Tag Archives: 2020

CSE Performance

Year-End 2020 Interview With Richard Carleton

Earlier this month, CSE CEO Richard Carleton sat down with Peter Murray of Kiyoi Communications to recap an eventful 2020 and discuss the coming year for the exchange.

Scroll down to read the full transcript of Part 1 of this interview. For ease of navigation, a list of hyperlinked topics is included below.

1. Leading through COVID-19

2. The role of Initial Public Offerings (IPOs)

3. What was funded in 2020

4. CSE’s contribution to the mining industry

Leading through COVID-19

PM: We spoke in the summer about leadership in the COVID-19 environment. Do you have any new observations to share from the past six months?

RC: The themes are basically the same as we talked about over the course of the summer in that we have done an excellent job – and not just at the Canadian Securities Exchange but the securities industry in general – to provide a high level of service while dealing with the staff dislocation caused by the lockdown orders, bans on non-essential travel, and so on.  That has certainly continued through the fall and now the winter.  We have a small team onsite in Toronto, primarily on the technology and market operations side.

We have transitioned most of our business development and education capabilities – all of them really – to virtual events.  And we concluded in late 2020 the Mining Over Canada project where we created more than 60 hours of content over the course of five or six weeks, which is available on our YouTube channel and various other social media platforms.  That was a wonderful collaboration with thought leaders and issuers from the mining industry.  It was a tremendous amount of work and kudos to Anna Serin and her team for putting the program together.  I think people in the mining industry really took note of our encouragement and support for the sector and we look forward to building on those relationships in 2021.  The landscape continues to be very favourable for mining and it’s a sector of the market we have high hopes for this year.

The role of Initial Public Offerings (IPOs)

PM: IPOs have gone from being very infrequent just four years ago to a listing approach of choice today.  Talk to us about how companies are coming to market and what the CSE feels the most efficient approaches are.  Also, are there any misconceptions that need to be set straight?

RC: The IPO was almost dead three or four years ago, and as you mentioned we now see the IPO as an increasingly common route to market.  I think there are a few drivers behind that, but every situation is unique, and for me to say the IPO is superior to the RTO in all circumstances would not be accurate.  Each company has to figure out in the context of their financing what the lowest cost of capital is, what approach will provide the best post-listing liquidity profile – there are a lot of considerations that go into it.

But historically, the concern has been that the IPO takes longer, costs more and introduces significantly more risk into the transaction because of the time it takes from the decision to launch the IPO to actually getting there.  There is also the side benefit that if you do an RTO and are able to get the growth capital required through a private placement supported by a relatively small number of investors, the management team is not having to lose focus on the day-to-day business of the company as they might spending time on the road selling the securities being qualified by the prospectus.  That is a significant consideration for some companies when they decide to do an RTO.

I think it is becoming better understood that there are a number of dealers who are in a position to handle IPOs and they have a lot of investors in place ready to support certain types of companies.  As a result, their sales effort may not be as challenging as it has been in previous market cycles.  And I think post-listing price performance and liquidity can be better with an IPO because you have investors who considered the company and have made the decision to invest in it.  With an RTO, the target can be in a completely different industry.  We  saw a lot of companies that had been mining companies and turned into cannabis companies overnight.  The original shareholders bought into a mining company, not a cannabis company; that can create an overhang that impedes price out of the gate.

So, there are many different considerations.  I think it is healthy that we are seeing more IPOs because that gives people broader access to investment opportunities.  You don’t have to be an accredited investor to invest in securities that are being qualified by a prospectus, and the more people who are able to participate in the growth of these companies, the better off and the healthier the public capital markets will become.

What Was Funded in 2020

PM: The stock market in general was robust through much of 2020.  CSE data shows financings and trading volume in particular at strong levels for yet another year.  Walk us through some of the numbers, and also discuss some of the internal achievements that people might not necessarily be aware of.

RC: The principal takeaway from the numbers is that financing activity was extremely healthy for the year beginning around late April.  That continued through the course of the summer.  There is often a drop-off in July and August, but in 2020 there was no such effect.

