliance with the Principles for Financial Market Infrastructures and additional Canadian regulatory and oversight
guidance, CDS Clearing and CDCC each have adopted a recovery plan, to be applied in the event that the entity is unable
to provide defined critical operations and services as a going concern. These recovery plans were filed with their
respective Canadian regulators. In connection with the recovery plans, and if certain funding conditions are met, TMX
Group Limited is to provide certain limited financial support to CDS Clearing and CDCC, if necessary, in the context of a
recovery.
(C) RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details changes in the Company's liabilities arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified
in the Company's consolidated statement of cash flows from financing activities.
Debentures
746.8 $
Commercial
Paper
319.5 $
CDCC syndicated
revolving standby
liquid facility
Balance at January 1, 2019
$
Recognition of leases under
IFRS 16 (non-cash)
Financing cash flows
Other (non-cash)
Balance at December 31, 2019
Financing cash flows
Other (non-cash)
Balance at December 31, 2020
$
$
—
—
0.3
747.1 $
—
0.4
747.5 $
—
(79.9)
—
239.6 $
(79.6)
—
160.0 $
Total return
swaps
Lease liabilities
— $
3.9 $
— $
—
8.2
—
8.2 $
(3.9)
—
4.3 $
—
(2.8)
—
1.1 $
1.3
—
2.4 $
111.4
(8.2)
0.5
103.7 $
(8.3)
(1.1)
94.3 $
Total
1,070.2
111.4
(82.7)
0.8
1,099.7
(90.5)
(0.7)
1,008.5
NOTE 13 – CAPITAL MAINTENANCE
The Company’s primary objectives in managing capital, which it defines as including its cash and cash equivalents, marketable
securities, share capital, debentures, commercial paper, and various credit facilities, include:
• Maintaining sufficient capital for operations to ensure market confidence and to meet regulatory requirements and
various facility requirements. Currently, the Company targets to retain a minimum of $165 in cash, cash equivalents and
marketable securities. This amount is subject to change;
• Maintaining a credit rating in a range consistent with the Company’s current A (high) and R1-low credit ratings from
DBRS;
Using excess cash to invest in and continue to grow the business;
Returning capital to shareholders through methods such as dividends paid to shareholders and purchasing shares for
cancellation pursuant to normal course issuer bids; and
Reducing the debt levels to be below the total leverage ratios as discussed in (a) below, which decrease over time.
•
•
•
The Company aims to achieve the above objectives while managing its capital subject to capital maintenance requirements
imposed on the Company and certain subsidiaries as follows:
TMX GROUP LIMITED
2020 Annual Report
131
TMX Group Limited
37
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
a.
In respect of the TMX Group Limited credit facility (note 12) that require the Company to maintain:
i.
ii.
an interest coverage ratio of more than 4.0:1;
a total leverage ratio of not more than:
1.
2.
3.75:1 until December 31, 2018; and
3.50:1 on January 1, 2019 and thereafter.
b.
In respect of each of TSX and Alpha Exchange Inc., to maintain the following requirements, on both a consolidated and
non-consolidated basis, as set out in the amended and restated recognition order issued by the Ontario Securities
Commission ("OSC") effective September 2020:
i.
ii.
maintain sufficient financial resources for the proper performance of its functions and to meet its
responsibilities; and
calculate on a monthly basis:
a current ratio;
a debt to cash flow ratio; and
a financial leverage ratio.
•
•
•
c.
In respect of TSX Venture Exchange Inc., as required by certain provincial securities commissions, to maintain sufficient
financial resources to perform its functions.
d.
In respect of MX, to maintain the following financial ratios as set out in the recognition order issued by the AMF:
i.
ii.
iii.
a working capital ratio of more than 1.5:1;
a cash flow to total debt outstanding ratio of more than 20%; and
a financial leverage ratio of less than 4.0.
e.
In respect of CDCC, to maintain certain amounts, as follows:
i.
ii.
iii.
iv.
maintain sufficient financial resources as required by the OSC and AMF;
$5.0 cash and cash equivalents or marketable securities as part of the Clearing Member default recovery process
plus an additional $5.0 in the event that the initial $5.0 is fully utilized during a default;
sufficient cash, cash equivalents and marketable securities to cover 12 months of operating expenses, excluding
amortization and depreciation; and
$30.0 total shareholder's equity.
f.
In respect of CDS and CDS Clearing, as required by the OSC and the AMF to maintain certain financial ratios as defined in
the OSC recognition order, as follows:
i.
ii.
a debt to cash flow ratio of less than or equal to 4:1; and
a financial leverage ratio of less than or equal to 4:1.
In addition, the OSC requires CDS and CDS Clearing to maintain working capital to cover 6 months of operating expenses
(excluding, in the case of CDS, the amount of shared services fees charged to CDS Clearing).
CDS is required to dedicate a portion of its own resources in the CNS default waterfall for the CNS function. The Company
maintains $1.0 in cash and cash equivalents or marketable securities to cover potential losses incurred as a result of a
Participant default.
g.
In respect of Shorcan:
i.
ii.
iii.
by IIROC which requires Shorcan to maintain a minimum level of shareholders’ equity of $0.5;
by the National Futures Association which requires Shorcan to maintain a minimum level of net capital; and
by applicable Canadian securities commissions, which require Shorcan to maintain a minimum level of excess
working capital.
h. In respect of TSX Trust:
i.
as required by the Office of the Superintendent of Financial Institutions, to maintain the following minimum
capital ratios:
1.
2.
3.
common equity tier 1 capital ratio of 7%;
tier 1 capital ratio of 8.5%; and
total capital ratio of 10.5%.
ii.
as required by IIROC, to maintain in excess of $100.0 of paid up capital and surplus on the last audited balance
sheet for the acceptable institution designation.
TMX GROUP LIMITED
2020 Annual Report
132
TMX Group Limited
38
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
As at December 31, 2020 and 2019, the Company complied with each of the externally imposed capital requirements in effect
at the applicable period-end.
NOTE 14 – FINANCIAL INSTRUMENTS
Financial assets are recognized on the trade date at which the Company becomes a party to the contractual provisions of the
instrument. Financial assets are generally derecognized when the contractual rights to the cash flows from the assets expire,
or when the Company transfers the rights to receive the contractual cash flows on the financial assets to another party
without retaining substantially all the risks and rewards of ownership of the financial assets.
Financial liabilities are initially recognized on the trade date at which the Company becomes a party to the contractual
provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged,
cancelled or expired. Financial liabilities are recognized initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition these financial liabilities are measured at amortized cost using the effective interest method.
Financial assets and liabilities are offset and the net amount presented in the consolidated balance sheet only when the
Company has a current legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and
settle the liability simultaneously.
Derivatives are recognized initially at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and
changes therein are accounted for as described below.
The Company holds total return swaps which, while providing a partial economic hedge against its share price exposure on its
cash-settled share-based compensation plans (note 24), are not designated as hedges for accounting purposes. As such, these
derivatives are recognized at fair value both initially and subsequently, with changes in the fair value recognized in the
consolidated income statement.
(A) CLASSIFICATION AND MEASUREMENT
Financial assets and liabilities are classified as fair value through profit and loss ("FVTPL"), amortized cost, or fair value
through other comprehensive income ("FVTOCI"). The Company has exercised judgement in its assessment of the business
model within which the assets are held and in its assessment of whether the contractual terms of the financial assets are
solely payments of principal and interest on the principal amounts outstanding to determine the classification of financial
assets.
The Company classifies its non-derivative financial assets in the following categories, depending on the purpose for which
they were acquired:
•
•
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses
recognized in profit or loss. The net gain or loss recognized in profit or loss includes any dividend or interest earned on
the financial asset and is presented as finance income or cost in the consolidated income statement.
Financial assets carried at amortized cost. Amortized cost is the amount at which the financial asset is measured at initial
recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any
difference between that initial amount and the maturity amount, adjusted for any loss allowance. On the other hand, the
gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance.
