Category Archives: CSE Performance

Interview with Richard Carleton First Half Review — June 2018

Earlier this month, CEO of the Canadian Securities Exchange, Richard Carleton, sat down with Peter Murray of Kiyoi Communications to discuss a number of topics related to the progress of the CSE in 2018 so far, the investment landscape for growth-stage companies and what’s on the horizon for the CSE heading into the second half of the year.

Scroll down to read the full transcript of this interview. For ease of navigation, a list of hyperlinked topics is included below.

  1. First Half Performance in 2018
  2. Blockchain-based Clearing and Settlement – Updates
  3. Cannabis Sector Perspectives
  4. Growing the CSE Brand
  5. Keeping Pace with Expansion
  6. Trading Enhancements & Liquidity Growth
  7. Share Structures and US Issuers
  8. What’s Next for 2018

First Half Performance in 2018

PM: Performance at the CSE as measured by standard metrics – listings, financings, trading volume – was strong yet again in the first half of 2018.  Can you recap some of the key numbers for us?  And were there any trends that you feel really stood out?

RC: By every metric, we are ahead of 2017’s record pace.  Whether we measure our performance by trading volume, value traded, number of trades, or financings conducted by companies listed on the Canadian Securities Exchange, the numbers are considerably ahead of where we were at this time last year.

I am particularly pleased that on a 12-month trailing basis, companies have raised almost $2 billion via the facilities of the CSE, either through an IPO or as a secondary offering once the issuer was listed with us.

And with every additional listing, we reach a new benchmark in terms of the number of securities trading on the exchange.  We are above 380 securities at this point, and about 360 companies.

I’d also note that this performance comes at a time when the industry in general is not setting new records.  Measures of liquidity confirm that companies listed on the Canadian Securities Exchange trade at better levels than their counterparts on other exchanges in Canada.

When assessing liquidity, we use a measure of share value traded versus market capitalization.  In Canada’s large cap space, approximately 5% of a company’s market capitalization by value will turn over in a typical month.  In the junior markets, that number tends to be a little higher.

On the Canadian Securities Exchange, we regularly see our companies turn over at almost twice that rate.  And in January 2018, when there was an enormous amount of market activity, principally in the blockchain and cannabis sectors, our average turnover was almost 35% of a company’s market capitalization.

In previous interviews, I have talked about some of the challenges and hurdles the exchange has overcome during the last several years.  There was, for some time, a persistent view in investment banking and trading circles that we might not have the liquidity which some of the other trading centres did.  But the statistics now demonstrate that Canadian Securities Exchange issuers are among the most liquid traded instruments in Canada.
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Blockchain-based Clearing and Settlement – Updates

PM: In February, the CSE announced plans to launch a blockchain-based clearing and settlement facility.  That was near the height of the blockchain mania and triggered a tremendous amount of discussion within the securities industry.  What can you tell us about progress since the announcement?

RC: We’ve been working a lot with dealers and other entities involved in providing services to the securities processing side of the business.  And we have also been working with companies who would like to issue tokenized securities.  We’d like to be in a position to offer companies who are interested in raising capital by way of a tokenized security a place not only where they can list – because if the instrument is a security we can list it tomorrow, as a securities exchange – but to extend the full power of blockchain technology to the clearing and settlement process.  By doing so, we can eliminate a lot of cost and friction that exists with the current processes provided by the Canadian Depository for Securities.

One of the principal issues companies deal with is the cost of processing dividend or royalty payments to their shareholders.  The cost of doing this can be prohibitive to smaller companies, or to companies that wish to have a payment stream to shareholders more frequent than quarterly or semi-annual.

The other thing is that the current system is extremely inefficient when it comes to corporate governance.  Shareholder documents often go through multiple hands before they get from the company issuing the document to the beneficial owner of shares.  It goes to the transfer agent, to the clearing and settlement organization, and to the broker before it finally reaches the investor.  What we would like to do is eliminate the middlemen who are not adding value and enable companies to seamlessly communicate with their shareholders.

Take corporate governance as an example.  Proxy voting using the blockchain would be secure and inexpensive.  And going back to my previous example, it would enable companies to design securities where there are regular streams of income from different types of assets that move into the hands of shareholders.

Since we announced our plans in February, we’ve had a large number of people spend time with us from different industries.  For example, royalty streams are very common private equity instruments in the mining industry but less so on the public company side.  Some groups would like to be able to use the power of our system to issue new types of securities to public investors, instead of just to a small group of extremely well-funded private equity participants, as is currently the case.

We are in the process of working through the system we will be offering, though we’re slightly behind schedule from a technology perspective.  We had a significant new release of trading system technology which consumed a little more of our resources than I had hoped.  But I will say that the reception we have received from the industry – be it the investment banking side, the trading side, or the back-office side – is extraordinarily enthusiastic and supportive.
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Cannabis Sector Perspectives

PM: The CSE continues to attract new issuers doing business in the US cannabis market.  What are your latest observations on the sector, and can we anticipate more listings to come?

RC: It does seem that a lot of people who were invested in Canadian MMPR (Marihuana for Medical Purposes Regulations) licensees over the last couple of years have shifted their investment focus to companies with exposure to the cannabis business in the United States.  Quite a few large US-based companies have listed on the exchange recently, and more such companies are currently in the application pipeline.  And, clearly, they are being funded by Canadian and US investors.  Pre-IPO financings are heavily subscribed, and often oversubscribed, so we are far from being at the end of investor appetite for the cannabis space generally, and companies with a US focus specifically.

We are heartened by some of the regulatory developments in the United States.  It appears that there may well be a federal bill that provides additional comfort to companies operating within the legal framework at the state level, such that they will not be subject to federal prosecution, which would obviously benefit the entire sector.  We find ourselves in a situation where the Canadian public markets are funding the rise of a new and potentially quite large and interesting industry in the United States, and it really shows no signs of slowing.
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Growing the CSE Brand

PM: As noted earlier, demand by entrepreneurs to list companies on the CSE remains strong.  Your fee structure and streamlined listing process are a big reason why, and it doesn’t hurt that the exchange works hard to support its issuers with outreach events, visits overseas, and recently the launch of a new magazine, Public Entrepreneur.  Can you talk about why you devote so many resources to these efforts, and the feedback you receive from issuers and investors?

RC: I’ve commented before that after taking this job I learned that the brand of an exchange – brand awareness and brand identity – is extraordinarily important.  In order to reach the level of acceptance we now enjoy, it’s been necessary to assure people across every part of the industry – from issuers to dealers, traders, investment bankers, and, of course, investors – that we are a well-regulated exchange, and that we are thought-leaders committed to supporting the efforts of our issuer companies to achieve the kind of investor access and visibility they might potentially get with other marketplaces.  And instead of just comparing ourselves to other markets, we wanted to do a superior job so that investors interested in the types of issuers we have could get efficient access to information about them.

That’s really what has directed our efforts – awareness efforts with different brokers and in different marketplaces to provide our issuers with better access to capital and to secondary market trading liquidity.  That explains, for example, the work we have done with the OTC Markets Group in the United States, and some of the work we have done internationally with brokers to increase their coverage and visibility of CSE listed companies through their networks.

We are really committed to building our brand and providing everyone with a degree of confidence that we are a responsible, reputable, accessible, fair, and cost-effective source for capital, as well as a provider of robust and cost-effective secondary market liquidity.
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Keeping Pace with Expansion

PM: The CSE’s Vancouver team just moved into a new office at the beginning of June and you’ve added some more members to the organization, as well.  Tell us about expansion of the exchange on the corporate side and the benefits this has for issuers.

RC: Our focus has really been in two areas: our sales and marketing group as well as in our issuer regulation group.  Let me talk about the latter first.

As noted, the exchange is growing very, very quickly and we continue to receive listing applications at a record rate.  As a result, we have retained a number of additional professionals to help us maintain service levels.

Although some nasty rumours have been spread about our timelines extending, a cool-headed review of the statistics shows that our turnaround time is about the same as it was over the last three to five years.  And I am pleased about that because I can assure you we are handling a significantly higher volume of business these days.

On the sales and marketing side, we are expanding to better promote the exchange within specific markets, particularly Toronto and Vancouver.  We know that we need to have team members charged with the responsibility to meet with the investment banking and dealer communities to further build our core message, which is that we are the best place for companies, especially in the earlier stages of development, to seek public capital.

We’ve invested in that effort with new hires in Vancouver and Toronto and we plan to become even more active in hosting events, showing our thought-leadership, and helping our issuers tell their stories to an ever-broadening audience of investors.
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Trading Enhancements & Liquidity Growth

PM: Is there anything new on the trading platform front that dealers and professional traders should be aware of?

RC: We just had a new release of our trading system technology, and while there is nothing bold in the features and functionalities, we are constantly refining this service offering by providing different order types that can be used by the various players in the marketplace.  And we do this with a view to maximizing the liquidity that issuer companies enjoy from being on the Canadian Securities Exchange.

What we are seeing with the increase in volume is the arrival of what some call a virtuous liquidity cycle, where, because there is more trading and participation, interest grows from new participants, especially internationally, and that drives more volume.  The old saying in the market that liquidity begets liquidity is something we have definitely been seeing.  The pace we are at now is roughly 10 times where we were just two years ago.  It is magnificent progress that we have managed to make in a relatively short period of time.
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Share Structures and US Issuers

PM: The listing of subordinated voting shares by MedMen Enterprises and FSD Pharma during the half generated a lot of comment.  Can you walk us through the issues involved and give us some perspective on how to interpret those decisions?