As I mentioned a moment ago, from a dollar perspective the cannabis industry was the largest fundraiser on the exchange.  However, in terms of the number of individual financings, the mining industry was by far the leader.  It’s not surprising, given concerns about incipient inflation brought about by the enormous monetary creation by central banks in developed economies.  As a result, we have seen a tremendous amount of investment activity in the precious metals space.  There is also the expectation that coming out of the pandemic, governments will invest significant amounts in infrastructure, and that means commodities such as iron, copper and other components of steel are going to be in high demand.  We are already seeing spot prices of these commodities increase quite nicely.

There are also concerns about supply chains, where people would prefer to source materials from jurisdictions that are more politically stable than others.  So, people looking to rationalize supply chains and shorten their delivery cycles are encouraging a lot of activity in the North American mining space in particular.

PM: Let’s look a little more at this continuation of strong financing activity on the exchange.  Aside from mining and cannabis, was their notable investor interest in any particular sectors?

RC: For obvious reasons healthcare technologies, and telehealth in particular, are industry categories in which companies performed very well over the course of the year.  It’s not something we would have predicted to that extent going into the year, but when the pandemic began to really take off it was a timely area for these companies to be in.

As far as psychedelics go, we have around 30 companies pursuing different business opportunities in the space.  We first began to hear rumblings in 2019 that people were going to be looking to advance the cause for psychedelics, particularly as a treatment for substance abuse, anxiety and depression.  I’ve had the opportunity in my position to learn from the industry’s thought leaders and the takeaways are fascinating.

There is a meaningful body of clinical research dating from the 1920s through the 1950s for substances such as LSD, psylocibin and ketamine.  The clinical indications were incredibly positive for some of these therapies on depressive illness that had resisted other kinds of treatment.  It was really the war on drugs that pushed these substances into the background and ended research into the space for the last 70 years.  We are now in a position where researchers will be able to continue that work.  I’m confident that we will see supervised therapies involving these compounds achieve important breakthroughs on multiple illnesses that have been very challenging for traditional pharmaceutical companies to appropriately address.

PM: The growth in aggregate market capitalization on the CSE in 2020 was exceptional, and as of early 2021 it has surpassed $50 billion.  Walk us through the reasons for the increase and your thoughts on growth in the years ahead.

RC: For us, the significant increases in market capitalization are almost entirely due to the US multistate operators in the cannabis sector.  The top ten operators in the United States are listed on the CSE and they contribute a significant percentage of that $50 billion.  Curaleaf, which is our largest company by market capitalization, as well as by revenue and some other measures, passed $10 billion in market capitalization just the other day.  It’s fascinating to see the growth in these companies.

It’s going to be interesting with the political changes in the United States, with the Democrats now controlling the Senate.  A lot of these companies have been on a tremendous run on the belief that the Biden administration will oversee liberalization and potentially the de-scheduling of cannabis from the Controlled Substances Act.  My take is a little less bullish. I think there will be liberalization of banking and potentially tax measures associated with the industry, but I don’t believe that either Mr. Biden or Ms. Harris have full support from their party to make new cannabis laws a central piece of their legislative program.  I think a number of longstanding issues will be addressed, but I’m not sure we are going to see full-on de-scheduling of cannabis in the United States, certainly during the first two years of the administration.

In the meantime, progress continues at the state level, with New Jersey having voted to legalize, and New York and Connecticut appear on track to legalize cannabis for adult use in the coming year.   We’ll probably see recreational legalized in Pennsylvania at some point in the next year or two.  These are really big populous states, and the companies that have real scale will have the opportunity to expand their businesses as a result of work at the state level.  These companies will likely continue to grow at significant rates.

CSE’s contribution to the mining industry

PM: I want to go back to Mining Over Canada, as there was so much to learn from the series, and it will have significant educational value for investors for years to come. Talk to us more about how it developed internally and some of the insights that came out of it.