The classification of the Company’s financial instruments, along with their carrying amounts and fair values are as follows:
TMX GROUP LIMITED
2020 Annual Report
133
TMX Group Limited
39
Assets at fair value through profit or loss
Marketable securities
Assets at amortized cost
Cash and cash equivalents
Restricted cash and cash equivalents
Trade and other receivables
Promissory note
Clearing Members cash collateral
Balances of Clearing Members
Balances of Participants
Liabilities at fair value through profit or loss
Total return swaps
Liabilities at amortized cost
Other trade and other payables
Accrued interest payable
Participants’ tax withholdings
Clearing Members cash collateral
Balances of Clearing Members
Balances of Participants
Credit and liquidity facilities drawn
Commercial Paper
Debentures
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
December 31, 2020
December 31, 2019
Carrying
amount
Fair
value
Carrying
amount
$
55.8 $
55.8
55.8 $
55.8
80.4 $
80.4
222.1
153.3
108.0
4.7
6,002.0
19,050.3
5,218.1
30,758.5
222.1
153.3
108.0
4.7
6,002.0
19,050.3
5,218.1
30,758.5
149.0
151.5
105.3
5.0
1,596.7
24,333.6
658.6
26,999.7
Fair
value
80.4
80.4
149.0
151.5
105.3
5.0
1,596.7
24,333.6
658.6
26,999.7
(2.4)
(2.4)
(2.4)
(2.4)
(1.1)
(1.1)
(1.1)
(1.1)
(71.8)
(3.8)
(153.3)
(6,002.0)
(19,050.3)
(5,218.1)
(4.3)
(160.0)
(747.5)
(31,411.1) $
(71.8)
(3.8)
(153.3)
(6,002.0)
(19,050.3)
(5,218.1)
(4.3)
(160.0)
(830.7)
(31,494.3) $
(61.0)
(3.8)
(151.5)
(1,596.7)
(24,333.6)
(658.6)
(8.2)
(239.6)
(747.1)
(27,800.1) $
(61.0)
(3.8)
(151.5)
(1,596.7)
(24,333.6)
(658.6)
(8.2)
(239.6)
(784.9)
(27,837.9)
$
The carrying amount of the Company’s financial instruments approximate their fair values at each reporting date, with the
exception of the debentures. The fair values of the debentures were obtained using Level 2 observable market prices as
inputs.
(B) FAIR VALUE MEASUREMENT
The categories within the fair value hierarchy of the Company’s financial instruments carried at fair value are as follows:
As at
Asset/(Liability)
Marketable securities
Total return swaps
As at
Asset/(Liability)
Marketable securities
Total return swaps
$
$
Level 1
55.8 $
—
—
Level 1
80.4 $
—
Level 2
Level 3
December 31, 2020
Total
— $
(2.4)
—
— $
—
—
55.8
(2.4)
—
December 31, 2019
Level 2
— $
(1.1)
Level 3
— $
—
Total
80.4
(1.1)
There were no transfers during the periods between any of the levels.
TMX GROUP LIMITED
2020 Annual Report
134
TMX Group Limited
40
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
NOTE 15 – CASH AND CASH EQUIVALENTS, RESTRICTED CASH AND CASH EQUIVALENTS AND MARKETABLE SECURITIES
(A) CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AND CASH EQUIVALENTS
Cash and cash equivalents, and restricted cash and cash equivalents are comprised of:
As at
Cash
Term and other deposits
Treasury bills
Overnight money market
Regulatory surplus
Cash and cash equivalents
Restricted cash and cash equivalents – CDS Clearing
Restricted cash and cash equivalents
December 31, 2020
December 31, 2019
$
$
$
117.7 $
28.6
72.7
—
3.1
222.1 $
153.3
153.3 $
35.8
51.4
56.3
1.0
4.5
149.0
151.5
151.5
Cash and cash equivalents consist of cash and highly liquid investments having an original maturity of three months or less
and also include restricted cash. MX operates a separate regulatory division, responsible for the approval of participants and
market regulation, which operates on a cost recovery basis. The surplus of this regulatory division has an equivalent and off-
setting amount included in trade and other payables.
Restricted cash and cash equivalents contains tax withheld by CDS Clearing on entitlement payments made by CDS Clearing on
behalf of CDS Clearing Participants. The restricted cash and cash equivalents related to this withheld tax is ultimately under
the control of CDS Clearing; however, the amount is payable to various taxation authorities within a relatively short period of
time and so is restricted from use in normal operations. An equivalent and off-setting amount is included in the consolidated
balance sheet as a current liability under the caption Participants’ tax withholdings.
(B) MARKETABLE SECURITIES
Marketable securities are comprised of:
As at
Treasury bills
Marketable securities
December 31, 2020
$
$
55.8 $
55.8 $
December 31, 2019
80.4
80.4
The Company has designated its marketable securities as fair value through profit and loss, with changes in fair value being
recorded within finance income in the consolidated income statement in the period in which they occur. Fair values have
been determined based on quoted market prices or are based on observable market information.
NOTE 16 – TRADE AND OTHER RECEIVABLES
Trade and other receivables are comprised of:
As at
Trade receivables, gross
Less: Allowance for impairment
Trade receivables, net
Other receivables
Trade and other receivables
December 31, 2020
100.2 $
(2.7)
97.5
10.5
108.0 $
December 31, 2019
96.9
(2.8)
94.1
11.2
105.3
$
$
Loss allowances for trade and other receivables are measured at an amount equal to lifetime expected credit losses. The
expected credit losses on trade and other receivables are calculated using historical credit loss experience taking into account
current observable data at the reporting date to reflect the effects of any relevant current and forecasts of future conditions.
Trade receivables generally have terms of 30 days. Loss allowances for trade receivables are measured at an amount equal to
lifetime expected credit losses ("ECL"). Trade receivables that are more than three months past due are considered to be
impaired and the impairment is the lifetime ECL. Allowances for ECL are recorded within selling, general and administration
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costs in the consolidated income statement. Other specific trade receivables are also provided against as considered
necessary.
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
The aging of the trade receivables was as follows:
As at
Not past due
Past due 1-90 days
More than 90 days past due
Trade receivables
$
$
December 31, 2020
Allowance
— $
—
2.7
2.7 $
Gross
69.4 $
26.0
4.8
100.2 $
December 31, 2019
Allowance
—
—
2.8
2.8
Gross
64.3 $
27.5
5.1
96.9 $
The movement in the Company’s allowance for impairment is as follows:
Balance at January 1
Allowance recognized in the year, net of allowance released
Receivables written off as uncollectible
Balance at December 31
No allowance for impairment is considered necessary for other receivables.
December 31, 2020
$
$
2.8 $
1.4
(1.5)
2.7 $
December 31, 2019
2.8
1.1
(1.1)
2.8
NOTE 17 – GOODWILL AND INTANGIBLE ASSETS
(A) GOODWILL AND INDEFINITE LIFE INTANGIBLE ASSETS
Goodwill is recognized at cost on acquisition less any subsequent impairment in value. Intangible assets such as trade names,
derivative products, regulatory designations and structured products are considered to have indefinite lives as management
believes that there is no foreseeable limit to the period over which these assets are expected to generate net cash flows.
A summary of the Company’s goodwill and indefinite life intangible assets is as follows:
Goodwill
Trade names
Derivative
products
Regulatory
designations
Balance at January 1, 2019
Acquisition of VisoTech (note 3)
Impairment
Effect of movements in exchange rates
Balance at December 31, 2019
Adjustment for VisoTech
Effect of movements in exchange rates
$
1,648.6 $
26.2
(18.0)
(7.1)
1,649.7
(4.5)
8.5
283.8 $
—
—
(0.4)
283.4
—
0.4
Balance at December 31, 2020
$
1,653.7 $
283.8 $
632.0 $
—
—
—
632.0
—
—
632.0 $
1,407.3 $
—
—
—
1,407.3
—
—
1,407.3 $
Total
3,971.7
26.2
(18.0)
(7.5)
3,972.4
(4.5)
8.9
3,976.8
The Company measures goodwill arising on a business combination as the fair value of the consideration transferred less the
fair value of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. The Company
elects on a transaction by transaction basis whether to measure non-controlling interests at fair value or at their
proportionate share of the recognized amount of the identifiable net assets acquired, at the acquisition date. Transaction
costs, other than those associated with the issue of debt or equity securities as consideration, that the Company incurs in
connection with a business combination are expensed as incurred.
