10/02/2011 07:05 EDT | Updated 12/02/2011 05:12 EST

Rival trading platform not worried about Maple bid for TMX and plans for Alpha

OTTAWA - The head of Omega ATS, one of a handful of alternative trading systems for Canadian stocks, isn't scared of the possibility of a merged Toronto Stock Exchange and Alpha Trading Systems.

Omega ATS president Mike Bignell is confident he can take market share away from his much bigger rivals whether or not there's a takeover of the company that controls the TSX by a group that includes many of the owners of Alpha.

"At the end of the day, we're not afraid of competition and we're not afraid of the 800-pound gorilla," Bignell said.

The Maple Group, a consortium of some of Canada's biggest financial companies and pension funds, is looking to take control of the TMX Group (TSX:X) in a deal that values Canada's largest stock exchange operator at about $3.8 billion.

As part of its takeover plan, Maple wants to combine Alpha as well as CDS Clearing and Depository Services Inc. to create a bigger Canadian-based exchange. A combined of TMX and Alpha would control roughly 80 per cent of the stock trading in Canada.

But even if Maple is successful, it wouldn't necessarily mean a return to the "old boy's club" controlling stock trading in Canada, Bignell said.

In addition to Omega, other alternative trading systems in Canada include Chi-X Canada and Pure Trading, which offer alternatives to the Toronto Stock Exchange.

Launched in December 2007, Omega grew its business 500 per cent in the last year, according to Bignell.

He noted that the rules in Canada that require trades be executed at the best price, help the level the playing field for the smaller trading platforms.

"Just because they're bigger doesn't mean they are going to always have the best price," he said, noting that the Toronto Stock Exchange controlled all of the trading in Canada not so long ago.

"While they might start off with a combined 80 per cent, we suspect that number would probably drop over the long term."

The Maple bid for TMX has stalled as the consortium awaits the necessary regulatory approvals including by the Competition Bureau. The group extended its offer to shareholders last week to the end of October as it awaits a ruling.

Some have argued the Maple deal would create a virtual monopoly that could lead to higher fees and create enforcement and transparency issues.

However Bignell focused his concerns on CDS, which acts much like a utility for the trading platforms by offering trade clearing and settlement services.

"We don't expect CDS to see any competition any time soon and this consortium will have a monopoly on that side of the ball here and some caution needs to be exercised for the pricing of settling securities in the future," he said.

TMX and Maple started formal discussions about a takeover bid in the summer after a proposed merger of the London Stock Exchange Group and TMX died because of a lack of shareholder support.

Maple's members are seeking a minimum of 70 per cent and a maximum of 80 per cent of the shares of TMX with an offer of $50 per share. The rest of the TMX stock would continue to be publicly traded and no Maple member would own more than 10 per cent of TMX shares, in line with Ontario regulatory restrictions.

The investors in Maple: the Alberta Investment Management Corp., Caisse de depot et placement du Quebec, Canada Pension Plan Investment Board, CIBC World Markets (TSX:CM), Desjardins Financial, Dundee Capital Markets, Fonds de solidarite des travailleurs du Quebec, GMP Capital (TSX:GMP), National Bank Financial (TSX:NA), Ontario Teachers' Pension Plan, Scotia Capital (TSX:BNS), TD Securities (TSX:TD) and Manulife (TSX:MFC).