RC: Mining Over Canada was really the culmination of other virtual events we had done earlier in the year.  One of the things that struck us early on was that everyone is working from home, so these highly respected investors and company leaders, they are available – we can call them up and get 15 or 20 minutes for a video segment with them.  I think back to an interview that our James Black did with Howie Mandel early in the pandemic in support of Howie’s charity, which helps provide personal protective equipment to healthcare professionals in North America.  James was thanking Howie for his time and he said, “Hey, I’ll give you as much time as you want.  I’m just here, you know.”

We had a similar experience with Mining Over Canada.  We approached a number of thought leaders – whether it be analysts, investors, or leadership at our issuers – and they were extremely cooperative and generous with their time and guidance.

One of the things we really wanted to help emphasize is just how important the mining industry is to the Canadian economy, not only in historic terms but in the present day as well.  And how Canada can leverage its leadership in public finance for the industry to service the wave of demand coming from the industry.  Whether it’s significant increases in infrastructure, desire to shorten supply chains, new demand for minerals brought on by the electrification of the economy – mining is going to be at the forefront of a lot of thinking and investment in coming years.

Check out Part 2 of the interview here.

CSE Performance

Year-End 2020 Interview With Richard Carleton Part 2

Earlier this month, CSE CEO Richard Carleton sat down with Peter Murray of Kiyoi Communications to recap an eventful 2020 and discuss the coming year for the exchange.

Scroll down to read the full transcript of Part 2 this interview. For ease of navigation, a list of hyperlinked topics is included below.

1. Changes at the board level for the organization

2. Outlook for 2021

Changes at the board level for the organization

PM: Thomas Caldwell stepped down as Chairman of the CSE’s Board of Directors in September after spending almost eight years in the role. Talk about his contribution to the Exchange as an investor and also as Chairman. How will he continue to support the Exchange’s efforts going forward?

RC: I think it’s fair to say that the Canadian Securities Exchange would not exist in its present form without Tom’s leap of faith back in late 2012 to lead an investment round that provided the exchange with the capital required to continue to offer its services.  In his capacity as chairman, Tom was a relentless advocate for the CSE in his work and with his contacts, which of course are incredibly broad in the exchange world.  He is tremendously supportive of our management team and very inspirational with his “relentless optimism” as he calls it.  His energy, his commitment and his passion for the business were an inspiration not just to me, but to the entire organization.

Tom is not far away, because he is the chairman and principal of Urbana Corporation, which is the largest shareholder of the Canadian Securities Exchange.  In that capacity, we will continue to look to Tom for the benefit of his guidance and wisdom, and his continued support for our organization in its work.

PM: Other changes were also made to the board, with four new members elected at the annual general meeting. Tell us about the new board members, why the time was right to welcome them, and what it means for the CSE.

RC: There were a couple of drivers at the annual general meeting in September, which is when these changes took place.  The first was that we entered into  new recognition orders with the Ontario Securities Commission and the BC Securities Commission, our two principal regulators, and those orders required the exchange to have an independent chairperson.  Mr. Caldwell, by virtue of the shareholding of Urbana, was not considered an independent director of the organization.  Steve Blake, a continuing member of the board, graciously agreed to take on the responsibility of serving as chair.  Steve was elected by the shareholders at the AGM and we look forward to an excellent working relationship with him in his new role.

In addition, we were shorthanded, as former board member Mary Anne Palangio had become our chief financial officer earlier in the year, so we had a vacancy to fill.  And we also had some directors who had indicated to us that they were looking for different challenges, and they moved on with our best wishes.

Our new directors include Hema Barkhouse.  Hema is in the treasury group at Canadian Tire, where she is a senior officer and  has experience in accounting and finance in a public company setting.  Hema is chair of our audit committee and we look forward to her advice in managing the financial situation of the company.

Eric Sites is a resident of Chicago.  He works with Horizon Kinetics, which is one of our significant shareholders.  In his work with Horizon Kinetics, he has overseen investments in a number of exchanges around the world, so Eric is a wonderful addition to our board, both to advise management and potentially to open doors for us as we spread our wings internationally.

