TMX Group Limited

Good morning, and welcome to the TMX Group Limited Q3 2020 financial results. I will now turn the call over to Mr. Paul Malcolmson, Managing Director, Investor Relations.

Well, thank you, Operator, and good morning, everyone. I hope that you and all your families are staying well and safe. Thank you for joining us this morning for the third quarter 2020 conference call for TMX Group. As you know, we announced our results late yesterday, and a copy of our press release is available on TMX.com under Investor Relations. This morning, we are once again joined virtually and have with us John McKenzie, our Chief Executive Officer, and Frank Deliso, our Interim Chief Financial Officer. Following opening remarks, we will have a question and answer session. Before we begin, I want to remind you that certain statements we make on today's call might be considered forward-looking. I refer you to the risk factors contained in today's press release and reports that we have filed with regulatory authorities. Now, I'd like to turn the call over to John.

Well, thank you, Paul, and good morning, everyone. Thanks for dialing into the call today to join our discussion of TMX Group's financial performance for the third quarter and for the first nine months of 2020. As we kick off the call day, let me start by wishing everyone continued good health. and on behalf of TMX to thank all of those on the front lines working diligently to protect and support our communities throughout the ongoing COVID-19 pandemic. Today, as Paul mentioned, we have Frank DiLizzo, TMX interim CFO, with us on the call. And Frank will take us through the Q3 numbers in a few minutes and will join us for the Q&A following his remarks. But to begin today, as I have shared with many of you in various investor events and conversations over the last few weeks, I want to reiterate how honored I am to be entrusted to lead this great organization. During my time here, I have been fortunate enough to work closely with our tremendous people across our various business areas and corporate functions to shape and advance the evolution of TMX. Five years ago, we undertook a major initiative to transform TMX, streamlining our business model and prioritizing our growth opportunities. Accelerated by important steps we have taken in executing our long-term strategy, including the acquisition of Trayport, each phase of this transformation has been met with success. In my view, our track record of execution has helped to set the stage for a promising future for TMX. I am most excited about the job ahead. Now, turning to our performance. We are pleased to report positive results for Q3 with 6% growth in revenue and 13% growth in earnings per share compared with Q3 2019. Frank will take you through these details in the year-over-year comparatives and the analysis for the quarter in a few minutes. This morning, I want to take a look deeper into the first nine months of 2020 for TMX to highlight some important trends and achievements, and also to add context around how the industry challenges this tumultuous year have informed our thinking as we embark on the next steps forward in our strategy. Overall, TMX's results through the first three quarters reflect the resiliency of our business model during a period of sustained market uncertainty and demonstrate the value of our consistent strategic focus on diversifying revenue streams. Revenue for the first nine months was $645.6 million, up 7% compared to the same period last year. And earnings per share was up 3% or 11% on an adjusted basis. Higher revenue was driven largely by increases from our equities and fixed income trading and clearing businesses and from GSIA, including Tradeport. These increases were slightly offset by lower revenue from our Darudas business and what has been a prolonged historically low interest rate environment. Revenue from equities and fixed income trading was 96.4 million, up 21 million or 28% compared with the first nine months of 2019. And even as we move beyond the period of unprecedented volatility in the first quarter, equity trading volumes remained robust throughout the first nine months of this year. Combined volumes on our equity markets, including Toronto Stock Exchange, TSX Venture Exchange, and Alpha, were up 39% compared to the first nine months of 2019. Inside the trading data, we are also seeing important signs of progress in some of our recent initiatives, including increased adoption of TSX Dark, our dark trading solution. TSX Dark's share of dark trading in TSX listed securities has grown to almost 28%, an increase of 6% new to date, and we have seen a positive uptick in trading since the launch of a new liquidity program in July. Turning now to Tradeport, activity and results remained strong through the first three quarters. Revenue, including Visotech, was $101.4 million for the first nine months ended September 30th, 2020. an increase of 12.7 million, or 14%, from the same period in 2019, with a 6% increase in average trader subscribers and an 8% increase in average total subscribers. Higher global energy markets activity and increased volatility in the first nine months of the year drove record volumes in both the European power and gas markets. And we also see continued positive results from recent trade port initiatives to capitalize on secular trends in the marketplace, specifically in the burgeoning liquid natural gas market and algorithmic power trading. Volumes in benchmark European and Asian LNG contracts were up substantially from 2019, and algorithmic power trading in European intraday markets and global energy markets continued to gain momentum. Volumes in the EPEC spot grew 22% compared with the first nine months of 2019. Commodities markets are globalizing. and the Tradeport team is exploring opportunities in disaggregated asset classes where we can add value by consolidating pricing data on a single platform, as well as new ways to address client needs for data