(B) DEFINITE LIFE INTANGIBLE ASSETS
Definite life intangible assets are recognized at cost less accumulated amortization, where applicable, and any impairment in
value. Cost includes any expenditure that is directly attributable to the acquisition of the asset. The cost of internally
developed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the
assets to a working condition for their intended use.
Costs incurred in research activities, undertaken with the prospect of gaining new technical knowledge, are recognized in the
consolidated income statement as incurred. Costs incurred in development activities are capitalized when all of the following
criteria are met:
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
•
•
•
•
•
•
It is technically feasible to complete the work such that the asset will be available for use or sale,
The Company intends to complete the asset for use or sale,
The Company will be able to use the asset once completed,
The asset will be useful and is expected to generate future economic benefits for the Company,
The Company has adequate resources available to complete the development of and to use the asset, and
The Company is able to reliably measure the costs attributable to the asset during development.
Definite life intangible assets are amortized from the date of acquisition or, for internally developed intangible assets, from
the time the asset is available for use. Amortization is recognized in the consolidated income statement on a straight-line
basis over the estimated useful life of the asset. Residual values and the useful lives of the assets are reviewed at each year
end, and revised as necessary.
Amortization is provided over the following useful lives of definite life intangible assets:
Asset
Customer relationships
Technology
Basis
Straight-line
Straight-line
A summary of the Company’s definite life intangible assets is as follows:
Rate
17 – 34 years
1 – 10 years
Technology
Customer
relationships
Open interest
Total
Cost:
Balance at January 1, 2019
Additions through general operations
Acquisition of VisoTech (note 3)
Adjustments
Effect of movements in exchange rates
Balance at December 31, 2019
Additions through general operations
Adjustment for VisoTech
Other adjustments
Effect of movements in exchange rates
Balance at December 31, 2020
Accumulated amortization:
Balance at January 1, 2019
Charge for the year
Acquisition of VisoTech (note 3)
Adjustments
Effect of movements in exchange rates
Balance at December 31, 2019
Charge for the year
Adjustments
Effect of movements in exchange rates
Balance at December 31, 2020
Net book values:
At December 31, 2019
At December 31, 2020
(C) IMPAIRMENT OF ASSETS
$
$
$
$
$
$
150.3 $
48.9
0.3
(3.2)
(0.4)
195.9
53.1
1.9
(1.1)
0.7
250.5 $
63.5 $
15.8
0.2
(3.0)
0.1
76.6
16.6
(1.3)
0.3
92.2 $
119.3 $
158.3 $
1,208.2 $
—
—
—
(3.3)
1,204.9
—
3.9
—
3.8
1,212.6 $
211.8 $
43.7
—
—
(0.1)
255.4
44.2
—
0.4
300.0 $
949.5 $
912.6 $
2.0 $
—
—
—
—
2.0
—
—
—
—
2.0 $
2.0 $
—
—
—
—
2.0
—
—
—
2.0 $
— $
— $
1,360.5
48.9
0.3
(3.2)
(3.7)
1,402.8
53.1
5.8
(1.1)
4.5
1,465.1
277.3
59.5
0.2
(3.0)
—
334.0
60.8
(1.3)
0.7
394.2
1,068.8
1,070.9
The carrying amounts of the Company’s non-financial assets, other than deferred income tax assets and employee future
benefit assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such
indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful
lives, or that are not yet available for use, are tested for impairment at least annually even if there is no indication of
impairment, and the recoverable amount is estimated each year at the same time.
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
The recoverable amount of an asset is the greater of its value-in-use and its fair value less costs of disposal. In assessing value-
in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing,
assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating
unit”, or “CGU”). For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to
the CGU, or the group of CGUs, that is expected to benefit from the synergies of the combination and reflects the lowest level
at which that goodwill is monitored for internal reporting purposes.
An impairment loss is recognized if the carrying amount of an asset, or its CGU, exceeds its estimated recoverable amount,
which is the higher of the asset’s fair value less costs of disposal and its value-in-use. Impairment losses recognized in respect
of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGUs, and then to reduce the
carrying amounts of the other assets in the CGU on a pro rata basis. Impairment losses are recognized in the consolidated
income statement.
An impairment loss in respect of goodwill cannot be reversed. In respect of other non-financial assets, impairment losses
recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that
would have been determined, net of depreciation or amortization, if no impairment loss had been recognized.
For the year ended December 31, 2019, the Company determined that the Shorcan CGU, included in Other, had a recoverable
amount that was lower than its carrying amount. As a result, the Company recognized an impairment charge of $18.0 related
to goodwill in the consolidated income statement. The Company recognized no impairment in 2020.
At December 31, the carrying values of goodwill and indefinite life intangible assets allocated to each CGU, after the
impairment charges described above, are as follows:
As at
Listings
TMX Datalinx
Trayport
Equities Trading
MX/CDCC
CDS
Other
$
$
Goodwill
13.3 $
707.7
631.9
5.1
159.4
89.5
46.8
1,653.7 $
December 31, 2020
Indefinite life
intangibles
1,227.9 $
82.9
39.7
283.3
663.7
22.0
3.6
2,323.1 $
December 31, 2019
Indefinite life
intangibles
1,273.9
81.4
39.3
238.7
663.9
22.0
3.5
2,322.7
Goodwill
13.3 $
707.7
628.0
5.1
159.4
89.5
46.7
1,649.7 $
The recoverable amounts of the above CGUs were determined based on value-in-use calculations, using management’s
discounted cash flow projections over periods of 5 to 8 years, depending on the CGU, along with a terminal value. The
terminal value is the value attributed to the CGUs’ operations beyond the projected time period. The terminal value for the
CGUs is determined using estimated long-term growth rates of 2.0% for all significant CGUs, except for MX/CDCC and
Trayport, which used 4.5%. The estimated long-term growth rate is based on the Company’s estimates of expected future
operating results, future business plans, economic conditions and a general outlook for the industry in which the CGU
operates. In calculating the recoverable amount of these CGUs, a pre-tax discount rate is used. The pre-tax discount rate
applied was 9.4% to 13.5%, which was set considering the weighted average cost of capital of the Company and certain risk
premiums, based on management’s past experience.
These assumptions are subjective judgements based on the Company’s experience, knowledge of operations and knowledge
of the economic environment in which it operates. If future cash flow projections, long-term growth rates or pre-tax discount
rates are different to those used, it is possible that the outcome of future impairment tests could result in a different outcome
with a CGU’s goodwill and/or intangible assets being impaired.
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
NOTE 18 – INVESTMENTS IN EQUITY ACCOUNTED INVESTEES
Investments in equity accounted investees are comprised of:
As at
Investment in BOX Holdings
Other
Investments in equity accounted investees
December 31, 2020
21.9 $
5.4
27.3 $
December 31, 2019
22.1
5.3
27.4
$
$
For the year ended December 31, 2020, the Company recognized $5.7 from its share of income from equity accounted
investees (2019 – $3.8). Also for the year ended December 31, 2020, the Company earned $1.4 from services rendered to
equity accounted investees (2019 – $4.9).
BOX HOLDINGS GROUP LLC
The Company holds an interest of 42.62% in BOX Holdings (2019 - 41.33%). The investment in BOX Holdings is accounted for
in its functional currency of USD using the equity method.
