The CSE is fast becoming the exchange of choice for innovative and entrepreneurial public companies. Every day there are stories of companies joining the exchange who wish to harness the advantages that lower cost access to capital brings. Along with its growth as a securities exchange, however, the CSE is also establishing itself as a nexus for innovation within the Canadian capital landscape.
To provide a gauge of innovation at work at the exchange, the CSE along with partners at Solactive AG, developed an index of CSE companies which launched shortly before the beginning of March this year. Solactive calculates indices for over 160 clients across the globe.
The CSE Composite Index is a cap-weighted index and is made up of companies listed on the CSE with a market cap of at least $5 million.
At the most recent count, the CSE Composite Index represents 65 issues across a diversity of sectors and has a combined value of just over $1.6 billion. The index is rebalanced quarterly (on the third Friday) in March, June, September and December.
As can be seen in the graph, technology firms make up a substantial portion of the listings in the index followed by mining, diversified industries, life sciences, clean tech and oil & gas respectively.
With the index being less than a month old, and having undergone its first rebalancing, there appears to be a promising future ahead of it. Nonetheless there are still some important milestones to reach. One of the big challenges that is being addressed, for example, is ensuring widespread access to the performance data of the index.
Currently quotes are available via Bloomberg or Thomson Reuters with the ticker CSECOMP. The CSE hopes to widen access to multiple sites and quote feeds in the near future. For the moment, index performance updates are also available on the CSE website homepage. Also, the CSE Composite Index information page contains details on which companies comprise the index as well as additional data on sector weightings, top holdings and historical performance.
Question: Are there any personal interactions you had with issuers in 2014 that stand out (i.e. any stories to share)?
Carleton: One of the best parts of my job is meeting with companies at the pre-public stage, and then seeing them again a year or two later in serious growth mode. In particular, it is great to see the number of jobs, many of them highly skilled, that these companies are creating.
It was a very positive experience seeing the interest and support from international investors for early stage Canadian stories. I also had the opportunity to meet with a number of European finance people who are interested in bringing companies to Canada. There is no viable means of access to public capital for companies in Europe. This is a huge advantage for the Canadian economy!
Question: What feedback did the CSE receive from funds and other institutional investors in 2014? Are there plans in 2015 to further enhance the CSE’s presence and relationships with the institutional investment community?
Carleton: People are surprised to learn how many institutions invest in CSE-listed companies. We had a great opportunity to interact with many of these players in 2013 when we joined to successfully resisted attempts by the Canadian regulators to reduce the “Early Warning” requirements for investors from 10% to 5%. Continuing to identify institutions interested in early stage public equity, and educating them about the benefits of the CSE model is a focus this year.
Question: The Canadian Securities Exchange being “The Exchange for Entrepreneurs,” individual investors necessarily play an important role in trading liquidity. What can the Exchange do to attract greater participation by individual investors, or is that more so up to issuers?
Carleton: We can support investment in CSE-listed companies by retail investors in a number of important ways:
Ensuring that the platform of choice (most often a discount broker) has access to our quotations, company information and electronic trading access.
Making sure that retail investors know that real-time quote information is available on an increasing number of popular web channels (Google Finance being one).
Encouraging investors to use our web site (www.thecse.com) to obtain company fundamental information and a link to the issuer’s SEDAR filings. Investors should also take advantage of the monthly updates posted by management of our listed companies, a disclosure feature unique to our market.
Continuing to work with various media outlets to improve the coverage of CSE-listed companies.
Question: Are there are any important regulatory trends the Canadian Securities Exchange and/or its issuers should be aware of heading into 2015?
Carleton: We are very concerned that the costs of various well intentioned regulatory initiatives (CRM2 for example) are being unduly borne by the independent dealer community. These dealers have played a very important role in supporting capital formation and trading for early stage companies. These dealers are clearly in distress: a number of well-known names have disappeared in the last year or so. This is not a supportive trend.
We are also concerned about the increasing complexity of Canadian equity market trading structure. Again, the banks and international dealers are able to bear the costs of responding to all of these new trading platforms, order types and modalities.
Dealing with all of this new complexity will be an increasing compliance and cost challenge for many of the independents.
Question: Please comment on financing trends in Canadian securities markets, and as they relate to the Canadian Securities Exchange in particular.
Carleton: As mentioned, 2014 was a record year for financing on the CSE: more than $150 mm was raised by issuers over the course of the year. This represents, however, a small fraction of the money raised on the Canadian public markets.
We continue to hear, from issuers and corporate finance professionals, that raising money for early stage companies across the business spectrum is increasingly difficult. What we hope to see, are more investment success stories that validate the public finance model.
In simple terms, if people see that other people are making money by investing in the space, we will draw more investment dollars in as a consequence.
Question: Aside from Canada, what are the major jurisdictions of importance for the Canadian Securities Exchange and why?
Carleton: We had a material success in the United States in 2014. We were recognized by the operator of the US OTC markets as a “designated exchange” early in the year, meaning that CSE-listed companies could apply to move from the unregulated “Pink Sheets” market, to the regulated QX or QB boards.
Almost 100 of our issuers made the move, meaning that they had a two-sided quote in US dollars on OTCQX, accessible by US residents through their domestic discount broker platforms. Market makers providing the liquidity in the US also participated in the CSE book, causing tighter spreads and greater trading volume. A true win-win for all concerned.
We look forward to replicating this model with exchange operators in the European Union and the United Kingdom in the coming year. In addition, we are expanding our direct sales and marketing efforts into the United States, South America, China and South Asia in the coming year.