RC: There are two ways of looking at it.  The first is that subordinated voting shares have been a feature of the Canadian public equity markets for a few generations.  And the fact that they are now showing up on the Canadian Securities Exchange is probably as strong an indication of our maturity as any I can cite.

If you go back in Canadian corporate finance history, they were used when there was a founding individual or family that wanted to retain a control position in a company but raise equity from outside investors at the same time.  Really, we have the same dynamic in play with the companies who have listed these subordinated shares.

The second component is that US issuers are essentially required to have a majority of their shares issued outside of the United States in order to not become reporting issuers in the United States, which for a number of cost reasons they would prefer to avoid.  Directors and officers insurance premiums are considerably lower in Canada, legal and civil liability risks are lower, and audit fees are less because in Canada you don’t have Sarbanes-Oxley compliance in addition to your regular public audit.  Regulatory fees are higher in the US, too.

If you can avoid having to become an SEC (US Securities and Exchange Commission) filer, that is a positive thing for a company from a cost perspective.  And if they issue the majority of their shares outside of the country, that is a legitimate way to not be required by the SEC to become a US reporting issuer.

I think it is a structure you are likely to see more of with companies we have looking to list in Canada.

Now, we need to make sure that the holders of those securities have a variety of protections in the event of mergers and acquisitions activity and some other issues, but we are aware of these concerns and are working with securities regulators and the companies on those questions.
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What’s Next for 2018

PM: The CSE is clearly coming off a very successful first half.  What initiatives are on the go for the balance of 2018 to maintain the momentum?

RC: With assurance, we know we will continue to be listing companies at a fast pace because of the number of applications and conditional approvals we are working on at the moment.  We have more than six months of business in the queue, if you will.

We will continue to work on developing the clearing and settlement system for tokenized securities.  That will be a key focus.  We also expect to welcome our first Israeli companies in the second half of 2018.  I have visited Israel twice in the past six months with a view to tapping into one of the world’s most dynamic start-up cultures and to provide these companies with a very cost-effective means of coming to North America, becoming a reporting issuer, getting a listing on a recognized stock exchange, and also building a shareholder following and profile in the United States by way of a quotation on the US OTC market.

We think that is very powerful, not just for Israeli companies but also for other international issuers looking to access public capital.  For example, we expect to visit Singapore later in the year, and we have also had discussions with companies located in Jamaica, in Colombia, and recently met with a delegation from Barbados on some listing opportunities there.  In summary, we’ll do more of the same, but I would expect to see an increasingly international flavour among our issuer community as we progress further into 2018.
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Interview with Canadian Securities Exchange CEO Richard Carleton: Year-end Review 2017

With 2017 now officially in the record books, CEO of the Canadian Securities Exchange, Richard Carleton sat down with Peter Murray of Kiyoi Communications, to discuss the best year on record at the CSE. Included in the discussion were important developments that took place at the exchange, the evolution of the cannabis investment landscape as well as opportunities in blockchain, fintech and more that the CSE will be looking to next in 2018.

  1. Record-breaking trading volume
  2. Market participants: Proprietary traders and retail investors
  3. On tap for 2018: Cannabis, blockchain and more
  4. Growth in new listings
  5. Enabling innovation
  6. Enhanced disclosure: A better model for investors and companies
  7. Regulatory outlook for cannabis-related businesses
  8. Strength behind the bench at the CSE
  9. Hitting its stride as a full-service stock exchange

Record-breaking trading volume

PM: It has been a truly phenomenal year for the CSE in terms of growth in trading volume/value, capital raised and many other measures. This has particularly been true in the fourth quarter, with the most active issues routinely trading well over 20 million shares per day. As the exchange’s CEO, what would you point to as the highlights of 2017?  What is driving the success?

Richard Carleton, CEO of the Canadian Securities Exchange

RC: There are multiple factors working in our favour at the moment, but clearly our decision more than three years ago to welcome the original applicants for the MMPR (Marihuana for Medical Purposes Regulations) licenses in the Canadian cannabis space is one that has proven to be quite sound as far as growth and development of the exchange is concerned.These companies have caught the attention of the retail investing public in particular, although the broader investment community is beginning to support and invest in them as they mature and grow.

We have seen a tremendous increase in trading volume in the cannabis space, and it has had a knock-on effect on technology, mining and other sectors on our exchange.

Overall, it has served to dispel a number of the incorrect, but in some cases widely held, beliefs about companies listed on the Canadian Securities Exchange in terms of liquidity and challenges to completing secondary financings. Given the trading turnover and secondary financings completed by issuers in multiple industry sectors on the CSE this year, I think we have laid those concerns to rest for good.

At the end of the day, our success in 2017 was simply a case of presenting companies to the marketplace that the investment community was interested in, and the community responded accordingly.
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Market participants: Proprietary traders and retail investors

PM: Looking at just trading volume for a moment, are program traders, algorithmic trading and high-frequency traders accounting for a considerable percentage of the activity?  Some people in the markets don’t like their presence, whereas others appreciate the liquidity they bring. What is their status on the CSE?

RC: We have a pretty good idea where the trading volume is coming from, and we have seen increased participation from proprietary traders, which I would define as people who tend to pursue relatively short-term strategies such as market-making or cross market arbitrage. By and large, that activity is not driven by computers but by actual human traders pursuing these strategies in the market.

But far and away the largest percentage of participants are in fact investors and individual traders. It is human beings hitting the enter button, and doing that, generally speaking, through the facilities of one of the discount brokers in Canada.
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On tap for 2018: Cannabis, blockchain and more

PM: How do you follow up on a successful year like 2017?  What is the 2018 game plan?

RC: We certainly think the cannabis space has a way to run, and we see that in our pipeline of applicants seeking to list on the CSE. We expect to see additional companies looking for growth capital to serve a particular segment of that market, whether it be recreational cannabis in the United States, cultivation internationally, or some aspect of the therapeutic market.

And, of course, with legalization anticipated at some point in Canada during 2018, it will be interesting to see how the industry develops specifically here at home.

We are also seeing a tremendous number of companies with some component of blockchain technology in their business development mandate, many of them looking to address some inefficiency, cost or risk for people on the payment side. There are quite a few interesting applications of blockchain technology to reduce the cost and risk of the payments process both for the customer and for companies.

We have a number of blockchain companies on the exchange already, there are more coming, and based on the funds raised and the interest in existing issuers, I think we will see a continuation of the high level of trading activity witnessed in the latter part of 2017.
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Growth in new listings

PM: The CSE welcomed over 50 new issuers in 2017. What is the pipeline looking like as we begin 2018, and where are the issuers coming from in terms of sectors?

RC: The interesting thing is that even as the pace of listings reached record levels in the fourth quarter, each month we received more applications than companies listed. In other words, even though we were listing more companies than we ever had before, the pipeline was growing.

As a general observation, the companies listing now tend to be larger, more mature and better capitalized than at any other time in the history of the Canadian Securities Exchange.

I mentioned the cannabis and financial technology sectors, with a particular focus on blockchain, but a number of the more traditional sectors are also seeing investor attention. There is certainly interest in the mining space. We have seen a number of transactions funded for later-stage mining projects, often with a clear path to initiating production. Those companies do tend to be larger and are looking to raise substantial amounts of capital to complete their business programs.

It really is a situation where, with the possible exception of the oil and gas space, we are firing on all cylinders.
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Enabling innovation

PM: Cannabis is a relatively new business sector for public markets and the CSE deserves credit for providing a platform enabling a substantial number of these companies to obtain the funding needed to carry their businesses forward. We now see a similar dynamic with companies in the blockchain space. Does the CSE have a unique proposition for these companies and is the exchange itself looking at opportunities with this technology?

RC: Let me begin with the first part of the question. The CSE’s proposition is really the same for all companies looking to access the public markets. We seek to facilitate the lowest cost of public capital for these companies, principally by providing a very streamlined listings process, and then once the company is listed to provide cost certainty in the form of fixed fees, regardless of how active the company is in secondary financings, changing its business, making acquisitions and other activities.

Our promise is that those companies will be able to conclude those transactions with more disclosure to the marketplace, but with less interference and second-guessing of their business plans from the exchange as their principle regulator.

Fundamental to the DNA of the CSE is that we believe the marketplace is best suited to price the risk and benefits of management’s business decisions, and not somebody at the exchange. To ensure this is the case, we must make sure the companies are providing the best possible disclosure to the marketplace so those decisions can be made.

I think it is interesting to see how fintech, and blockchain in particular, has come to the public markets. In past years I have talked about the challenges the public markets in Canada have had in attracting technology companies. These types of companies have often elected to raise their capital from private equity and venture capital firms as opposed to seeking a public market listing.

The fintech and blockchain space seems to have taken on a different dynamic, as these companies are in fact coming into the public markets, and to be fair it is probably a result of the capabilities demonstrated by the public markets in funding the cannabis space. Entrepreneurs in the fintech and blockchain space look at the public markets and acknowledge that we were able to back the creation of an entirely new industry with significant amounts of capital at competitive costs vis-a-vis private alternatives.

As far as the CSE goes, we are very much interested in looking at the potential to apply new technologies to reduce cost and risk. We have a number of experts looking at smart contracts and in effect tokenizing a security with a view to a potential listing on the exchange. We are going to have more to say about that in the very near future and are looking carefully at the potential to adopt a number of those technologies.

I will say that our systems developers have deep experience in the space and as a result we do have some excellent partnerships already developed that will give us a real leg up if we choose to become early adopters.
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Enhanced disclosure: A better model for investors and companies

PM: One of your competitors suggested recently that the CSE’s suitability standards for officers and directors might be too lenient. What would you say to this opinion?  And what about disclosure of issuers listed on the CSE in general?