Summary financial information for BOX Holdings in USD is as follows:
As at
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets (100%)
Revenue
Net income and comprehensive income (100%)
Share of income and comprehensive income (2020 - 42.62%, 2019 - 41.33%)
December 31, 2020
30.5 US$
4.6
(3.2)
(9.6)
22.3 US$
For the year ended
December 31, 2020
37.9 US$
9.3
4.0 US$
December 31, 2019
24.8
4.5
(2.5)
(0.1)
26.7
For the year ended
December 31, 2019
22.8
6.5
2.7
US$
US$
US$
US$
For the year ended December 31, 2020, the Company recognized $5.6 from its share of income in the consolidated income
statements and a loss of $0.4 from translation of the foreign operation in the consolidated statements of comprehensive
income (for the year ended December 31, 2019 – income of $3.6 and loss of $1.0, respectively).
NOTE 19 – TRADE AND OTHER PAYABLES
Trade and other payables are comprised of:
As at
Trade payables and accrued expenses
Sales taxes payable
Employee and director costs payable
Accrued interest payable
Regulatory surplus
Other
Trade and other payables
December 31, 2020
51.6 $
4.6
68.0
3.8
3.1
1.3
132.4 $
December 31, 2019
44.9
3.2
45.7
3.8
4.5
0.6
102.7
$
$
The fair value of trade and other payables is approximately equal to their carrying amount given their short term until
settlement.
Short-term payables with no stated interest rate are measured at the original transaction amounts where the effect of
discounting is immaterial. Short-term employee benefit obligations, such as wages, salaries and annual vacation entitlements,
are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the
Company’s annual short-term incentive plan if a present legal or constructive obligation to pay an amount exists as a result of
past service provided by the employee, and the obligation can be estimated reliably.
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NOTE 20 – DEFERRED REVENUE
Deferred revenue is comprised of:
As at
Listings
Technology solutions
Other
Current deferred revenue
Other
Non-current deferred revenue
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
December 31, 2020
December 31, 2019
$
$
$
10.8 $
4.7
2.5
18.0 $
0.4
0.4 $
8.3
6.2
2.0
16.5
0.4
0.4
Listings deferred revenue is mainly comprised of initial and additional listings fees for TSX Venture Exchange, which are paid in
advance for the services being provided, and initial listings fees for TSX. Initial listings are deferred over a 12-month period
from the date of listing, while additional listings are recognized when the additional listing occurs.
Technology solutions deferred revenue includes annual information services subscription sales from Trayport and CDS and
fees for network and infrastructure solutions and risk management software.
NOTE 21 – PROVISIONS AND CONTINGENCIES
(A) PROVISIONS
A provision has been recognized if, as a result of a past event, the Company has a present legal or constructive obligation that
can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If
the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the
discount is recognized as a finance cost.
A summary of the Company’s provisions is as follows:
Balance at January 1, 2019
Provisions recognized during the period
Provisions used or reversed during the period
Balance at December 31, 2019
Current
Non-current
Balance at December 31, 2019
Provisions recognized during the period
Provisions used or reversed during the period
Balance at December 31, 2020
Current
Non-current
Balance at December 31, 2020
(B) CONTINGENT LIABILITIES
Decommissioning
liabilities
Commodity tax
Other
Total
$
$
$
$
$
$
$
7.2 $
1.0
—
8.2 $
— $
8.2
8.2 $
0.2
(0.4)
8.0 $
— $
8.0
8.0 $
10.0 $
—
(5.3)
4.7 $
4.7 $
—
4.7 $
(0.1)
(4.0)
0.6 $
0.6 $
—
0.6 $
1.8 $
4.6
(3.2)
3.2 $
3.2 $
—
3.2 $
13.4
(16.1)
0.5 $
0.5 $
—
0.5 $
19.0
5.6
(8.5)
16.1
7.9
8.2
16.1
13.5
(20.5)
9.1
1.1
8.0
9.1
From time to time in connection with its operations, the Company or its subsidiaries are named as a defendant in actions,
including those for damages and costs sustained by plaintiffs, or as a respondent in proceedings challenging the Company’s or
its subsidiaries’ regulatory or other actions, decisions or jurisdiction. The outcomes of such matters are subject to future
resolution that includes uncertainties of litigation or other proceedings. Based on information currently known to the
Company, management believes that any material payment or other obligation in respect of any such action or proceeding is
remote.
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46
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
NOTE 22 – COMMITMENTS AND LEASE OBLIGATIONS
(A) LEASES
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
The Company allocates the consideration in the contract to each lease and non-lease component on the basis of their relative
stand-alone prices.
As a lessee, the Company recognizes a right-of-use asset and a lease liability at the lease commencement date. The right-of-
use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and any estimated costs to dismantle and
remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives
received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to
the end of the lease term and is reduced for any impairment losses and adjusted for certain remeasurements of the lease
liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company's
incremental borrowing rate. The Company applies judgement in determining the lease term for some lease contracts in which
there is a renewal option.
Lease payments included in the measurement of the lease liability comprise the following:
•
•
Fixed payments, including in-substance fixed payments which may contain variability but are unavoidable; and
Variable payments that depend on an index or a rate, are initially measured using the index or rate as at the
commencement date. Variable payments based on usage or performance are not included in the measurement of the
lease liability.
The lease liability is measured at amortized cost using the effective interest method. The lease liability is subsequently
increased by the interest cost and decreased by lease payments made, over the term of the lease. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, a change in the estimate of the amount
expected to be payable under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase
or extension option is reasonably certain to be exercised or a termination option is reasonably certain not to be exercised.
When a lease liability is remeasured, a corresponding adjustment is also made to the carrying amount of the right-of-use
asset.
Short-term leases and leases of low-value assets
The Company has elected to not recognize right-of-use assets and lease liabilities for short-term leases that have a lease term
of 12 months or less, and leases of low-value assets. The Company continues to recognize the lease payments associated with
these leases as an expense over the term of the lease on a straight-line basis.
For the year ended December 31, 2020, the Company recognized $9.4 and $3.3 of depreciation expense on right-of-use assets
and interest expense on lease liabilities, respectively (2019 - $9.8 and $3.5). As at December 31, 2020, $8.1 of lease liabilities
were classified as current lease liabilities and recorded in "Other current liabilities"(2019 - $8.3).
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Cost:
Balance at January 1, 2019
Additions
Impairment
Balance at December 31, 2019
Lease modifications
Balance at December 31, 2020
Accumulated amortization:
Balance at January 1, 2019
Charge for the year
Balance at December 31, 2019
Charge for the year
Balance at December 31, 2020
Net book value:
At December 31, 2019
At December 31, 2020
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
Right-of use assets
$
$
$
$
$
94.9
8.1
(0.2)
102.8
(1.5)
101.3
—
9.8
9.8
9.4
19.2
93.0
82.1
The Company leases several premises. The average lease term is 6 years.
The Company is also responsible for additional taxes, maintenance and other direct charges with respect to its leases. The
additional amount was $11.7 for 2020 (2019 – $12.1).
The figures above do not include the Company’s obligations to restore certain leased premises to their original condition
(note 21).
AMENDMENT TO IFRS 16
The Company has adopted the amendment to the leasing standard IFRS 16 (COVID-19-Related Rent Concessions) issued on
March 28, 2020. The amendment introduces an optional practical expedient for lessees to account for rent concessions that
are a direct consequence of the COVID-19 pandemic as variable lease payments as opposed to lease modifications. This
amendment does not have a significant impact on the Company's financial statements.
(B) CDS FEE COMMITMENTS AND REBATES
Under the CDS recognition orders granted by the OSC and the AMF, fees for services and products offered by CDS Clearing will
be those fees in effect on November 1, 2011 (“2012 base fees”). CDS Clearing cannot adjust fees without the approval of the
OSC, AMF and the British Columbia Securities Commission (“BCSC”). In addition, CDS Clearing may only seek approval for fee
increases on clearing and other core CDS Clearing services (which services are outlined in the OSC and AMF recognition
orders) where there has been a significant change from circumstances existing as at August 1, 2012, the effective date of the
recognition orders.