Brendan Caldwell, Tom’s son, is a new member of the board.  Brendan has been very closely aligned with his father at Caldwell Investment Management as well as Urbana Corporation.  Brendan also has worked with exchanges around the world and is extraordinarily knowledgeable about the space.

And last, but certainly not least, Michael Bluestein is a lawyer who founded a firm called Corporate Counsel just north or Toronto.  Michael has been a marvelous supporter of the Canadian Securities Exchange in his practice and he is the chair of our regulatory committee, which oversees the policymaking work of the exchange.  Michael is someone we have known well for quite a while.  We look forward to working together closely, particularly on our new listing rulebook.

Outlook for 2021

PM: Let’s look at the CSE’s plans for 2021. What goals have you set for the team? And what initiatives, both ongoing and new, will the CSE be focusing its time on?

RC: Goal setting in this space is always a little tricky.  We are subject to the whims of the market and even if we think at the beginning of the year that we are going to be focusing a lot of energy in a particular industry sector, we may find that investors decide to support different sectors in the marketplace with their investment and trading.  So, we can’t get too granular in the goals we set for the organization.

Clearly what we are seeing, though, is a significant expansion in trading activity, not just on the CSE but across Canada. Earlier in the year we were seeing roughly a billion shares a day trading across all markets.  And over the last six weeks or so we have gone to 2 billion.  What I can say, as someone who has been around this business for more than 30 years, is that this tends to be the pattern.  Canada will turn over X number of shares, and without warning it goes to 2X.  The interesting thing is that it happens without any real warning, and then it becomes the new baseline.

We had our previous record burst of activity in 2017 and 2018, which was driven by the US cannabis companies that joined the CSE and the extreme level of investment interest in them.  The other markets were not in line with those increases, but this time they are.  Everybody  has seen a doubling in turnover.  Did we see that coming?  Not really.  Volumes were healthy over the summer and we noticed increased retail participation, and that’s true on our exchange and some of the other exchanges catering to early-stage companies.  

Obviously, we are going to continue to explore and expand our use of social media platforms and virtual sessions, to get our message out and engage with as many people as we can, whether it is issuers or investors or other stakeholders.  We have learned a lot about what works and what does not work and we’ll apply that knowledge to our programs this year.  It is certainly less expensive than being in an airplane all the time and you can reach out and touch a lot more people this way as well.  It is going to be a permanent part of our programs moving forward and I think that will be the case for almost every industry.

That having been said, as we get later on in the year, I think there are a lot of folks who are going to want to see us face to face so my expectation is that we will be on the road quite a bit from October.

Overall, the picture appears quite robust from a listings perspective.  Certainly, the mining industry is in good shape, as it was our strongest sector in terms of new listings in 2020 by number of individual financings.  By dollar total the cannabis industry is still the champion by a wide measure because you have a number of issuers that raised very large sums of money last year.  We are also seeing more activity in the technology sector, some of it oriented toward health care.  Communications has obviously been a big theme.  And we have also made an impression in the growing psychedelics market.

PM: What other growth opportunities are there for the CSE over the longer term?

RC: We are going to continue to look at different international jurisdictions.  Listing on the CSE is a very cost-effective means for companies to access not just the Canadian public capital markets but the US private placement market as well.  By virtue of being a Canadian reporting issuer, without having to also undergo the pain and expense of becoming a reporting issuer in the United States, it really is one of the great bargains in our world.  We’ve had good success attracting companies from different countries from around the world.  And we’ve seen real interest from different Asian markets over the last six months.  It’s been challenging to do the kind of business development we’d like because we are all locked down.  But I can see as we move out of the pandemic that we’ll begin to capitalize on that interest from Asia.

I’d also highlight Australia, which is obviously a very large mining market.  The Australian miners have always had a lot of respect for the ability of Canada’s public markets to provide financing.  And we’ll be exploring ways to facilitate Australian company access to Canadian public markets through a CSE listing.

PM: Any final thoughts on the year ahead or topics we have not touched on so far?