RC: To be blunt, I was confused by that statement. I have no idea what that person was referring to. The rules in place for suitability for officers and directors are essentially identical across all exchanges operating in Canada, whether it be the NEO Exchange, the CSE, the Venture Exchange or the Toronto Stock Exchange. The spokesperson from the Toronto Stock Exchange would have no idea what our policies and procedures are in administering the rules. We can, and do with some regularity, exercise our discretion to prevent individuals being involved with particular companies. I think that was not an informed opinion being voiced by the spokesperson from the TMX Group.

The CSE believes that in return for the exchange not being as involved in a company’s decisions as perhaps other exchanges are in Canada, the company must agree to adhere to higher disclosure standards.

In addition to the work we do on a company’s initial listing statement, as well as their legal obligations to provide continuous disclosure, companies are required to file monthly reports that are effectively an update to the Management’s and Discussion and Analysis from the listing statement or prospectus. Companies find that it is a helpful part of their investor relations activities, and not a burdensome extra piece of exchange regulation.

That disclosure record builds for the companies and it is easy for people to see which companies are executing against the plan they set out, and which companies are not making the progress they set for themselves in their business plan.
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Regulatory outlook for cannabis-related businesses

PM: There was a degree of controversy this year about Canadian stock exchanges listing companies that operate cannabis-related businesses in the United States. Can you comment on the CSE’s policies and how your regulatory model held up in the face of this debate?   Do you foresee policy at the CSE changing at all in 2018?

RC: The answer to the latter question is that I do not see our policies changing. We may learn things as time goes on from the legal position in the United States, but this to us was a relatively straightforward call.

The basic principle is that all companies listing on the Canadian Securities Exchange, and for that matter any exchange in Canada, must provide a positive representation that they are operating in accordance with applicable law in the jurisdictions in which they conduct business.

To that end, and particularly with companies in the cannabis space in the United States, we can and do require the company to provide a legal opinion and analysis demonstrating how it is that they are operating in accordance with the licensing regime in place in the particular state or states in which they do business.

From an investor’s perspective, clearly there are risks in investing in these companies given the uncertainties in the legal framework in the United States. That is why companies who have come to us with US exposure, either in the listing statement or in a prospectus cleared with one of the provincial regulators, must spend a lot of time explaining the legal position of the company, and what the position of the company would be assuming various changes took place. Investors need to know what the impact on the company would be if the rules changed in the US.

This was formalized by the Canadian Securities Administrators in a guidance notice a couple of months back and it’s an approach, because it’s based on disclosure, that is entirely in line with the one we’ve taken to these companies coming into the public markets.

So, again, we see that there is considerable investor interest in these opportunities, there is considerable interest from entrepreneurs based in the United States to raise growth capital from the Canadian public markets, and we expect to see more of these companies, not fewer, coming to us in the months ahead.
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Strength behind the bench at the CSE

PM: The CSE’s largest shareholder is Urbana Corporation, which holds just under half of your common equity. This is different to the other major Canadian exchange groups, which often have a wider base of shareholders. Is there a benefit to having a concentrated ownership structure and, presumably, the relative independence it provides for?

RC: I don’t know if I can speak to the benefits of having a relatively concentrated shareholding. What I can speak to is the benefit of having Urbana Corporation as our principal shareholder, and that of course is that Urbana made its name some years ago for its successful investments in the exchange space, not just in Canada but around the world.

The team there, led by Tom Caldwell, who is also our chairman, is regarded as one of the most knowledgeable there is when it comes to the business of exchanges. Tom has access to many different types of people in the industry. Whether it be senior management at other exchanges or analysts and investment bankers, they all know Tom and if we need to meet these people, the opportunity is there because of our chairman and Urbana Corporation.

I believe we are very fortunate to have an engaged, supportive and extremely knowledgeable main shareholder. We really couldn’t have wished for anything more.
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Hitting its stride as a full-service stock exchange

PM: In some respects, the CSE is fighting a two-front war with other exchanges, both in attracting exciting young companies and in retaining your maturing issuers. Do you think it makes sense for companies to leave the CSE if they qualify for a “senior” exchange?  Conversely, does the CSE still maintain its advantages as an exchange suited for early-stage companies?  Can you realistically cater to both?

RC: Branding is obviously extremely important in the exchange world, and probably more than I understood when I became CEO. There is very little difference in what we do versus the so-called senior exchanges. The access that we provide, the systems that we deploy, the rules governing the companies and so on – there is an awful lot of commonality among us.

However, some institutional investors and retail investors believe, for some reason, that these senior markets will provide higher multiples, better liquidity, more access to investors both in Canada and internationally, and a better experience for the issuer.

I think that is a very difficult proposition to support, especially on a cost-benefit basis, when somebody looks at the increased costs of being, for example, on the Toronto Stock Exchange versus the Canadian Securities Exchange. It would be difficult to justify on an objective basis in a lot of cases.

The one area that really is one of the last mountains for us to climb as an organization is the institutional investment community in Canada. Some institutions have hard-coded into their mandate the requirement that a public equity in the portfolio must be listed on one of the TMX Group exchanges, or specifically on the TSX. They don’t mention the Canadian Securities Exchange and they don’t mention the NEO Exchange.

When we hear from a company that an interested investor has said they would invest in them but for the fact they were listed on the CSE, those are barriers that we need to continue to work to knock down. That is not just perception but a genuine issue that exists.

Our challenge as an organization is to try to reduce the number of institutions with those restrictions in their investment mandates. Our goal is to provide an identical or better experience than the other exchanges, where companies are going to pay considerably more for the privilege of being listed.

One other concern is that if a company believes it is on its way to joining one of the major indices on the Toronto Stock Exchange, there is a rule that to be in the long-established national indices, those stocks have to be listed on the Toronto Stock Exchange. It is sort of like back in the day on the S&P 500 when you had to be listed on the New York Stock Exchange. And as a result, companies such as Microsoft and Apple and Cisco and Intel didn’t qualify for the S&P 500 for a number of years because they were on Nasdaq. Eventually it got to the point where S&P had to do the right thing and permit companies from exchanges other than the NYSE into the index.

Our goal is to have companies stay on the CSE and get big enough and relevant enough to the broader market that people lean on the S&P and TSX to allow them into the indices. I think we may have our first billion-dollar company relatively soon, and with that achievement we might then have investors lobbying Standard and Poor’s to change the rules.

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Mid-year Update: An Interview with Richard Carleton

Richard Carleton, CEO of the CSE
CEO of the CSE, Richard Carleton, providing an update at the CSE’s annual pre-Stampede breakfast in Calgary (July 2017)

Earlier this month, CEO of the Canadian Securities Exchange, Richard Carleton, sat down with Peter Murray of Kiyoi Communications, to discuss the performance of the CSE in the first half of 2017 as well as to get the CSE’s perspective on a number of issues related to Canadian public markets, the evolving cannabis sector and innovation at the CSE.

Scroll down to read the full transcript of this interview. For ease of navigation, a list of hyperlinked topics is included.

  1. State of the Canadian microcap sector
  2. US companies choosing to list on the CSE
  3. Migration from the CSE
  4. Performance of the 1st half of 2017 at the CSE
  5. Reducing regulatory burden on small-cap issuers
  6. Simplifying access to marketplace data
  7. CSE marketing efforts
  8. Overview of cannabis sector
  9. Growing sectors
  10. Digital innovation at the CSE

State of the Canadian microcap sector

PM: Media outlets have published several articles recently on the demise of the microcap issuer, pointing to reductions in IPO activity, capital raised and issuer numbers.  The CSE is doing quite well servicing this segment of the market these companies.  What are your opinions on the state of the microcap sector?

RC: There are different ways to assess the health of the sector, some of which are pretty encouraging.  One of the concerns expressed in an article published by the Globe and Mail recently was that the number of companies listed on Canadian exchanges has declined quite considerably.  What they did not refer to was that there are some 320 companies listed on the Canadian Securities Exchange, and this was not the case eight or nine years ago.

In other words, some of those missing companies are not missing at all – they are listed on the Canadian Securities Exchange.

That said, we’ve obviously gone through a prolonged slump in the mining and oil and gas exploration sectors.  This has an impact on the overall health of the Canadian markets because Canada has been very good historically in terms of creating large numbers of these types of public companies.

The bottom line is that public capital is always there, but raising that capital is never going to be easy.  Quite frankly, it is not supposed to be easy.  But with price weakness in some of the commodities that underpin the value of Canadian resource companies, applying the model of raising public funds for pre-revenue companies has been a bit of a struggle.

Fortunately, the tremendous growth in the legal cannabis space since the spring of 2014 has served as a counterbalance.  We are increasingly seeing old fashioned IPO-type deals where companies are raising tens of millions of dollars, and even into nine figures, in ways that remind one of the good old days, with Canadian investment dealers conducting a wide distribution on behalf of the issuer.

So, what we really have is a kind of dichotomy where the traditional Canadian small-cap space continues to suffer a high degree of stress.  But the sunrise industry that is the legal cannabis space in Canada and the United States has attracted a lot of attention from investors and the investment dealer community.

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US companies choosing to list on the CSE

PM: The CSE has welcomed several issuers based in the United States over the past few years.  What is the attraction for US companies in listing on the CSE, and in general what do they tell you about their listing and post-listing experiences?

RC: The reason they come to Canada is that they can raise money here.  In the United States, deals in the $20 million to $40 million range are the realm of the venture capital and private equity investment communities.  Some companies don’t want to go down that route because there can be significant drawbacks when you accept money from these types of investors.