Under the CDS recognition orders granted by the OSC and AMF, for the two month period starting November 1, 2012 and
subsequent fiscal years starting January 1, 2013, CDS will share any annual revenue increases on clearing and other core CDS
Clearing services on a 50:50 basis with Participants. Beginning January 1, 2015 and subsequent years, CDS also shares with
Participants, on a 50:50 basis, any net annual increases in revenue applicable to the NYL/DDL Liquidity Premium compared to
the revenues for this service earned in the twelve-month period ended December 31, 2015.
For the year ended December 31, 2020, the rebate payable amounted to $10.3 (2019 – $6.1).
In addition, the Company is mandated to rebate an additional amount to Participants in respect of exchange clearing services
for trades conducted on an exchange or Alternative Trading System (“ATS”). This rebate gradually increased over the years to
reach its maximum of $4.0 annually in October 2016.
These rebates are accrued and recorded as a reduction against revenue in the year to which they relate.
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48
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(C) OTHER COMMITMENTS
The Company has other commitments in the form of long term contracts related to technology in the amount of $33.5 of
which $25.2 is payable in one year.
NOTE 23 – OTHER ASSETS AND OTHER LIABILITIES
(A) OTHER ASSETS
Other current and non-current assets are comprised of:
As at
Prepaid expenses
Current income tax assets
Other current assets
Investments in equity accounted investees (note 18)
Accrued employee benefit assets (note 25)
Premises and equipment
Promissory note
Other
Other non-current assets
(B) OTHER LIABILITIES
Other current and non-current liabilities are comprised of:
As at
Deferred revenue (note 20)
Provisions (note 21)
Current lease liabilities (note 22)
Total return swaps (note 24)
Current income tax liabilities
Other current liabilities
Deferred revenue (note 20)
Provisions (note 21)
Long-term incentive plan and director compensation obligations (note 24)
Accrued employee benefits payable (note 25)
Other non-current liabilities
NOTE 24 – SHARE–BASED PAYMENTS
December 31, 2020
25.1 $
4.8
29.9 $
27.3 $
6.2
67.9
4.7
0.7
106.8 $
December 31, 2020
18.0 $
1.1
8.1
2.4
31.1
60.7 $
0.4 $
8.0
38.6
20.2
67.2 $
$
$
$
$
$
$
$
$
December 31, 2019
21.3
8.8
30.1
27.4
4.1
59.2
5.0
1.0
96.7
December 31, 2019
16.5
7.9
8.3
1.1
28.3
62.1
0.4
8.2
37.3
18.2
64.1
Under the long-term incentive plan (“LTIP”), certain employees and officers of the Company will receive a mix of LTIP awards
consisting of share options, time-based restricted share units ("RSUs"), and performance-based restricted share units
(referred to as "PSUs"). For the year ended December 31, 2020, the Company recognized compensation and benefits expense
under the following share-based payment arrangements:
•
•
•
Share option plan;
Restricted share unit, performance-based restricted share unit and deferred share unit plans; and
Employee share purchase plan.
(A) SHARE OPTION PLAN
The share option plan has options that vest in quarters over 4 years and have a maximum term of 10 years. Under the share
option plan, the fair value of share options granted was estimated on the date of grant using the Black-Scholes option pricing
model with the following assumptions: a share price of $117.51 dollars (2019 – $83.74 dollars) and dividend yield of 2.25%
(2019 – 2.95%); expected life of between 2 and 5 years (2019 – 2 and 5 years); an expected volatility of between 13.9% and
14.5% (2019 – 16.5% and 17.0%); risk-free interest rate of between 1.6% and 1.7% (2019 – 2.1% and 2.2%); and expected
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Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
forfeiture rates of between 9.4% and 22.0% (2019 – 9.4% and 22.0%). The assumptions are based on the Company’s historical
share price movements and historical dividend policy and the expected life is based on the Company's past experience. The
resulting weighted average fair value calculated for share options granted in 2020 was $10.37 dollars (2019 – $8.49 dollars).
Options outstanding at December 31, 2020 will expire in 2021, 2024, 2025, 2026, 2027, 2028, 2029 and 2030.
Movements in the number of share options outstanding are as follows:
For the year ended
December 31, 2020
December 31, 2019
Outstanding, beginning of the period
Granted
Forfeited
Exercised
Outstanding as at December 31
Number of share
options
1,538,160 $
240,183
Weighted average
exercise price
(in dollars)
66.18
117.51
Number of share
options
1,743,134 $
392,405
Weighted average
exercise price
(in dollars)
59.97
83.74
(31,879)
(540,590)
1,205,874 $
75.28
58.65
79.27
59.60
(153,998)
(443,381)
1,538,160 $
635,433 $
72.74
55.04
66.18
54.25
Vested and exercisable as at December 31
458,615 $
The range of exercise prices and weighted average remaining contractual life of options outstanding are as follows:
As at
Exercise price range (in dollars)
$40.00 - $49.99
$50.00 - $59.99
$60.00 - $60.73
$70.00 - $72.23
$80.00 - $83.93
$100.00 - $117.51
Number of share
options
185,389
73,027
—
413,439
300,902
233,117
1,205,874
December 31, 2020
Weighted average
remaining
contractual life
4.4
3.6
—
6.7
8.2
9.1
7.0
Number of share
options
383,356
182,827
3,806
597,280
370,891
—
1,538,160
December 31, 2019
Weighted average
remaining
contractual life
5.6
4.0
6.6
7.6
9.2
—
7.1
The Company accounts for its share option plan to eligible employees which calls for settlement by the issuance of equity
instruments 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. The amount recognized as an expense is adjusted to reflect the actual number of options expected to vest. For
the year ended December 31, 2020, the Company recognized compensation and benefits expense of $2.6 in relation to its
share option plan (2019 – $2.5).
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. At December 31,
2020, 3,628,448 common shares of the Company remain reserved for issuance upon exercise of share options granted under
the plan, representing approximately 6% of the outstanding common shares of the Company.
(B) RESTRICTED SHARE UNIT (“RSU”), PERFORMANCE-BASED RESTRICTED SHARE UNIT ("PSU") AND DEFERRED SHARE UNIT
(“DSU”) PLANS
RSUs and PSUs vest over a maximum of 35 months and are payable provided the employee is still employed by the Company
at the end of the second calendar year following the calendar year in which the RSUs and PSUs were granted. In the case of
the PSUs, the amount of the award payable at the end of this vesting period will be determined by a factor of total
shareholder return versus the total gross return of the S&P/TSX Composite Index 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 the PSUs vest.
The Company has a plan that, among other things, gives executives who have not met their equity ownership requirements
the opportunity to convert all or part of their short-term incentive award into deferred share units ("DSU"s). In addition,
members of the Board of Directors who do not waive their compensation or direct that it be paid to their employer are
granted DSUs annually and are also given the opportunity to convert some of their annual remuneration into DSUs. These
DSUs vest immediately. The amount of the award payable is based on the number of units outstanding multiplied by the 30-
day volume weighted average price of the Company’s common shares at the date of the payout. The DSUs will only be paid
TMX GROUP LIMITED
2020 Annual Report
144
TMX Group Limited
50
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
out when the DSU holder retires or otherwise ceases to hold any position with the Company or such of its subsidiaries as are
designated from time to time.
The Company records its obligation for the RSUs and PSUs, if any, over the service period in which the award is earned. The
liability is measured at fair value on the date of grant and at each subsequent reporting date. As at December 31, 2020, the
total accrual for the Company’s RSUs, PSUs and DSUs was $57.5, which includes $18.9 in trade and other payables and $38.6
in other non-current liabilities (2019 – $50.8, $13.5 and $37.3, respectively).
The maximum amount to be paid is not known until the awards become payable and will be based on total shareholder return
from the date of grant to the time of payout. The accrual is based on the 30-day volume weighted average price of the
Company’s common shares at the end of the reporting period.
Compensation cost attributable to these employee awards which call for settlement in cash is measured at fair value at each
reporting date. Changes in fair value between the grant date and the measurement date are recognized in the consolidated
income statement over the vesting period, with a corresponding change in either current or non-current liabilities, depending
on the period in which the award is expected to be paid. For the year ended December 31, 2020, the Company recognized
compensation and benefits expense and selling, general and administration expense of $14.0 and $6.7, respectively, in
relation to its RSUs, PSUs and DSUs (2019 – $15.9 and $11.9, respectively).