RC: We are continuing to work on the delivery of a clearing and settlement system for tokenized securities.  I always caution that we are not talking about bitcoin or ether or other cryptocurrencies, but securities which use the smart contracts originally developed by those in the blockchain and cryptocurrency world and applying them to solve problems in the cash equities world.  I have been heartened over the course of the year, as we have attracted a number of partners to work with us on achieving this goal. These organizations are expert in different components of service and have existing customer relationships with issuers and the Canadian dealer community.  We’ll be talking more about this as the year progresses and hope to be in a position to get it into people’s hands later in 2021.

 Check out Part 1 of this interview here.

CSE Performance

Interview With Canadian Securities Exchange CEO Richard Carleton: 2019 Review

The CSE is known to share milestone moments with their newly listed companies, but it also celebrated some major milestones of its own this past year. In addition to its 15th anniversary in 2019, the CSE also celebrated 129 new listings – including three Israeli companies – the signing of an MOU with the Jamaica Stock Exchange, and a growing team of over 50 employees. Scroll on for an exclusive, in-depth interview with CSE CEO Richard Carleton, as he discusses industry challenges from 2019, areas of growth for the CSE, and what’s in store for the new decade.

PM: First of all, congratulations on marking your 15th year as an exchange in 2019. We’ll review some developments in a moment illustrating how the CSE has grown in size and stature. But let’s begin by discussing what it’s like to take a concept built around superior issuer service and grow it into a securities exchange that now routinely attracts listings and capital from around the world.


RC: The quick answer is that we are not ready to declare victory just yet. Yes, we are pleased, and in some respects, humbled, with the success we have had to date. But we know there is a lot more work to do to provide the best possible listing and trading environment for issuers and investors before we can really feel any significant level of satisfaction.

We still have a lot of work to do on improving access to the CSE from outside of Canada. We also want to engage with the institutional investor community to provide a greater diversity of shareholders for CSE issuers so we are able to expand beyond the traditional base of retail investors who have supported CSE issuers to date. There is still quite a bit of work for us to do to provide that best possible experience for issuers and the investing community.

Back to top

PM: Comment for us on market quality. The CSE team has been very successful at establishing relationships on the data side and ensuring easy access for investors to place orders. Are we seeing the hallmarks of a quality market, such as market depth, tight spreads and lower volatility? And what is the CSE doing to continue to enhance market quality?


RC: We are constantly looking for ways to improve all of the benchmarks of market quality you mentioned, whether it’s spreads, turnover, trade continuity, or other measures. And let’s face it, it is particularly challenging in the small cap space, where companies can be subject to significant levels of volatility.

Again, we think that providing as broad access as possible to all categories of investors in Canada, the United States and beyond is key in terms of improving market quality. The more participants you have in the auction process, the better the outcomes will be for investors, as well as for companies looking for an appropriate valuation of their shares and the ability to conduct financing activities at the lowest possible cost of capital.

Back to top

PM: European retail and institutional investors often participate in North American small cap opportunities. What can you tell us about trading access for European investors?


RC: Canadian and US small cap markets got caught up in a European securities regulator initiative a few years back to limit access to the so-called penny stock market. As a result, most of the bank- and institutional-owned advisors in Europe are unable to provide trading services for companies listed on the CSE, over the counter in the United States, and various other markets that cater to small cap companies.

That said, we have made inroads in improving coverage from the “self-directed” market in Europe, and that has assisted companies in broadening their shareholder base to interested retail and private investors on the continent. These folks have become an important source of capital for our issuers: in the cannabis space, for instance, 15% of the capital raised in 2019 came from Europe. So, people who have conviction are finding a way to trade shares from overseas.

All that having been said, the CSE team continues to work with various platforms and service providers who can manage that order flow into Canada from other parts of the world, and that will be an important area of focus for us in the coming year.