Specifically, entrepreneurs find that venture capital funds and private equity funds exert a tremendous level of control over investee companies, as you would expect when they are investing the amounts of money we are talking about.  An important advantage to raising funds publicly is that you often retain more control over the future direction of the enterprise.

Another issue is that the exit scenarios for private funds may be at odds with those of a company’s founders.  Funds may be more interested in an early trade sale, rather than continuing to finance the company to the point where it is one of the big and truly successful entities in its space.

The result is that we see companies looking to raise the smaller amounts available in Canada through the public markets.  And the cost of that capital tends to come in lower than if they were raising money privately in the United States.

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Migration from the CSE

PM: A number of companies have successfully grown their operations on the CSE but then left for other exchanges as they reached a point they felt warranted such a move.  Can you share your views on why this happens?

RC: There are two issues in play in my opinion. The first is something the team at the Canadian Securities Exchange is working to address, and that is a bias held by some members of the institutional investment community.

When companies are looking to raise large amounts of money – and again I am talking high tens of millions, or over $100 million – many institutional investors are more comfortable with the incumbent exchanges because they have worked with them before and they understand their standards and procedures.  It really is up to the CSE to better communicate our value proposition and our reliability as a partner to these institutions, because we have a lot to offer.  This is definitely something we are working diligently on.

The other issue is that if a company believes it will have sufficient market capitalization and trading turnover to qualify as an index component on the Toronto Stock Exchange, public company managers may see that as a powerful inducement to move.  Once you join the index it means the company is likely to be followed by several analysts and its shares will be included in a variety of portfolios held by investors both domestically and internationally.

Those two factors combined can create, under certain circumstances, an incentive for companies to move to another exchange.

I do believe, though, that some of this thinking is rooted in the past.

If one looks at the trading volumes and amounts of capital being raised on our exchange in the first half, a well-run company clearly can achieve its goals with a CSE listing.  Not to mention the advantages we offer from cost and other perspectives.

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Performance of the first half of 2017 at the CSE

PM: It has been a good first half for the CSE and the financial community is increasingly supportive of what the exchange and its issuers are working toward.  Can you briefly review the half for us and share some of the approaches that seem to be succeeding for issuers right now?

RC: We have a number of projects underway at the exchange and one I would highlight is the update to our listing standards.

We updated the initial listing standards last year and are now in the process of introducing continued listing standards.  Our intent is to ensure that companies listed on the exchange are active businesses, which means that the ones hanging on purely for shell value are not going to qualify for continued listing unless they can show that there is an imminent opportunity for a transaction.

We are receiving a lot of support from both the investor and issuer communities for this effort.  Last year, we delisted almost as many companies as we listed, which was almost 10% of the listed company register.  We want to assure investors that the companies that remain listed are active.

In the first six months of the year, CSE issuers raised a record amount of capital ($320 million).  I think observers would expect that it is flowing mostly into the legal cannabis space, but actually this sector accounted only for about half of the total.  We have seen a variety of companies in the financial technology space, clean technology and mining add significantly to their treasuries.

Again, although capital is scarce and companies are having to work hard to obtain it, they are certainly doing so at record levels on the Canadian Securities Exchange to this point in the year.

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Reducing regulatory burden on small-cap issuers

PM: The CSA (Canadian Securities Administrators) recently released for comment a list of proposals designed to reduce the regulatory burden on small-cap issuers.  Can you discuss the CSE’s positions on some of the key recommendations?

RC: Most of the recommendations are aimed at small- to mid-cap companies listed on the Toronto Stock Exchange.  So-called venture issuers, which covers companies on the CSE, are already afforded relief from some of the reporting requirements imposed on public companies.  Essentially, the CSA was looking to extend similar relief to some of the companies listed on the Toronto Stock Exchange.

The key measure in the discussion paper was a proposed reduction in the financial reporting cycle from quarterly to semi-annually.  Basically, only the audited annual financial statements and a half-year summary would be required from public companies.

The CSE does not support this proposal, and neither do the vast majority of companies, financial advisors and accounting firms we have spoken with.

Quarterly reporting is not burdensome, and in fact the decrease in transparency resulting from a move to semi-annual reporting would increase the cost of capital for small companies.  So, while the idea is well-intentioned, we think it would bring about the opposite of its intended goal.

What we would like to see is significant change in how the exempt markets in Canada are managed and regulated.  For example, we would like to see regulation similar in nature to Regulation A+ in the United States, which gives individual investors an opportunity to invest in exempt market companies up to individual deal limits and annual limits.

What this means is that smaller retail investors would be able to participate in opportunities that at this point are only available to accredited investors and institutions.

We think this is important to engaging the next generation of investors because the average accredited investor is getting on in years.  We are concerned that younger investors are not getting the opportunity to invest in the kinds of growth stories they should.

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Simplifying access to marketplace data

PM: I know you are working on a consortium of sorts to address data fee costs for investors.  What are the specific issues at play here and what do you hope to achieve?

RC: I have some good news to share on this topic.

First, though, the background is that any professional investor looking to get a full picture of what is going on in Canadian equity markets must sign contracts and pay fees to each of the individual exchanges if they want access to real-time data.  Not surprisingly, the fees add up pretty quickly.  Canadian data can thus be considerably more expensive than in other markets around the world.  It is another resistance point we just don’t need.

The Ontario Securities Commission was successful in late June in its long-term effort to gain jurisdiction over marketplace data.  It looks as if the commission will seek to exercise that jurisdiction to address the pain points that professional data users currently suffer.  It remains to be seen what specific approaches to the problems the regulators are going to take.

This is a positive development from our point of view because there is a large transparency deficit at present.

The CSE and some of the alternative exchanges do not reach the same scale of user population that the TMX exchanges do from a data-subscription perspective.  And that means a significant transparency deficit exists in the marketplace.

It looks as if we will be asked to take a leading role in helping to define what the data delivery model, fees and terms look like in coming years for marketplace operators in Canada.

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CSE marketing efforts

PM: The CSE team has been very active in the first half of the year hosting CSE-branded events and participating in investment conferences.  Can you share with us the goals and some of the achievements on the marketing side?

RC: Our team has been extraordinarily busy this year, literally traveling all over the Northern Hemisphere – Europe, Asia, and across North America.

We always pursue two goals: to explain to the international and domestic investing public what the value proposition of the Canadian Securities Exchange is, and to meet with issuers, investors and advisors so that we continue to build the list of companies we present through our facilities.

The favourable reception we receive at virtually every stop is extremely gratifying.

I am amazed when I sit back on a given day and try to figure out where the various members of the CSE team are, because we have literally crossed the northern half of the globe several times over the course of the first half of 2017.

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Overview of cannabis sector

PM: Cannabis companies have experienced some ups and downs since entering the public markets a few years ago but the sector in general seems to be getting itself on a steadier track now.  While most of the early movers focused on opportunities in Canada, many of what one might term the “second wave” of issuers seem set on operating in the US.  What is next for the cannabis sector in your opinion?

RC: I actually think of the US companies as the third wave.  The first wave was the licensed medical marijuana producers in Canada.  Next, we saw entities in ancillary industries – extractors and alternative delivery systems are good examples.  The third wave is clearly companies that have business interests in the United States and are ramping up to address the coming legalization for adult use in very large jurisdictions.

We speak to people in this industry on a regular basis and the numbers are mind-boggling.

California’s population is roughly that of Canada, and they are on a similar timeline as Canada to legalization.  Cultivators there are looking to raise billions of dollars to build the operations necessary to supply the state’s legal market.

Given that one of the objectives of government policy in every jurisdiction is to displace the black market, it is critically important to the success of those policy directions to enable the legal market to meet the demand from the adult-use side.

It is fair to say that we have not seen anything yet in terms of how big this is going to become.  There will be a steady stream of companies in this space with solid business plans looking to build out and meet the dawn of a significant new industry in North America.

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Growing sectors

PM: Are there any market sectors right now that remind you of what cannabis felt like in 2014?

RC: In the sense that the legal cannabis market is one of the most significant new business opportunities to hit public capital in a long time, I can’t really say I sense anything up and coming of the same magnitude.

As I mentioned before, we see a lot of different stories getting funded, but I think we are going to continue to see the legal cannabis space driving a substantial percentage of our growth as we make our way through the rest of 2017.

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Digital innovation at the CSE

PM: The infrastructure supporting securities trading and information exchange is predominantly digital these days.  How has the CSE navigated the rapidly evolving digital landscape?

RC: There are a variety of things I would like to see happen faster than they are today.

One of them relates to information released by issuers, where I would like a more aggressive implementation in Canada of a protocol called XBRL (eXtensible Business Reporting Language).  This basically refers to digitally tagging news and company filings with the regulator.  The practical impact is that an analyst can download a company’s financial history directly into spreadsheets.  At the present time, an analyst wanting to initiate coverage on a CSE company has to manually key its financial history into a spreadsheet.

To put it mildly, that is a massive time commitment, with significant potential for error involved.

I would really like to see the Canadian exchanges and regulators get together on a taxonomy of XBRL for reporting financial information for public companies in Canada.  It has already been mandated for use in the United States.

We have also implemented a new trading system and a variety of new technologies around that system.  Although it was a significant investment for us, the benefits have been immediate, including lower operating and data centre costs.

We don’t describe ourselves as a technology company but we do certainly avail ourselves of those tools in a significant way and they up our game from a customer service perspective while helping us to manage costs.