The Company has entered into a series of TRSs which synthetically replicate the economics of the Company purchasing its
shares as a partial economic hedge to the share appreciation rights of RSUs and DSUs.
The Company has classified its series of TRSs as fair value through profit and loss and marks to market the fair value of the
TRSs as an adjustment to income. The Company also simultaneously marks to market the liability to holders of the units as an
adjustment to income. Fair value is based on the share price of the Company’s common shares at the end of the reporting
period. The fair value of the TRSs and the obligation to unit holders are reflected on the consolidated balance sheet. The
contracts are settled in cash upon maturity.
For the year ended December 31, 2020, unrealized losses of $1.4 and realized gains of $8.7 related to TRSs, respectively have
been reflected in the consolidated income statement (2019 – unrealized and realized gains of $2.8 and $10.8, respectively).
(C) EMPLOYEE SHARE PURCHASE PLAN
The Company has an employee share purchase plan for eligible employees of the Company. Under the employee share
purchase plan, contributions by the Company and by eligible employees will be used by the plan administrator, to make
purchases of common shares of the Company on the open market. Effective May 31, 2020, each eligible employee may
contribute up to 15% (previously 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 $3,500 dollars per
year (previously $2,500 dollars per year).
The Company accounts for its contributions as compensation and benefits expense when the amounts are contributed to the
plan. For the year ended December 31, 2020, compensation and benefits expense related to this plan was $2.7 (2019 – $2.1).
NOTE 25 – EMPLOYEE FUTURE BENEFITS
The Company has registered pension plans with both a defined contribution tier and a defined benefit tier covering
substantially all employees, as well as supplementary income plans ("SIP") for senior management. The costs of these
programs are being funded currently, except for the MX SIP, where a portion is guaranteed by a letter of guarantee. The
Company also provides other post-retirement and post-employment benefits, such as supplementary medical and dental
coverage, which are funded on a cash basis by the Company, and contributions from plan members in some circumstances.
(A) DEFINED CONTRIBUTION PLANS
For defined contribution plans, the expense is charged to compensation and benefits expense in the consolidated income
statement as it is incurred. The total expense recognized in respect of the Company’s defined contribution plans for the year
ended December 31, 2020, was $7.5, which represents the employer contributions for the period (2019 – $7.5).
(B) DEFINED BENEFIT PLANS
The Company measures the present value of its defined benefit obligations and the fair value of plan assets for accounting
purposes as at the balance sheet date of each fiscal year. The most recent actuarial valuation of the registered pension plan
TMX GROUP LIMITED
2020 Annual Report
145
TMX Group Limited
51
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
for funding purposes was as at December 31, 2019, and the next required valuation is as at December 31, 2022. For the TMX
supplementary income plan, the most recent actuarial valuation for funding purposes was as at December 31, 2019, and the
next scheduled valuation is as at December 31, 2020. For the CDS and MX SIP plans, the funding valuations are performed
annually with the most recent actuarial funding valuations completed as of January 1, 2020 and the next scheduled valuations
are at January 1, 2021. Lastly, for the non-pension post-retirement plan, the valuation date was May 1, 2018 and the next
scheduled valuation is at May 1, 2021.
The accrued benefit assets and accrued benefit obligations related to the Company’s defined benefit pension and non-
pension post-retirement plans are included in the Company’s consolidated balance sheet at December 31 as follows:
Accrued employee benefit assets
Accrued employee benefits payable
Pension and SIP
plans
2019
2020
6.2 $
(0.5)
5.7 $
4.1 $
(0.5)
3.6 $
$
$
2020
Other post-retirement
benefit plans
2019
—
(16.4)
(16.4)
(18.5)
(18.5) $
— $
Accrued employee benefits payable on the consolidated balance sheet also includes the obligation under the post-
employment benefit plan of $1.2 (2019 – $1.3).
The Company’s net obligation in respect of pension and SIP plans is calculated separately for each plan by estimating the
amount of future benefit that employees have earned in return for their service in the current and prior periods, and that
benefit is discounted to determine its present value and the fair value of any plan assets are deducted. The benefits are based
upon earnings and years of service. The Company’s net obligation in respect of the post-retirement and post-employment
benefit plans is the amount of future benefit that employees have earned in return for their service in the current and prior
periods, discounted to determine its present value. Under all these plans, the discount rates used are based on Canadian AA-
rated corporate bond yields.
The calculation is performed annually by an actuary based on management’s best estimates using the projected benefit
method pro-rated on service. If the calculation results in a surplus, accounting standards require that a limit is placed on the
amount of this surplus that can be recognized as an asset. The total amount of defined benefit asset that can be recognized by
the Company is limited to the present value of economic benefits available by way of future refunds of plan surplus and/or
reductions in future contributions to the plan. In the determination of the economic benefit, minimum funding requirements
resulting from the most recent actuarial funding valuations are also taken into consideration. An economic benefit is
considered available to the Company if it is realizable during the life of the plan or on settlement of the plan obligations.
The accrued benefit assets and accrued benefit liabilities are comprised of:
Accrued benefit obligation:
Balance, beginning of the year
Service (recovery) cost
Interest cost
Benefits paid
Employee contributions
Actuarial losses
Balance at December 31
Plan assets:
Fair value, beginning of the year
Interest income
Employer contributions
Employee contributions
Benefits paid
Plan administration cost
Actuarial gains
Fair value at December 31
Accrued benefit asset (liability) at December 31
TMX GROUP LIMITED
Pension and SIP
plans
2019
2020
Other post-retirement
benefit plans
2019
2020
116.0 $
(0.9)
3.5
(5.3)
0.1
12.9
126.3 $
119.6 $
3.6
3.7
0.1
(5.3)
(0.3)
10.6
132.0 $
107.6 $
1.2
4.0
(7.5)
0.1
10.6
116.0 $
112.9 $
4.2
1.5
0.1
(7.5)
(0.3)
8.7
119.6 $
16.4 $
0.7
0.5
(0.5)
—
1.4
18.5 $
— $
—
0.5
—
(0.5)
—
—
— $
14.4
0.6
0.5
(0.5)
—
1.4
16.4
—
—
0.5
—
(0.5)
—
—
—
5.7 $
3.6 $
(18.5) $
(16.4)
$
$
$
$
$
2020 Annual Report
146
TMX Group Limited
52
Plan assets consist of:
Asset category
Equity securities
Debt securities
Other
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
December 31, 2020
48.7 %
37.8 %
13.5 %
100.0 %
Percentage of plan assets
December 31, 2019
47.5 %
38.3 %
14.2 %
100.0 %
MX has provided a letter of guarantee in the amount of $0.5 to the benefit of the trustee of the MX SIP (2019 – $0.5), using a
part of the TMX Group Limited credit facility (note 12).
The service cost, which represents the benefits accruing to the employees, along with the interest cost and the expected
return on plan assets, is recognized in the compensation and benefits expense in the consolidated income statement.
The elements of the Company’s defined benefit plan costs recognized in the year ended December 31 are as follows:
Pension and SIP
plans
Other post-retirement
benefit plans
Service (recovery) cost
Net interest (income) cost
Plan administration cost
$
(0.9) $
(0.1)
0.3
Net benefit plan expense (income) recognized in the income statement
$
(0.7) $
1.2 $
(0.2)
0.3
1.3 $
2020
2019
2020
0.7 $
0.5
—
1.2 $
2019
0.6
0.5
—
1.1
The Company recognizes all actuarial gains and losses arising from defined benefit plans and post-retirement plans
immediately in other comprehensive income. For the post-employment plans, actuarial gains and losses are recognized within
compensation and benefits expense in the consolidated income statement. When the benefits of a plan are amended, the
portion of the change in benefit relating to past service by employees is recognized immediately in the compensation and
benefits expense in the consolidated income statement.