Back to top

PM: Let’s look at a few numbers: listed securities up 23% in 2019 to 569, total value of financings down 42% to $3.15 billion, trading volume down 31% to 19.8 billion shares, and  value of trading down 17% to $16.9 billion. Despite these declines in KPIs, 2019 still stands as the second best year for trading and financing in the exchange’s 15 year history. Take us behind those numbers and tell us what you saw and heard to help us make sense of it.


RC: It’s really quite straightforward. On the finance side, 2018 was the year that the big US multistate operators came into the Canadian Securities Exchange. We saw record amounts of money raised that year, led by a handful of very large US companies. As valuations fell in 2019, companies were not in the same strong position to raise additional capital by way of a secondary offering. It would have represented considerable dilution of the original investors.

We saw a real shift in 2019.  There was a lot less capital raised in the cannabis sector and, secondly, the capital that was raised was through secondary offerings of convertible or debt-related securities issued by existing companies. And I think it’s fair to say that there were a lot of private companies in the United States that took a wait-and-see attitude in 2019 to watch whether valuations for US companies would recover. And if and when they did, those companies would be re-visiting their plans to do a  public offering.

I’m pleased to say that, from the beginning of November, the US cannabis group is up more than 20%, with the positive price performance accelerating in recent weeks. That should be a positive leading indicator for us for the coming year.

Back to top

PM: The CSE’s growth has been driven by multiple industry sectors, but far and away the most important for the past few years has been cannabis.  It’s fair to say that this sector ended 2019 with some challenges on its hands. Talk to us about 2019 in terms of the way the market transitioned for cannabis, and what are you hearing that might be of use to those trying to understand where it goes next?


RC: The cannabis sector as a whole traded with very high correlations through 2019. What I mean is that whether the company was a Canadian cultivator, an extraction company, a US multistate operator, or another type of company, the stocks tended to trade up and down with a very high degree of correlation.

That was a source of some frustration for the management teams of US companies, as many of them were meeting or exceeding their revenue and earnings forecasts. Many are doing really well and expanding their networks into additional states. So, those companies, while they may have a different set of challenges in front of them than do Canadian LPs, have an addressable market that is already significant and will only grow going forward. We are beginning to see support for that theme, and it does look like the correlations are breaking down; companies are being judged more on specific achievements than prevailing sector sentiment.

Back to top

PM: What about other sectors? Are there any already shaping up with a particularly interesting outlook as we begin 2020?


RC: We did a lot of outreach to the esports community last year and we have had success with some listings in that space already. It is a very interesting market. I don’t think it is clear what the most successful investment approach in the sector will be, but I believe investors accept the idea that as time goes on, people will spend more money and time on esports.

But in terms of the number of companies that joined the exchange last year, half of them were gold exploration companies. That was certainly driven by the fact that the value of the underlying commodity increased last year to well above $1,500 per ounce. And after many years of very little activity in the space, we saw a number of get funding, join the public markets and begin to pursue exploration programs. We see that continuing in 2020, in all likelihood, particularly given the backlog of applications to list on the CSE and continued strength in the price of gold. I guess it is kind of getting back to our roots in many respects, as for most of our existence the mining sector has been far and away the largest industry group on the exchange.

Back to top

PM: With mineral exploration taking on renewed importance, do you have any thoughts on the Save Canadian Mining initiative and the impact of short selling on the mining industry?


RC: The issue is not short selling as much as it is abusive short selling. And we already have a lot of rules in place designed to curb abusive short selling. I am concerned that some of the measures proposed, regarded by many as a panacea, may not in fact be the magic bullets they are purported to be.

I think that the first step is taking a hard look at whether our current rules are being circumvented in any way. We certainly don’t lack anecdotal testimony about the evils of abusive short selling. But it is a complicated issue and I have concerns that you could materially affect share turnover and liquidity if we make well-intentioned but poorly applied changes to the short sale rules. As I say, it is a very complicated topic, and to the extent that there is abusive short selling taking place, I believe that it is likely well within IIROC’s ability to address right now without any additional rules.

Back to top

PM: The plan to create a senior tier at the CSE was revealed in 2019. What is the status, and is there any interesting feedback you can share with us from issuers, regulators or others regarding this idea?