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Canadian Securities Exchange Outperforms Peers Heading into 2017

Many junior and small cap companies have seen a resurgence in market caps as well as investor confidence. For public companies and their shareholders, however, one recurring question is – does where a security is listed make a difference to either the degree to which it will trade (i.e. liquidity) or to the amount of money that it can raise?

Based on data detailing financing and trading activity on Canada’s most popular small/junior cap exchanges, the TSX Venture and the Canadian Securities Exchange, the answer appears to be a resounding no.

Starting first with capital raised, the following table summarizes the amount of money raised as a proportion of the total market cap of the exchange on both the TSX Venture Exchange and the Canadian Securities Exchange in January and December of 2016. This metric provides a measure of effectiveness for a particular company at raising capital relative to its market value.

Table 1: Capital raised divided by market capitalization of CSE and TSX Venture listed securities
 Listing Venue December 2016 January 2016
CSE Listed 2.85% 0.7%
TSX Venture Listed 1.14% 0.4%

While January 2016 was a tough month for small cap entities raising capital, December 2016 was much better. For CSE listed companies, the dollars raised in December 2016 as a portion of the total market cap worked out to be 2.85% – more than double the 1.14% for TSX Venture listed companies.

Despite external market conditions, in both December and January of 2016, CSE listed companies were able to raise a greater percentage of their market capitalization from investors than TSX Venture listed companies were. This implies that investors were more interested in the deals taking place on the CSE rather those on the TSX Venture.

In terms of liquidity, data once again demonstrates that where securities are listed does not appear to determine whether or not investors wish to trade in those particular securities.

As shown in the following table, for both December 2016 and January 2017, the aggregate trading value divided by the total market cap was about two percentage points higher for CSE listed companies than those listed on the TSX Venture.

Table 2: Trading value divided by market capitalization of CSE and TSX Venture listed securities
 Listing Venue January 2017 December 2016
CSE Listed 5.8 % 6.7 %
TSX Venture Listed 3.8% 4.6%

Clearly, the perception that trading is more liquid or that companies are more readily financed if a company is listed on a larger exchange is not borne out by the data. Although a fraction of the size of the TSX Venture, the relative outperformance of the Canadian Securities Exchange shows that ultimately it is the companies and their respective investors that drive interest in deals and liquidity.

Nevertheless, as awareness of the choice available to publicly listed securities in Canada improves, factors such as total value to shareholders will become the more important benchmark for publicly-listed companies to consider when evaluating which venue to list on. As trading, financing and listing data have shown, however, an increasing number of companies and their shareholders are being rewarded for listing on the CSE.

Climbing to New Heights: CSE has Best Year on Record in 2016

It is fitting that in an Olympic year, the motto of faster, stronger, higher could also characterize the year that was at the Canadian Securities Exchange.  After an exceptional performance in 2015, the CSE managed, yet again, to finish 2016 on a record-breaking note.

With trading volume, capital raised and listings on the CSE achieving their highest levels in the exchange’s 13-year history, the Exchange for Entrepreneurs continues to prove that small-cap companies, as well as those who invest in them, benefit from having real choice in the Canadian securities landscape.

And, while the numbers themselves are impressive, the numerous examples of continuous innovation this past year at the CSE demonstrate why they are committed to making 2017 even better.

Strength in Numbers

From a trading perspective, 2016 was the best year on record for the CSE. Order flow came through at 6.4B shares worth a total value of over $1.5B – the highest amount ever since launching in 2003 and a 159% increase over 2015. In addition to the secondary market, investors were also interested in directly funding CSE listed companies. CSE-listed companies participated in 364 deals raising over $400 million in 2016.

While these figures are a great endorsement of companies being able to raise capital on the CSE, the bigger win for companies as well as their investors is that more of that capital could be used for their own growth plans rather than go towards the ‘middlemen’.  As shown in the image below, unlike competitor exchanges, the CSE does not take a percentage of the funds raised which means more money in the hands of entrepreneurs as well as their shareholders. For additional information on why companies are choosing to list on the CSE, click here.

Comparison of fees collected by the Canadian Securities Exchange and TSX-Venture
Comparison of fees collected by the Canadian Securities Exchange and TSX-Venture

On the listings front, the CSE saw a record high number of listed securities in the summer of 2016, reaching 328.  In addition, the CSE’s commitment to innovation meant that, despite a relatively challenging IPO market, five companies elected to go public on the CSE and 38 listings joined the exchange in 2016. The CSE saw the composition of securities listed on the exchange shift to include firms participating in emerging industries like drone transportation, fintech as well as medical marijuana.

Finally, with regards to performance, the CSE Composite Index, a benchmark of performance of the CSE, finished 16.1% higher compared to 2015 and the 103 firms (as of December 19th) that constitute the index had a collective market cap of over $2.3B.

The Value of a Handshake

Part of what has contributed to this record-breaking year has been a consistent focus on the entrepreneurs, companies and investors that choose to work with the CSE. Despite the realities of operating in an increasingly digital world, the CSE made a concerted effort to reach out in person to entrepreneurs and investors across the globe.

From coast to coast across Canada, as well as throughout the US, Europe and even as far away as Mongolia, the CSE team members attended, sponsored or hosted over 40 events throughout the year. In those travels and conversations with many entrepreneurs, it was abundantly clear that modern capital markets are global in nature and that the CSE has an increasingly global reach. Many of the chronicles of the CSE team’s travels from 2016 can be found on the CSE Facebook page here.

Another important outcome of talking to entrepreneurs in person was the discovery that many of them were curious to understand the requirements and realities of taking a company public.  As a result, this past year marked the launch of the first ‘Going Public’ boot camps in 2016.

James Black, VP Listings Development, introducing the first edition of the CSE Go Public Boot Camp in Vancouver
James Black, VP Listings Development, introducing the first edition of the CSE Go Public Boot Camp in Vancouver

These one day workshops were held in Vancouver and Toronto and brought together capital markets professionals and entrepreneurs for an intensive and informative session on what it takes to succeed as a growing company.

Both sessions were met with an overwhelmingly positive response, indicating that, regardless of what stage they may be at with their respective businesses, entrepreneurs value learning about the path to going public. For those who missed it, recordings from the Vancouver session are available on the CSE YouTube channel here.

Committed to Innovating

Capital markets are rapidly evolving and becoming increasingly reliant on technology to power all parts of the capital formation ecosystem. In 2016, the CSE implemented a number of enhancements to the overall technology infrastructure that helped pave the way for expansion and improved service delivery.

In April of 2016, the CSE rolled out its newly designed responsive website. Rebuilt from the ground up, this new website streamlined the user experience to enable visitors from screen size to access data on the CSE as well as the companies listed on it. In addition to the design and layout changes, the addition of integration with social media, such as Twitter, enabled website users to stay updated on the latest developments and activities at the Exchange for Entrepreneurs.

Another important development to the CSE’s digital evolution in 2016 was the increased focus on digital communication, specifically across social media.

We are excited for the launch of the National Angel Capital Organization’s new publication! Here is James Black of the #CSE with Yuri Navarro, CEO of NACO.

A photo posted by Canadian Securities Exchange (@canadiansecuritiesexchange) on

The CSE added another digital channel, Instagram, into its stable of digital social media channels. Over the past year, followers of the CSE as well as listed issuers and investors were able to get an increasingly detailed view of the work of the CSE as well as exclusive access to what goes on behind the scenes at the Exchange for Entrepreneurs.

Finally, one of the big technology projects of 2016 was the rollout of a new trading engine that improved performance, decreased latency as well as enhanced stability all the while consuming less resources than the previous system.

Looking Forward to 2017

With such a strong performance in 2016, the bar has been set high for 2017. While it is difficult to predict exactly what the year ahead will bring, the CSE will continue to stick to its winning formula of putting entrepreneurs first, committing to innovation and providing real value to public markets.

Record Growth in an Evolving Marketplace: An Interview with Richard Carleton

2016 will officially go down as one of the best years in the Canadian Securities Exchange’s history.

At the outset of the new year, CEO of the CSE, Richard Carleton, sat down with Peter Murray of Kiyoi Communications to discuss and reflect on the achievements of the CSE in 2016 as well as to provide insight on the capital markets ecosystem and what’s around the corner for the CSE in 2017.

Below is the full text from both parts of their interview (for ease of navigation, links to each part and topic have been provided).

Part 1: A look back on 2016 & look ahead to 2017

The first portion of the interview focused on the performance of the Canadian Securities Exchange in 2016, including the record trading and capital raising efforts from companies listed on the exchange. In addition, Richard Carleton highlighted a number of important operational and technical investments that were made to facilitate future growth and enhance investor experiences at the CSE.

Peter Murray (PM): The year 2016 was a particularly good one for the CSE and the financial community is interested to learn what the exchange’s plans are as we enter 2017.  I’ll begin by asking you to walk us through some of the milestones and accomplishments at the CSE during the year just finished.

Richard Carleton (RC): The headline event would be the performance of our overall market, where we enjoyed record trading volume, trading value and number of trades for our CSE listed companies.  We saw very strong momentum begin to build about halfway through the year and it grew to a crescendo in the month of November.  For all members of the team, and perhaps particularly those of us who have been working with the organization from near inception, it was tremendously gratifying to see the investing public accept our issuers to the extent they did.  From an external perspective, I think that is the headline story.

At the same time, I would say some of the things we did behind the scenes were equally important.  We invested very heavily in our infrastructure in 2016.  The first tangible evidence of this effort was the new website launched early in the year.  Though we received plenty of positive feedback on the improved look and usability of the website, we worked to further refine it on a continuous basis over the balance of the year.  I think the website presents a clean, professional and complete view of the Canadian Securities Exchange to all visitors.