The aggregate actuarial gains and losses and effects of asset limits recognized in other comprehensive income for the year
ended December 31, are as follows:
Effect due to demographics
Effect due to financial assumptions
Effect due to experience adjustments
Return on plan assets (excluding interest income)
Actuarial losses (gains) recognized in other comprehensive income
Pension and SIP
plans
Other post-retirement
benefit plans
2020
2019
2020
2019
$
$
— $
— $
— $
10.0
2.9
(10.6)
2.3 $
10.6
0.1
(8.8)
1.4
—
—
1.9 $
1.4 $
—
1.4
—
—
1.4
The significant actuarial assumptions adopted in measuring the obligation as at December 31 are as follows:
Discount rate (weighted average)
Inflation rate (consumer price index)
Commuted value
Rate of compensation increase
Pension and SIP
plans
Other post-retirement
benefit plans
2020
2.50 %
1.50 %
2.30 %
3.00 %
2019
3.10 %
1.25 %
2.50 %
2.75 %
2020
2.50 %
n/a
n/a
n/a
2019
3.10 %
n/a
n/a
n/a
Assumptions regarding mortality rates are based on published statistics and mortality tables. The mortality tables used in
2019 and 2020 for the pension, SIP and other post-retirement plans was the Canadian Pensioner Mortality (CPM) RPP2014
private sector table with projection scale CPM-B and CPM RPP2014 table with projection scale CPM-B for lump sum
payments. The assumed health care cost trend rate at December 31, 2020 was 5.60% decreasing to 4.00% over 20 years (2019
– 5.7% decreasing to 4.00% over 21 years).
At December 31, 2020, the weighted-average duration of the defined benefit obligation was approximately 13 years (2019 -
13 years).
TMX GROUP LIMITED
2020 Annual Report
147
TMX Group Limited
53
Reasonably possible changes to one of the relevant actuarial assumptions, holding other assumptions constant, would impact
the accrued benefit obligations as follows:
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
(Increase)/Decrease
50 bps decrease in the discount rate
50 bps increase in the discount rate
1 year increase in mortality rates
100 bps decrease in initial and ultimate trend rates
100 bps increase in initial and ultimate trend rates
Pension and SIP
plans
Other post-retirement
benefit plans
2020
2019
2020
2019
$
(8.5) $
(7.6) $
(1.4) $
7.5
(2.7)
n/a
n/a
6.7
(2.4)
n/a
n/a
1.2
(0.8)
0.7
(0.8)
(1.2)
1.0
(0.6)
0.6
(0.7)
In 2021, the Company expects to contribute approximately $1.6 to its pension and other post-retirement benefit plans.
Additional amounts to be contributed to the Company’s SIP plans will be determined by management once the valuations
have been prepared.
NOTE 26 – 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 OSC and the 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.
There are no preemptive, 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.
On February 28, 2020, the Company announced that the Toronto Stock Exchange ("TSX") accepted its normal course issuer
bid ("NCIB") under which it can purchase for cancellation up to a maximum number of 560,000 of its common shares through
the facilities of the TSX. The purchases will be made at prevailing market prices at the time of acquisition and in accordance
with the rules and policies of the TSX. Purchases under the NCIB commenced on March 4, 2020 and ended on January 8,
2021, once the Company reached the maximum number of shares available for repurchase under the plan.
As at December 31, 2020, 473,400 common shares were purchased for cancellation by the Company, at an average price of
$120.09 , and for a total amount of $56.8.
The following transactions occurred with respect to the Company’s common shares during the period:
Balance, beginning of the period
Options exercised
Shares repurchased under normal course
issuer bid
Balance as at December 31
Number of common shares
issued and fully paid
2019
2020
56,233,929
540,590
(473,400)
56,301,119
55,790,548 $
443,381
—
56,233,929 $
2020
2,965.1 $
35.3
(56.8)
2,943.6 $
Share capital
2019
2,938.0
27.1
—
2,965.1
The Company’s shares trade on Toronto Stock Exchange under the symbol “X”.
TMX GROUP LIMITED
2020 Annual Report
148
TMX Group Limited
54
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
NOTE 27 – RELATED PARTY RELATIONSHIPS AND TRANSACTIONS
(A) PARENT
The shares of the Company are widely held and as such there is no ultimate controlling party of the Company. Under the OSC
and AMF recognition orders, no person or combination of persons acting jointly or in concert is permitted to beneficially own
or exercise control of direction over more than 10% of any class or series of voting shares of the Company without prior
approval of the OSC and the AMF.
(B) KEY MANAGEMENT PERSONNEL COMPENSATION
Compensation for key management personnel, including the Company’s Board of Directors, was as follows:
For the year ended
December 31, 2020
December 31, 2019
Salaries and other short-term employee benefits, and termination benefits
Post-employment benefits
Share-based payments
$
$
10.4 $
0.6
12.9
23.9 $
9.7
0.6
17.0
27.3
NOTE 28 – DIVIDENDS
Dividends recognized and paid in the period are as follows:
For the year ended
December 31, 2020
December 31, 2019
Dividend paid in March
Dividend paid in June
Dividend paid in September
Dividend paid in December
Total dividends paid
$
$
$
$
Dividend
per share
Total paid
Dividend
per share
0.66 $
0.66 $
0.70 $
0.70 $
$
37.2 $
37.2 $
39.6 $
39.6 $
153.6
0.62 $
0.62 $
0.62 $
0.66 $
$
Total paid
34.6
34.8
34.8
37.1
141.3
On February 8, 2021, the Company’s Board of Directors declared a dividend of 70 cents per share. This dividend will be paid
on March 12, 2021 to shareholders of record on February 26, 2021 and is estimated to amount to $39.4.
NOTE 29 – FUTURE CHANGES IN ACCOUNTING POLICIES
The following new standards and amendments to standards and interpretations are not yet effective for the year ending
December 31, 2020, and have not been applied in the preparation of the financial statements. These new and amended
standards and interpretations are required to be implemented for financial years beginning on or after January 1, 2021, unless
otherwise noted:
•
•
IAS 1, Presentation of Financial Statements – Amendments clarify that liabilities are classified as either current or non-
current, depending on the rights that exist at the end of the reporting period. The amendments also clarify what IAS 1
means when it refers to the ‘settlement’ of a liability. Classification is unaffected by the expectations of the entity or
events after the reporting date. The amendments apply for annual reporting periods beginning on or after January 1,
2023. The Company does not expect the amendments to have a material impact on its financial statements.
IAS 37, Provisions, Contingent Liabilities and Contingent Assets – Amendments clarify that the direct costs of fulfilling a
contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to
fulfilling contracts. Before recognizing a separate provision for an onerous contract, the entity recognizes any impairment
loss that has occurred on assets used in fulfilling the contract. The amendments apply for annual reporting periods
beginning on or after January 1, 2022 to contracts existing at the date when the amendments are first applied. The
Company does not expect the amendments to have a material impact on its financial statements.
TMX GROUP LIMITED
2020 Annual Report
149
TMX Group Limited
55
Notes to the Consolidated Financial Statements
For the years ended December 31, 2020 and 2019
•
Reference to the Conceptual Framework – Amendments to IFRS 3, Business Combinations – Minor amendments were
made to IFRS 3 to update the references to the Conceptual Framework for Financial Reporting and add an exception for
the recognition of liabilities and contingent liabilities within the scope of IAS 37, Provisions, Contingent Liabilities and
Contingent Assets and Interpretation 21, Levies. The amendments also confirm that contingent assets should not be
recognized at the acquisition date. The amendments apply for annual reporting periods beginning on or after January 1,
2022. The Company does not expect the amendments to have a material impact on its financial statements.
TMX GROUP LIMITED
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TMX Group Limited
56
Board of Directors
AS OF MARCH 1, 2021
Charles Winograd (Chair)
Senior Managing Partner
Elm Park Capital Management
Committees: Governance and Regulatory Oversight,
Human Resources
Director since: 2012
Martine Irman
Corporate Director
Committees: Derivatives, Finance and Audit, Public
Venture Market
Director since: 2014
Luc Bertrand
Vice Chair
National Bank Financial Group
Committees: Derivatives (Chair),
Public Venture Market
Director since: 2011
Harry Jaako
Executive Officer, Director and a Principal
Discovery Capital Management Corp.