RC: Basically, we have completely rewritten the listings manual for the Canadian Securities Exchange in order to effectively create two tiers of issuers. This is designed to reflect the distinctions in Canadian securities law related to venture issuers and non-venture issuers.

Non-venture issuers, who are the more senior companies with larger market capitalizations and complexity of operations, have different rules around corporate governance, financial reporting and continuous disclosure. Timelines for them to report quarterly and annual audited financial statements and other burdens more appropriately borne by larger companies are a good example.

We have a significant cohort of companies which, if they were listed on two of the other exchanges in Canada, would be categorized as non-venture issuers.  We think it is appropriate to put in place a formal framework to ensure that those companies are regulated by us as non-venture issuers, as they are on other marketplaces.

It is important that comparable companies are subject to the same level of oversight and regulation. The companies win because investors know that there is no possibility of regulatory arbitrage or differences in reporting between the CSE and other exchanges. If companies on the senior tier become eligible for margin under IIROC rules, as we are working towards, that will improve liquidity in those names because trading and corporate finance costs should go down.

We have completed the work and are now basically huddled with regulators in BC and Ontario on the final few points. We hope to get clearance from the regulators to soon publish the new listings manual for a 30-day public comment period. If all goes well, we look to implement these new rules shortly after the 30-day comment period expires, and on the receipt of formal regulatory approval from the two commissions.

Back to top

PM: What, if any, impact will this have on fees at the exchange? Your fee structure has always been a factor that differentiates you positively from other exchanges.


RC: We have made some adjustments to our fee schedule for issuers. This is both for applications and for what we refer to internally as hosting fees, i.e. the monthly fees that companies pay over the life of their listing on the exchange. We have established four tiers, which are market capitalization-related, with different levels of fees.

Going into this exercise we knew there were a few governing principles. We knew that we wanted to maintain one of our key strengths from a pricing perspective, and that is cost certainty. So, regardless of how much activity a company engages in – whether it is secondary financings, business changes or another activity – they are going to pay the same to us regardless.

Secondly, we know that as the relatively new kid on the block, we do need to be cost-competitive with all of the alternatives, whether they be exchanges in Canada, or the over-the-counter market in the United States, or some of the venues in Europe that cater to early stage companies. We have achieved that in this exercise, but we still gain considerable resources, both from the growing number of listed companies and the fee increases that have been introduced. It enables us to reinvest in the work that we do on behalf of our issuers in a variety of ways, one of them being to help them tell their story in a number of ways to a market that is very crowded and competitive.

Back to top

PM: The second half of last year saw three companies from Israel list on the CSE, the first ones from that country. You signed an MOU with the Jamaica Stock Exchange. How important are international activities to the CSE today, and how do you see them being important in the years ahead?


RC: Our international activities have largely been driven by our support for and involvement in the cannabis industry. The three Israeli companies that have listed are in different parts of the cannabis space, and we have the same situation with the Jamaica Stock Exchange. There is a significant legacy industry in Jamaica which is in the process of being legalized. It is a low-cost cultivation jurisdiction, but they have challenges locally from banking and other perspectives in listing and trading those stocks. Our work with the Jamaica Stock Exchange is to help Jamaican companies raise capital from Jamaican and CSE investors and have a liquid market in their securities here on the CSE, which is something we are really looking forward to.

In the case of the Israeli issuers, we have done good work with the OTC Markets Group out of New York, collaborating on what essentially amounts to access to North America in a single transaction. Companies that become Canadian reporting issuers and list on the Canadian Securities Exchange, in addition to being able to raise money from Canadian investors, are also able to take advantage of prospectus exemptions in the United States to do private placement financings with US investors. These companies are also able to access liquidity in the US through the markets operated by the OTC folks.

This is a very powerful tool. For a small Israeli company to consider the ability to work in the United States, it is a very big leap, and very expensive, and risky. We can cut a lot of this cost and risk out by providing them access to North America through a CSE listing.