We also invested in our trading infrastructure.  In mid-December, we completed the final stage in launching a new trading system that is approximately 11 times faster than our former system but requires considerably less hardware to operate.  For us, that means we are offering a higher level of service at a lower operating cost.

In addition, we bundled the new trading system with order routing solutions, compliance and risk management services.  For example, we provide features such as “fat-finger” protection, credit limits, risk limits, and risk tolerance limits to assist dealers trading on our exchange with meeting their risk management obligations to clients.  Basically, it gives dealers new tools that enable them to provide a higher level of service to their clients.
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PM: You mentioned new volume and value records.  Statistics released by the CSE during the year showed year-on-year volume growth of over 100% in some months.  What drove these increases?

RC: There clearly was a lot of investor interest in the legal cannabis sector, both in Canada and the United States.  With propositions on the ballot during the US election in eight states to either permit medical marijuana or legalize it outright, the belief was that companies active in the US market could have a tremendous increase in business opportunities available to them.  In the run-up to the election we saw a big increase in trading and price performance for names in the sector.

Canada-focused cannabis companies were also caught up in the investor interest given the posture of the federal government toward liberalizing laws in this country.

But I’d hasten to point out that cannabis-related companies weren’t the only ones fueling the growth.  A number of natural resource issuers and technology companies also traded heavily in the latter half of the year.  The result was a string of monthly records for share turnover, value traded and number of trades as we went from September through November.
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PM: On the oversight front, there is an ongoing effort to update the rules companies must abide by while on the exchange, as well as during the listing process.  Where do things stand currently?

RC: Most of the work has been taken up in two specific areas: original listing requirements and continued listing requirements.  The new requirements for original listings have been implemented.  We increased a number of the thresholds, which essentially had not been adjusted since the exchange began business in 2003.  In the intervening 13 years, some of the numbers came to need a reassessment.  Still, I would say that all of the companies approved for listing prior to the adoption of the new requirements would have made it under the new rules as well.

If you consider this together with the work we did in 2015 on plans of arrangement, we are trying to communicate to the investment community that we need to see companies with a business plan and sufficient capitalization to meet financial requirements for that plan over a 12 to 16 month period prior to listing.

To assist companies in meeting their disclosure obligations, both as they list and subsequent to listing, we retained two very important individuals in 2016.  Dr. Francis Manns is now our consulting geologist working with prospective issuers to provide expert-level peer review of 43-101 reports, or in the case of oil and gas issuers 51-101 reports.  Francis is universally respected in the mining and financial communities and is a real asset for resource companies to work with as they list with us.

Another strong addition is John Hughes, who joined our compliance team in a management capacity.  John is a consulting accountant who advises firms on the impact of IFRS and other contemporary accounting issues.  John reviews financial statements and other disclosure documents from prospective and current issuers with a view to helping companies meet the highest standards when it comes to financial reporting and disclosure.

For companies listing with us, having Francis, John and the other experts on our team to turn to is a real benefit.

We are still working on the continued listing requirements and the idea there is to establish minimum criteria a company must meet to remain listed on the exchange.  The objective of the exercise is to ensure companies on the exchange are actively pursuing the business they have set out in their disclosure materials and listing statement.  If a company decides that it needs to raise additional capital or find another business, it has a period of time in which to do that, but we are not going to allow inactive companies to reside on the exchange indefinitely.
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PM: Quite clearly, 2016 was a year of progress on multiple fronts.  What is the CSE team preparing to focus on as we enter 2017?

RC: Now that we’ve got the new trading system running we are really going to shift our attention to improving market making and overall market quality for our issuers.  We have been working with several dealers on ways for market makers to deepen liquidity and reduce the choppiness in prices by contributing buy and sell orders to the CSE book.  Ensuring that companies have a continuous two-sided market is quite important for issuers and their investors.

We are also going to be continuing our efforts to bring companies listed on the exchange to the attention of investor audiences in Canada, the United States and beyond.  We are planning quite a few events over the course of 2017 designed to introduce more potential investors to our issuers.  And, of course, that has the side benefit of demonstrating to entrepreneurs deciding where to list that they should choose the CSE ahead of some of the alternatives, as we quite actively support the efforts of our issuer community in markets around the world.  This is going to be another important focus of our energies over the course of 2017.
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PM: The CSE approach to issuers and markets has some unique aspects to it.  Do you think the CSE has helped change the environment for securities listings in Canada?

RC: Well, we sure hope so.  Our Senior Vice President of Market Development, Rob Cook, said the other day that when the organization launched in 2003, while we may not have been re-inventing the wheel, we certainly set out to apply a healthy degree of lubrication to the process.  And in many respects we have successfully done that.  We are continuing our mission to facilitate the lowest cost of public capital for small-cap companies in Canada.  The principal means by which we do that is improving the listing process and the secondary trading environment, and we work with as many parties as we can to accomplish our objectives.  This is our core strength and we will retain that commitment to a higher level of service for our issuers.
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Part 2: Industry Insights

In the second portion of the interview Richard Carleton provided his insights on a spectrum of issues facing Canadian capital markets. In particular, Carleton provided his take on the evolving landscape for IPOs, performance of commodities markets, algorithmic trading and opportunities for Canadian listings in the US.

Peter Murray (PM): Data shows that 2016 was a slow year overall for Initial Public Offerings in Canada.  What is your viewpoint on what has happened to the IPO and what is going to be its role for future public financings and listings?

Richard Carleton (RC): I don’t think there is any doubt that the decline in the number of IPOs is more than a cyclical phenomenon.  We have witnessed a sea change in how early stage corporate finance is conducted in Canada.  Participants are voting with their feet and avoiding the IPO process.  They are doing so because of concerns about cost, concerns about delay in having their prospectus approved, and also that there are now very few dealers who have the capacity, willingness or business model to support a small-cap IPO and distribute the securities to their clients and to the clients of other members of an underwriting syndicate.

The so-called “exempt market” has really stepped into the gap.  Here, I am talking about dealers (specifically “exempt market dealers”) who are able to distribute securities on the basis of one or more prospectus exemptions in the different securities acts.  The most common means, the “accredited investor” exemption, where securities may be distributed to high net worth individuals and institutions without a prospectus, accounts for the lion’s share of the funds raised by early stage companies in Canada today.   I prefer to think of this development as less as of an IPO crisis than as the emergence of a new dynamic, the funding of new businesses via the exempt market.  Typically, a new company will conduct a reverse takeover of an existing listed company, or existing listed company management may decide to undergo a fundamental business change.  In both cases, the exempt market is where 90% to 95% of the funds are being raised for new CSE companies.  This development means we are working not just with the traditional IIROC dealers on their underwriting activities, but also with exempt market dealers who are the lead actors in this new access to private capital for public companies.
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PM: A year or two ago when junior markets were having a particularly tough time, some observers criticized predatory trading practices for contributing to the weakness.  Are such things as high-frequency trading and black boxes issues for companies on the CSE?

RC: We saw the first consistent participation by high-frequency trading firms on the CSE this year.  These firms were pursuing a market-making strategy, which means they are significant contributors to the available liquidity in a particular stock.  The firms are very competitive; they tend to narrow spreads and provide for deeper order books.  I believe it has contributed in a positive way to liquidity on the CSE.  There were complaints voiced about “HFTs” a few years back when there was a lot of selling pressure, but we didn’t hear so much in the way of concern when the early stage markets began to recover.
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PM: Given the differences in the two markets, there seems to be an opportunity to harmonize Canada’s public venture market with capacity in the United States for deal flow and retail investing.  How do you see this developing and what role can the CSE play?

RC: There is no doubt Canada is an extremely advantageous jurisdiction in which to launch a smaller public company.  The economics don’t really support it in the US, UK or EU.  Arguably, Australia is the only other place in the world where small companies without revenues – typically mineral exploration companies – have an opportunity to raise public capital.

We know from experience that there is a lot of interest in our companies from investors in the United States.  We have a close working relationship with the OTC Markets Group in the US and in many cases we encourage issuers to obtain a quotation on one of the OTC’s regulated boards and to make sure their securities are properly registered with the clearing and settlement agency in the United States.  With these measures, US-resident retail investors will be able to trade these stocks via their discount brokerage accounts.

Issuers end up enjoying the best of both worlds.  They have a relatively low-cost jurisdiction in which to list their company, but at the same time can tap the US capital markets for both investment capital out of the gate and further rounds once they are trading in the secondary market.  That is something several of our companies have taken advantage of.  Generally, companies that obtain a US quotation have seen an immediate improvement in liquidity and it gives them additional fundraising opportunities in the US.  The fact is that Canadian public companies travel very well internationally.
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PM: Do you have any closing thoughts for issuers and investors, perhaps on issues we have not addressed so far?

RC: I would more so just take the opportunity to state again that the two things we will focus on in 2017 are working more with market-making and other groups to improve liquidity, and secondly that issuers should expect opportunities to work with us to promote both the exchange and their companies on an international basis.  We are going to be very active in the US, in Europe and potentially in Asia as well.

Really, what this is all about is proving the value of a listing on the CSE, and in so doing make the challenge facing our issuer companies of raising funds significantly easier.
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Record third quarter for CSE continues momentum through Q3 2016

CSE is proud to present its most recent quarterly update video and press release below highlighting the record third quarter of the year at the Canadian Securities Exchange:

Multiple Industry Sectors Push CSE Trading Volume, Financings to New Records in Third Quarter of 2016

CSE Posts Record Activity in Q3 of 2016

The Canadian Securities Exchange (CSE) today released performance metrics for the third quarter of 2016 highlighting continued strong growth, particularly in trading volume and capital raised by CSE listed companies. Both measures rose to the highest levels ever recorded by the exchange.