Our sense is that we can leverage Canada’s ability to finance early stage companies into a destination for qualified international issuers on the CSE. 2015 promises to be a very exciting year for the exchange.
For many at the Canadian Securities Exchange, 2014 was a year to remember with records shattered and the Exchange gaining traction and momentum heading into 2015.
In this exclusive two-part series, CSE Chief Executive Officer Richard Carleton discusses the record breaking year that was for the Exchange and looks ahead at what he believes will be a strong 2015.
Engaging, thought provoking and insightful; this question and answer series with Carleton touches on several leadership aspects of the industry, including strategy, growth, forecasts and analysis; along with the CEO’s perspectives on trends and regulatory issues.
In part one of the series, Carleton reflects on some of the key factors which contributed to a year of great accomplishments at the CSE and he also reveals some of the CSE’s goals for 2015 and why he is predicting strong growth for the first quarter of the New Year. Carleton also shares insight from the marketplace and what is top of mind for issuers.
Be sure to check out part two of the interview where Carleton shares an intimate story about why he loves his job and delves deep into industry related issues; on how the CSE can support investment in CSE-listed companies by retail investors and how the industry is reacting to a surging Exchange.
Part 1: A Good Year and Forward with Confidence
Question: What did the Canadian Securities Exchange accomplish in 2014? Did these accomplishments meet the expectations that the exchange had at the beginning of the year?
Carleton: The goal of the exchange is to reduce the costs of Canadian public capital for growing businesses. As we tell people, we do this in two principal ways: through the provision of a streamlined listings process, and by providing a liquid and efficient secondary market trading services. We received powerful feedback from the industry in 2014 that our message is resonating: new listings, financings and trading all exceeded previous records by significant margins during the year. Approximately half of our new listings came from other exchanges in Canada, suggesting that our service offering is competitive with alternatives for public companies.
Question: What are the Canadian Securities Exchange’s goals for 2015? What are the plans for achieving them? Is there anything new or different compared to the thinking that prevailed at the beginning of 2014?
Carleton: We put a lot of effort into raising our profile with key segments of the public finance community in Canada and internationally in 2014. We will build on these efforts in the coming year with more resources available for our sales and marketing team. In addition, we will be launching key initiatives on the trading side to improve the liquidity picture for our listed companies: we are launching a formal market making program designed to provide our issuers with a trader responsible for posting a continuous two-sided market, automated execution at the bid/offer for eligible orders and automated odd lot execution; new order routing, compliance and risk management tools to assist dealers in directing trading traffic our way, and an expectation that within a short period of time we will have all of the Canadian discount brokers with electronic access to our markets.
Question: The year 2014 saw record growth in listings. How is the first quarter of 2015 shaping up, and how would you characterize listings expectations for the full year? Does the Canadian Securities Exchange anticipate that certain industry sectors will contribute more or less than they did in 2014?
Carleton: The application pipeline is very strong, so our outlook for early 2015 is strong. Continued finance challenges for early stage companies, in particular, seems to make our operating model more attractive for these issuers. There appears to be no immediate relief on the horizon for these companies, meaning that our cost and time effective listing model will continue to be an important incentive for companies to work with us. As for sectors, as I tell people often, we don’t focus on particular sectors, instead we reflect the choices made by investors in agreeing to finance companies. We didn’t go into 2014, for example, believing that medical marijuana was going to generate a substantial amount of interest; that came about as a result of investors supporting the launch of a great many new companies in the space. I wish I could tell you what the next break out sector will be.
Question: In general, what did issuers tell the Canadian Securities Exchange that it did well in 2014? How did they say they would like to see the exchange improve?
Carleton: Issuers were almost unanimous in crediting our listings team with an excellent service attitude: identified problems were resolved in a timely and constructive manner, with companies able to take advantage of the deep experience represented by our team. On the other side of the coin, issuers were almost unanimous in looking for us to address the remaining access (Canadian and international discount brokers in particular) and visibility (where do I go to find a quote?) issues. We have made great strides on both points, but much work remains to be done.
Stay tuned for part two of this interview to be released soon.
Summer may be long gone but the heat is still on at the Canadian Securities Exchange. With September in the books and October about to draw to a close, the CSE has just announced that the first half of the fall season has brought with it continued positive performance for listing, capital raising and trading volume metrics.
250 Listings and Growing
With the addition of Fundamental Applications Corp (CSE:FUN) the CSE officially crossed the 250 active issuer mark. This milestone of 250 active issuers marks the first time in the exchange’s history that there have been this many active issuers.
Listings have grown by over 23% since the end of September 2013, with 60 issuers joining just this year from across various sectors.
Turning up the Volume
Listings aren’t the only component of the CSE’s business that are experiencing record-breaking growth; trading volume is also having a banner year.
In the period between July and September of 2014, trading volume represented the second most active quarter ever on the CSE with 549 million shares traded, representing a 252% increase over previous year’s comparable period. Year to date, there have been over 1.8 billion shares traded representing over $426 million in value.
The message the market seems to be telling the CSE is ‘stay the course’. Not only has the CSE’s approach of lowering financial and operational burdens helped make financial capital easier to access, support initiatives for listed issuers has helped to contribute intellectual capital.
Although the achievements to date are noteworthy, it looks like the close of 2014 will have several more pieces of positive news. Interest in joining the CSE remains high and there are already a number of issuers in the process of coming aboard.
As this past year of new listings has shown, putting a premium on efficiency and growth is not restricted to any one sector or company. Despite their diversity of business types, many emerging and growing companies agree on a simple fact: the more lean the operation, the better the odds of being able to run the marathon instead of being held back by costs.