Back to top

PM: The CSE does a lot of work on behalf of the issuer and dealer communities that people never hear about. Is there anything interesting going on in regulatory or other realms that the exchange is helping to shape?


RC: We are an active and engaged participant in the ongoing debate over public capital markets policy. We routinely submit comment papers to the securities commissions and are represented on a number of stakeholder committees and industry boards to advance the interests of our listed companies.

The biggest challenge for companies who are nearly public, in reality, is coming to grips with the fact that the going-public transaction is not the goal, but rather just the beginning of the heavy lifting. Companies really do need to understand that they have to tell their story and win mindshare from investors in order to stand out from what is a very, very large group of peers.

What we’ve tried to do is give them opportunities to tell their unique stories in a number of  different ways. We initiated market opening ceremonies for our issuers, which tie in with various media outlets with whom we are affiliated to give them more exposure. We also created a podcast studio inside our head office where issuers and thought leaders from different industries have conversations about issues of interest to the CSE community. There has been great pickup on these services, as we can see how many people listen to a podcast and how many people follow us on social media. So, there is that sort of general work that we do to provide our issuers with opportunities to tell their stories.

We are going to do more work in the coming year to teach companies about the public markets. How can they boost liquidity in their shares? What are the things that work for companies? And there are questions around market-making, and marketing activities – what are the marketing activities you need to undertake, what are the trade shows you need to be at? We try to really act as a concierge to give them access to as many opportunities as we can to help them navigate what is a very complicated, confusing and difficult world.

Back to top

PM: The CSE now has over 50 employees. How do you see the continuous expansion of the CSE influencing your culture, and what is the impact on your clients, the companies who list on the CSE?


RC: Well, so far, the growth has not come at the expense of what I believe is an enthusiastic, fun-loving, “don’t take yourself too seriously, but do take your work seriously” kind of culture. And if that comes from the top, that’s great, as it’s entirely intentional. Our employee turnover is low, and the experience level is very high. I think we do have a healthy and strong culture in the company, and I am looking forward to seeing that continue in the future.

I get tremendously encouraging feedback from our clients – the issuers, the dealer firms and others – about how positive their interactions with our team members are, and that is extremely gratifying. In fact, that is about as good as it gets. I understand that those types of compliments are not won easily. From my perspective, it is very gratifying when I get that kind of feedback.

Back to top

PM: Finally, can you share with us your expectations for the exchange in 2020? And what do the next 15 years hold for the CSE?


RC: That’s easy – there will be another chief executive at the helm 15 years from now, I’m pretty sure.  Nearer term, we clearly have a few key projects. We’ve talked about the new rulebook that will see the introduction of a senior tier, with the knock-on effect of margin eligibility for issuers. We haven’t mentioned that the new rulebook provides for the ability for the CSE to list ETFs and Special Purpose Acquisition Corporations, which is a vehicle that has proven popular for issuers to raise capital. So that will have a positive effect for us and provide new and interesting vehicles for investors.

We also haven’t talked about our clearing and settlement initiative to list, trade, clear and settle tokenized securities. We have been quietly working away on that last year and into 2020. I expect this is the year we will be making a formal application to the regulators for that clearing facility. It is a significant undertaking and there are a lot of different people at the exchange engaged in the effort. And again, we continue to receive a lot of support and interest from the issuer community to implement this ability to use securities tokens to raise capital.

As far as the longer term, I think there are some interesting challenges ahead for public markets generally. There is a lot of competition from different forms of private equity investment. Whether that is private equity or venture capital or different sources of non-public financing. Public markets are really going to have to continue to make their case to consumers of investment capital and constantly address areas of inefficiency and cost. You don’t have to look very hard to see studies or commentary on the benefits of staying private, for the technology and life sciences industries in particular. I think that is going to be a big theme over the next few years. Essentially, is the existence of the public market assured? Is the Canadian Securities Exchange going to continue to be a venue for companies to raise capital? Or, is it instead going to be an exit for the early stage investors who are looking for public market liquidity? I think that is a hugely important debate that is already taking place, and the continued existence of the status quo is simply not assured.