Key Statistics

  • Trading volume in CSE listed securities climbed 138% compared to the third quarter of 2015 to 1.27 billion shares;
  • Companies listed on the CSE conducted 85 financings for gross proceeds totaling $109 million, an increase of 222% over the same period a year earlier;
  • The CSE finished the July-September quarter with 315 listed securities, 13 more than at September-end 2015;
  • Trading on the CSE platform in securities listed on other exchanges totaled 811 million shares, higher year on year by 59%.

Metrics for January through September also set records, with the 3.27 billion shares traded in CSE listed securities outpacing the total for all of 2015 (2.48 billion shares). CSE listed companies raised $226 million in the first nine months of the year, compared to $195 million in full-year 2015.

Trading volume continues to gain momentum in the fourth quarter, with a record 99,704,073 shares trading in CSE listed securities on October 6. Over the past 30 days the CSE has set new records for both daily trading volume and number of trades on seven occasions.

Several CSE issuers ranked among the most actively traded public companies in all of Canada during the quarter as investor interest increased across most industry sectors, and particularly for life sciences companies. The CSE also welcomed one of the few Initial Public Offerings completed in Canada this year when Glance Technologies Inc. (GET) made its trading debut on September 7.

Toward the end of the quarter, the exchange announced several important executive level appointments, and the addition of a highly experienced financial industry executive to its Board of Directions (http://thecse.com/en/news/cse-announces-senior-appointments-to-board-of-directors-compliance-and-listings-teams). The appointments were made to expand business development coverage and deepen the pool of expertise in the listings review group.

The CSE team remained hard at work connecting with entrepreneurs, hosting events in Vancouver, Calgary, Montreal and Toronto during the quarter, as well as presenting and exhibiting at the first ever Mines and Money conference held in North America. Senior exchange staff also travelled to China and Mongolia to continue outreach efforts in growing overseas markets.

The exchange is pleased to report that it will soon implement a new trading system technology featuring execution services for all equities listed in Canada. Related to this, a commitment to heightening the visibility of companies listed on the CSE through continued investor events and publications (including the CSE Quarterly magazine), plus support for market-making and other activities, will assist with further advances in volume and liquidity.

“The CSE is firing on all cylinders, with an improved capital markets backdrop helping our issuers to meet, and in some cases exceed, their financing targets,”

said Richard Carleton, CSE Chief Executive Officer.

“Having added several talented executives to our team, the CSE is positioned even more strongly to facilitate access to growth capital for entrepreneurs at the lowest possible cost, while providing liquid and accessible trading services for investors anywhere in the world.”

CSE Summer 2016 Adventure Recap

This past summer, the CSE team set out to meet and greet entrepreneurs all across Canada.

From Bay St boardrooms to Alberta badlands and a few golf courses on either side , the CSE team had a great time connecting  with listed issuers as well as with folks interested in learning more about how the CSE can help junior companies improve access to the lowest-cost of public capital.

Check out the highlights from this summer’s adventures below and be sure to stay on top of all of our upcoming events by visiting the new and enhanced events calendar here or by following us on Twitter or Facebook.

via GIPHY

Calgary Stampede Pre-Stampede Breakfast

The CSE was thrilled to welcome a record setting crowd to this year’s breakfast (150+!), an annual institution for the CSE and its network of friends and supporters in Calgary.

Along with a healthy spread of pancakes, sausage, and other breakfast staples, the crowd was treated to a welcome address from CSE CEO Richard Carleton who dusted off his best western wear for the occasion.

Mark your calendar for next year’s occasion which is slated for July 6th! Yahoo!

Summer Golf

Summer Golf was in full swing for the CSE in August, where amateur golfers across the organization gathered to crush drives, sink puts, and network over 18 holes of scenic golf courses.

Our team hosted the first annual Montreal Summer Golf at the members only Mr. Bruno Country Club – an event so exclusive we could not even take photos! Rumour has it that it was a competitive round highlighted by exceptional play of CSE Senior Advisor Scott Pritchard.

Toronto was also on the tour, where Senior VP Rob Cook and Director – Listed Company Services Barrington Miller showcased their game at the TechConnex golf tournament.

Finally, in Vancouver, another “first annual” golf tourney was hosted at Northlands Golf Course – where a group of 24 played a friendly round of Texas scramble on what was agreed to be “the nicest day of the year” – a claim supported by the photos included in this gallery.

Canadian Securities Traders Association Conference

A marquee event of any Summer is the annual CSTA (Canadian Securities Traders Association) Conference – held this year in beautiful Whistler, BC.

Often a productive mix of both business and pleasure, the CSE managed to strike a good balance between both.

From a business perspective, CSE CEO Richard Carleton participated on the much anticipated marketplaces panel, lending his thoughts on the status of exchanges and leading trends in the trading world.

Afterward, CSE offered up an equally substantial piece of hospitality, hosting an exclusive dinner at the renown Araxi Restaurant + Oyster Bar.  A truly spectacular meal (accompanied by choice wines) was followed by an impromptu lottery and betting pool in anticipation of the Tragically Hip’s final song during the next evening’s concert.

The trader spirit was in full effect!

Strong second quarter for CSE leads to record first half of 2016

CSE is proud to present its most recent quarterly update video and press release below highlighting the record first half of the year at the Canadian Securities Exchange:

Growth in Trading Volume and Financings Highlight Productive Q2

CSE Posts Record Activity in First Half of 2016

The Canadian Securities Exchange (CSE) is pleased to release an update on activity of the second quarter of 2016, resulting in a record first half of 2016 highlighted by record trading volume, changes to listing requirements, and initiatives to help CSE issuers build on recent positive momentum in financing and other aspects of corporate development.

Key Statistics

  • Trading volume in CSE listed securities grew 64% compared to the first half of 2015 to 2.01 billion shares;
  • The CSE finished the first six months of 2016 with 328 listed securities, up 12.3% compared to the same period the previous year;
  • CSE companies conducted 178 financings for total gross proceeds of $123 million, up 28.4% over the first half of 2015;
  • Trading on the CSE in securities listed on other exchanges totaled 1.82 billion shares, an increase of 19.1%.

Growth in trading volume and financing proceeds during the first half of the year reflected both the increased number of securities listed on the CSE and noticeable improvement in Canadian investor sentiment across all sectors. The 2.01 billion shares traded in CSE listed securities in the first six months of 2016 puts the exchange well ahead of its pace of 2015, when a record 2.47 billion shares traded for the full year.

The CSE is proud to highlight a busy first half supporting issuer outreach to the financial community with a variety of activities. These include CSE Days held in major cities where executives enjoy the opportunity to present to audiences of financial industry professionals, retail investors and issuer peers.

The exchange also published new issues of its CSE Quarterly magazine, the most recent leading with a profile of the CSE’s top performing companies as measured by growth in market capitalization (the CSE Quarterly magazine can be viewed at http://blog.thecse.com/2016/06/01/cse-quarterly-issue-9-now-live/).

In addition, the CSE launched a new website in April. The modern format makes it easier for investors to gather information on CSE companies, and for both existing and prospective issuers to access the resources they need to make interaction with the exchange as efficient and cost-effective as possible. The CSE’s new website can be accessed at http://www.thecse.com.

Other achievements in the first half of 2016 included a comprehensive update to initial listing requirements. Proposed changes were published for comment in February and following feedback the modified rules were submitted for regulatory approval. The new requirements will become effective in Q3 upon publication of a notice from the exchange.

In the second half of 2016, the exchange will work to finish a review of continued listing requirements for listed companies. A list of proposed amendments will be published for comment in the near future.

“The CSE team is constantly working on new and dynamic ways to drive our mandate, which is supporting entrepreneurs and lowering the cost of capital for early stage companies,”

said Richard Carleton, CEO of the Canadian Securities Exchange.

“The activities we undertook in the first half of 2016 made our offering as an exchange stronger, as evidenced by growth in both trading volume and financings closed by our issuers. We will continue to support CSE listed companies with a variety of public efforts, and by working with regulatory authorities to improve the operating environment for Canadian financial markets as a whole.”

For the full-length semi-annual interview with CSE CEO Richard Carleton please click here for the transcript.

Navigating Shifting Landscapes: An Interview with Richard Carleton, CEO of the CSE

Richard Carleton, CEO of the CSE
Richard Carleton, CEO of the CSE

The first half of 2016 has been eventful for the CSE as well as for early-stage securities markets more broadly. With a return in trading activity and prices in the shares of early stage companies, investors are once again shifting focus back to  growth stage firms.

While price action is one part of the story of any publicly listed entity, there are also other forces that influence the health, competitiveness and overall sustainability of the growth stage marketplace.

In a recent interview with Peter Murray of Kiyoi Communications, CEO of the CSE Richard Carleton discussed some of the milestone achievements at the Exchange for Entrepreneurs thus far in 2016, as well as his take on the forces shaping capital raising structures and participants.

Below is the transcript of their interview:

(PM) Earlier this year the Investment Industry Regulatory Organization of Canada (IIROC) requested written proposals for addressing market structure issues facing small-cap issuers.  What were some of the important themes identified in the CSE’s response?

(RC) IIROC asked a variety of participants in the small capitalization space – exchanges, issuers, broker dealers and other stakeholders – to comment on, and propose potential solutions to, a number of specific issues raised over the last few years within the industry.  This took place on a couple of levels, one being the technicalities of such things as short sale rules, tick size and board lots.

