Part 2: The Year in Review and a Look Ahead with CSE CEO Richard Carleton

CSE CEO Richard Carleton
CSE CEO Richard Carleton

In part one of the Q&A session with CSE CEO Richard Carleton, he spoke about some of the milestone achievements of the CSE in 2014.  Part two of this interview (conducted by Peter Murray)looks at the direction the CSE is poised to head towards for 2015.

Part 2: The Right Direction

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.

I also had the opportunity to travel to Europe with three of our listed companies (four including a conditionally approved company), Pasinex Resources, BioMark Diagnostics, and SecureCom Mobile. We joined a road show organized by Vancouver-based Zimtu Capital, where we met with institutional and individual investors in Frankfurt, Munich, Zurich and Geneva.

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 ( 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.