Committees: Finance and Audit, Public Venture
Market (Chair)
Director since: 2012
Nicolas Darveau-Garneau
Chief Strategist, Google Search
Committees: Human Resources
Director since: 2018
Moe Kermani
Managing Partner, Vanedge Capital
Committees: Public Venture Market
Director since: 2020
Christian Exshaw
Managing Director and Head Global Markets
CIBC World Markets Inc.
Committees: Derivatives
Director since: 2015
Jean Martel
Corporate Director
Committees: Governance and Regulatory Oversight
Director since: 2012
Marie Giguère
Corporate Director
Committees: Governance and Regulatory Oversight
(Chair), Human Resources
Director since: 2011
John McKenzie
Chief Executive Officer
TMX Group Limited
Director since: 2020
2020 Annual Report
151
TMX Group Limited
William Linton
Corporate Director
Committees: Finance and Audit (Chair),
Governance and Regulatory Oversight
Director since: 2012
Gerri Sinclair
Corporate Director, Digital Technologies Consultant
and B.C.’s Innovation Commissioner
Committees: Governance and Regulatory Oversight,
Human Resources, Public Venture Market
Director since: 2012
Kevin Sullivan
Corporate Director
Committees: Derivatives, Finance and Audit,
Public Venture Market
Director since: 2012
Claude Tessier
Chief Financial Officer
Alimentation Couche-Tard Inc.
Committees: Finance and Audit
Director since: 2020
Eric Wetlaufer
Corporate Director
Committees: Finance and Audit,
Human Resources (Chair)
Director since: 2012
2020 Annual Report
152
TMX Group Limited
TMX Group Officers
AS OF MARCH 1, 2021
John McKenzie
Chief Executive Officer
TMX Group
Cindy Bush
Chief Human Resources Officer
TMX Group
Luc Fortin
President and Chief
Executive Officer, Montréal
Exchange and Global
Head of Trading
TMX Group
Cheryl Graden
Chief Legal and Enterprise
Corporate Affairs Officer
and Corporate Secretary
TMX Group
Frank Di Liso
Interim Chief Financial Officer
TMX Group
Jay Rajarathinam
Chief Operating Officer
TMX Group
2020 Annual Report
153
TMX Group Limited
Shareholder Information
Stock Listing
Toronto Stock Exchange
Share Symbol “X”
Auditor
KPMG LLP
Toronto, ON
Share Transfer Agent
Requests for information regarding share transfers
should be directed to the Transfer Agent:
TSX Trust Company
100 Adelaide St. West
Suite 301
Toronto, ON
M5H 4H1
T +1 416 361-0930 ext 205
+1 866 393-4891 (Toll Free)
F +1 416 361-0470
tmxeinvestorservices@tmx.com
Investor Contact Information
T +1 416 947-4277 (Toronto Area)
+1 888 873-8392 (North America)
F +1 416 947-4444
tmxshareholder@tmx.com
Registered Office and
Head Office of TMX Group
300 - 100 Adelaide Street West
Toronto, ON Canada
M5H 1S3
Le rapport est également disponible en français.
Dividend Information
The Board of Directors of TMX Group Limited
declared a dividend of $0.70 on each common
share outstanding, payable on March 12, 2021 to
shareholders of record at the close of business
on February 26, 2021. TMX Group hereby advises
that this dividend is an “eligible dividend” for
Canadian income tax purposes. Shareholders with
questions regarding the tax treatment of dividends
should consult with their own tax advisors or
contact their local office of the Canada Revenue
Agency and where applicable, the provincial
taxation authorities.
Normal Course Issuer Bid
On February 26, 2021, TMX Group announced that
its normal course issuer bid ("NCIB") had been
accepted by Toronto Stock Exchange ("TSX"). TMX
Group intends to repurchase up to 560,000 of its
common shares through the facilities of the TSX,
representing approximately 1% of its common
shares outstanding on February 22, 2021. TMX
Group will make purchases in accordance with
TSX requirements and the price TMX Group
will pay for any such common shares will be
the market price of such shares at the time
of acquisition. The purchases were eligible to
commence on March 4, 2021 and will terminate
on March 3, 2022, or on such earlier date as TMX
Group completes its purchases. All repurchased
shares will be cancelled.
The Company also entered into a pre-defined
plan with its designated broker to allow for the
repurchase of common shares at times when the
TMX Group ordinarily would not be active in the
market due to its own internal trading blackout
periods, insider trading rules or otherwise.
A copy of our Notice of Intention to Make an NCIB
may be obtained, without charge, by contacting
Investor Relations as outlined above.
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TMX Group Limited
Trademarks
Canadian Best Bid and Offer, Capital Pool
Company, CBBO, CDB, CDF, Centre de marche
TMX, CLF, CPC, Groupe TMX, NEX, TMX, the
TMX design, TMX Datalinx, TMX Datalinx Xpress,
TMX Group, TMX Market Centre, TMX Matrix,
TMX Money, Toronto Stock Exchange, TSX, TSX
DRK, TSX Market on Close, TSX Venture Exchange,
TSXV, The Future is Yours to See., and Voir le futur.
Réaliser l'avenir. are the trademarks of TSX Inc.
BAX, Bourse de Montréal, CGB, CGF, CGZ,
Montréal Exchange, MX, SOLA, SXF and SXM
are the trademarks of Bourse de Montréal Inc.
and are used under license.
Alpha and Alpha Exchange are the trademarks of
Alpha Exchange Inc. and are used under license.
BOX is the trademark of BOX Market LLC and
is used under license.
Canadian Derivatives Clearing Corporation,
Corporation canadienne de compensation de
produits dérivés, CDCC and CCCPD are the
trademarks of Canadian Derivatives Clearing
Corporation and are used under license.
CDS and CDSX are the trademarks of
The Canadian Depository for Securities Limited
and are used under license.
Shorcan and Shorcan Brokers are the
trademarks of Shorcan Brokers Limited
and are used under license.
Trayport and Joule are the trademarks of
Trayport Limited and are used under license.
VisoTech is the trademark of Trayport VisoTech
G.m.b.H and is used under license.
All S&P/TSX Indices referred to herein are products
of S&P Dow Jones Indices LLC or its affiliates
("SPDJI") and TSX Inc. ("TSX"). Standard & Poor's®
and S&P® are registered trademarks of Standard &
Poor's Financial Services LLC ("S&P"); Dow Jones®
is a registered trademark of Dow Jones Trademark
Holdings LLC ("Dow Jones"); and TSX® is a registered
trademark of TSX. SPDJI, Dow Jones, S&P, their
respective affiliates and TSX do not sponsor, endorse,
sell or promote any products based on the S&P/
TSX Indices and none of such parties make any
representation regarding the advisability of investing
in such product(s) nor do they have any liability for
any errors, omissions or interruptions of the S&P/
TSX Indices or any data related thereto.
All other trademarks used are the property
of their respective owners.
Forward-Looking Information
This report contains forward-looking statements,
which are not historical facts but are based on
certain assumptions and reflect TMX Group’s
current expectations. These forward-looking
statements are subject to a number of risks and
uncertainties that could cause actual results
or events to differ materially from current
expectations. 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 report.
Please see “Caution regarding Forward-
Looking Information” in the 2020 Management’s
Discussion and Analysis for some of the risk
factors that could cause actual events or results
to differ materially from current expectations.
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TMX Group Limited
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156
TMX Group Limited
For more information
Please contact TMX Group if you have any additional questions or require further clarification.
General Enquiries
300-100 Adelaide St. West
Toronto, ON
M5H 1S3
T +1 416 947-4277
info@tmx.com
tmx.com
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TMX Group Limited