The CSE thought it was also important to look at the bigger picture and where the industry can go over the longer term to address what we think is a significant issue, which is a noticeable reduction in buyer interest.

When we look at what has happened to the junior capital space in Canada over the last five to seven years, the decline in commodity prices has clearly had a major influence.  For certain, it has encouraged some investors to look at opportunities outside the small-cap space.  But we think that the problems afflicting small-cap formation in Canada go beyond the decline in commodity prices.

Broad industry change is continuing to take place, a big one being the decline of the independent brokerage firms in Canada, and a rising concentration of assets under management at bank-owned dealers.  The independent firms have long been an important part of the community helping to finance resource exploration, technology research and other forms of business development important to the Canadian economy.

What we see in the current environment, however, is that many of the independent firms have disappeared, with the remaining firms experiencing extreme pressure on their business models.  These firms are an important source of retail investor interest in small-cap stocks through the support of their investment advisors, where a dealer will commit to an underwriting or participate in a dealer syndicate supporting an underwriting or capital raise.  And in the secondary market they support trading through stock recommendations and research.

That model has broken down to a significant extent over the past five years and instead what we increasingly see is corporate finance being conducted through the exempt market.  Speaking from the perspective of the CSE, we see about 90% of the money raised by our issuers coming from the exempt market.

So-called accredited investors are the primary source of capital in the exempt market.  But accredited investors in Canada only represent about 1-2% of all households.  This sharply narrows the number of investors eligible to participate in small-cap financings and, needless to say, limits the amount of money available for companies to raise.

The industry has adjusted to the decline of the independent broker by leaning more and more on the exempt market.  But at the CSE, we are concerned that this is far from a complete answer to corporate finance challenges moving forward.

(PM) What do you see as some of the solutions to reinvigorating the early stage capital formation process in Canada?

(RC) One of the things we really need to do is engage the next generation of investors.  The industry is not doing a good job of encouraging the next generation of investors to come into the Canadian equity markets.  One approach to consider is providing a very clear set of guidelines for early stage crowdfunding.  It is a potential source of modest amounts of money, say around $1 million to $1.5 million, but the funds can be acquired at relatively little cost to the companies raising the money.

The problem in Canada is that we have a fragmented regulatory regime with different sets of rules dictating how crowdfunded offerings can be marketed, depending on the residency of the potential investor.  This makes it confusing for people to know if they can participate or to what extent they can participate in a given offering.

It also makes it difficult for those managing the websites that people use to find out about different investment opportunities to carry out compliance activity on a national basis.  The whole process becomes complicated and the likelihood of making mistakes rises significantly.  You have to decide between limiting an offering to a province or group of provinces that have the same rules, or taking on the compliance risk associated with doing a national offering across Canada.

That’s a real problem that adds cost, complexity and confusion for everyone involved.

The other issue is that once a company is beyond the crowdfunding stage, there really isn’t much other than the accredited investor exemption to help companies to raise funds.

The CSE is looking very carefully at new legislation in the United States that has come into force just recently under the JOBS (Jumpstart Our Business Startups) Act.  The objective in that case was to provide a relatively simple means of raising equity capital from the public that eliminated the necessity of having to file a prospectus with the Securities and Exchange Commission (SEC) or become a reporting issuer with the SEC.

In the United States, companies will be permitted to raise up to $50 million per year and to market these offerings to individual investors subject to participation limits of $1,500 per opportunity and an aggregate of $10,000 per year for each investor.  These rules are in place across the United States and require a relatively limited amount of work on behalf of an issuer.  For companies on the CSE it would be a very cost effective means of raising capital from individual investors because our companies already meet most of the requirements to participate in such offerings.  They file quarterly financial statements, their audits are subject to annual review, secondary trading is monitored by an independent third party, plus they have continuous disclosure requirements and are regularly providing updates to the investing public.

With all of those benefits available, CSE companies are positioned well to take advantage of such funding opportunities.  In fact, we already have one company in the process of marketing an offering under the JOBS Act right now.

We would really like to see a similar mechanism put into place in Canada because it would provide a bridge between crowdfunding and full-blown prospectus-led offerings, which have to be reasonably large before the associated cost begins to make sense.

One of the key things to understand here is that instead of limiting participation to accredited investors – people with large investment portfolios or substantial annual incomes – the new rules actually present the opportunity to engage a whole new generation of investors in the equity market.  And really it is that generation that we have to bring into the market in order to provide a successful and healthy ecosystem for capital formation in the coming 15-20 years.

When I go to industry events, I am often surprised at the average age of people in attendance.  The average is quite high and that is not a sign of an industry positioned to continue supporting the needs of growing enterprise in Canada for the next generation.  We need more young people engaged and we feel that a clear-cut means of permitting them to invest in companies directly and trade the shares afterward is very important.

(PM) What specifically is the CSE doing to help ensure this new environment is fostered?

(RC) I think one of the challenges we have in Canada is the fragmented regulatory regime when it comes to equities.  It is pretty clear if you look where we are with crowdfunding rules and how different they are across Canada that we don’t have an awful lot of commitment to broadening access to the equity markets from the various securities commissions.  I think what we are going to have to do is engage the political side.

When you look at any of the provincial governments, and certainly the federal government, they frequently talk about supporting innovation, new technology development and entrepreneurship.  You can’t read a press release from any of the governments over the last little while without seeing those ideas held up as a means to promote economic growth in Canada.

The problem is that none of this is going to happen if these new companies can’t get funding.  And there is a limit to the amount of public funds that can be devoted to the space, so we are going to have to figure out ways to engage the private investor in these companies.

This is a long-winded way of saying I think we are going to have to actively engage the political side, which is exactly what happened in the United States with the JOBS Act.  That in fact was not an initiative of the Securities and Exchange Commission, but something that came from Congress as a means of promoting investment in early stage enterprise in the United States.  We think there would be substantial political will for a similar approach at the provincial and federal levels in Canada.  I think that is the path to genuinely reforming the investment process here in Canada.

(PM) The CSE recently launched a new website that clearly was created with a specific vision in mind.  How has the reaction been so far?

(RC) The response has been almost universally positive.  People really like the modern, clean design and particularly how easy it is to navigate on the website using a mobile device.

We are learning a lot about where visitors go and what types of information are most important to them.  This enables us to be responsive in making sure it is easy to get to the most popular types of information.  You can plan all you want, but when the real-life data comes in you always see things you were not aware of.

I’m also excited by our greater use of social media, which includes promoting our blog through Twitter plus posting photos, and sometimes even real-time video, of specific events.  That is an area where I think we will continue to extend our presence as the website evolves.

Actually, social media is a topic worth discussing further.  Most, if not all, dealers in Canada prevent their investment advisors from using Twitter, Instagram and other social media platforms for communicating with existing and potential clients.  From a compliance perspective, they want the ability to control and edit messages before they go out, but the immediate nature of social media makes it a difficult fit for that type of tightly controlled environment.

Now, contrast that with the US JOBS Act provisions, which allows securities to be marketed over the Internet.  That is something perhaps the older generation may not be so comfortable with, but it is how younger people get their information and shop and interact with the rest of the world.  If we as an industry are not prepared to engage with people using social media, we’re in trouble.

(PM) The new website and social media are not the only ways in which the CSE interacts with its audience.  You are doing quite a bit to help issuers tell their stories via the CSE Quarterly magazine, company-specific articles, video opportunities, an extensive blog and person-to-person interaction at CSE Days.  What is the ultimate objective of these activities, as they obviously require the exchange to commit significant resources?

(RC) We want to provide multiple platforms on which issuers can tell their stories.  One of the challenges you have as an early stage entrepreneurial company is that there are not usually a lot of specialized public relations and investor relations professionals around to help out.  Everybody at the company is too busy trying to build the business.  Whether it is development of a technology, or if it is to advance an exploration program if you are a resource company, they often don’t have the time or resources necessary to engage with those in the community who are potentially interested in their story.

As an exchange, we can help our issuers to help themselves by providing all of these different vehicles for conveying their excitement about their businesses to a broader community than they might otherwise reach.

(PM) Toward the end of February, the CSE requested comment on proposed changes to its listing requirements.  What kind of feedback have you received and how close is the exchange to implementing some of its ideas?

(RC) We received approval from the Ontario Securities Commission in late June to implement the proposed changes, so you’ll be seeing them take effect shortly.  We had not amended our listings criteria since we launched in 2003.  With the benefit of over a decade of operating the exchange, and also given the price inflation that has taken place over that time frame, we felt it appropriate to update a number of the financial measures in the original rules.  We have also provided a lot of guidance around certain types of transactions, whether it be reverse takeovers or companies creating reporting issuer subsidiaries through plans of arrangement.  We want to provide very clear guidance about what our approach is to all types of prospective applicants.

We first worked with the securities commission on the proposed amendments, and then put them out for public comment.  The comments were quite supportive and we also received some questions that were addressed through minor amendments to the proposals.

I would point out that we expect to shortly be proposing further amendments to our listings policies and requesting comment on them as well.  The new proposals will mostly focus on continued listing requirements so that we have certain financial and other measures companies have to meet if they are to remain listed on the exchange.

By and large they are not focused on the price of the shares or trading activity because that can be a result of factors beyond a company’s control.

The exchange’s list of issuers continues to expand and we are seeing more and more fast-growing, high-profile companies choose the CSE as the exchange on which they want to build their business.  It is important that we keep pace with this interest and expansion by continually reviewing how we operate as an exchange and make sure we are serving our user community in the best way possible.