and analytical applications. Now, turning to our capital formation business, we have seen encouraging positive shift in momentum over the last few months, highlighting both the increasingly global appeal of Canada's capital markets ecosystem and the long-term value of listing on TMX's exchanges. High-profile IPOs and new listings have garnered recent headlines in sectors TSX and TSX Venture are traditionally known for, such as mining and resources, and also in the innovation sector, where we are building an international reputation as a leading marketplace among established and starter-stage companies, as well as investors. The TSX-TSX Venture ecosystem, which includes our vast and varied group of stakeholders, is a global differentiator and a competitive advantage. In October, Newcrest Mining, Australia's largest gold producer, began trading on TSX. The company's CEO was quoted in the media saying that listing on the Toronto Stock Exchange would improve the global visibility of the company and broaden access to North American capital pools. A strong testimonial and proof of the high regard for Canada's market throughout the world. That global visibility is no accident. Canada is the number one marketplace to raise capital for mining. It is a fact and a well-earned reputation. Through September 30th, listed TSX and TSX Venture mining companies raised a total of $5.5 billion, an increase of 56% compared with the same period in 2019. In parallel with the resurgence in mining, our markets continued to build on a newly established international reputation as a center of innovation through the first nine months of 2020. Investor response has been loud and clear. Through the end of September, The S&P TSX tech index was up 41% year-to-date and has consistently outperformed Canadian and U.S. benchmark indices over the last few years. September marked the largest tech IPO by amount raised in Toronto Stock Exchange history with the addition of NuviCorp, a Montreal-based payments company, added to our stock list. Nuvi joins a list of recent tech IPOs' success stories, including Lightspeed, Decebo, and Diane Durham. Tech companies have raised $6.2 billion in total financing through the first nine months of 2020, and that's more than any other full year in the last decade. In our derivatives business now, overall revenue was $95.4 million in the first nine months of the year, down $4.5 million or 5% from 2019, driven by a 2% decrease in revenue from MX and CDCC as reduced revenue from Vox, as our agreement to provide transitional services ended in June 30, 2020. While the extreme volatility of early 2020 drove higher derivatives volumes in the first quarter, the historically low interest rate environment had a negative impact on volume in MX's key products and revenue in the second and third quarter. Importantly, though, we remain on track in terms of enhancing our existing derivatives product suite and expanding our global reach. Later this month, we will relaunch trading in the two-year Government of Canada Bond Futures Contract, or CGZ. We tweaked the contract structure in response to client demand and to stimulate additional activity on the contract. Trading on London time zone has also been a success. The overall proportion of volume traded in our leading products during the extended hour sessions was approximately 6% for the first nine months this year, and we hit peaks of 10% at the height of volatility in Q1. The preliminary groundwork is also underway for the next phase of MX Extended Hours Initiative, expansion into Asia. We have laid the foundation on a clearing solution and are working with industry stakeholders to pave the way for adoption. We have also initiated digital and virtual engagements with clients in the regions. Extending hours to sync with an Asian market will align us with global peers. It will increase international visibility for Canadian markets and ultimately enable us to connect to more clients. Turning now to another important development and a little closer to home, but also in pursuit of expanding our business and client base, in September, TMX announced the agreement to acquire AST Trust Company of Canada. From a strategic standpoint, this acquisition fits squarely within our broader capital formation growth plans and will strengthen TSX Trust's competitive position and value proposition in the transfer agency and corporate trust service business. The addition of AST Canada will bring dynamic new capabilities to our business, and most important of all, add a team of professionals with proven expertise to our own exceptional talent base. The transaction is expected to close within six to 12 months from signing at the end of September, subject to receipt of the regulatory approvals. And I want to take this opportunity to thank all of TMX's employees across Canada in our virtual offices around the world. for their exemplary and unwavering dedication and performance this year. Now eight months of operating in a remote working environment, our people have worked hard to ensure that we maintain close connection to our clients and that we deliver the excellent standards of service our markets require. This effort is crucial. Ultimately, our success is rooted in our clients' success. And so we continue to look for meaningful and informed ways to improve the client experience of issuers, investors, and traders. And I open my remarks with how much TMX has changed over the last few years. And in particular, in 2020, months can seem like years, and years can seem like decades. But I want to emphasize something that has not changed about the way we think about TMX's role in the marketplace, something that, if anything, has become more pronounced. TMX is directly and deeply connected to the markets we serve. We've learned a lot about ourselves in times of crisis, and COVID-19 has taught us many lessons and shone a bright light for TMX on the near-term priority areas where we can have a positive and lasting impact. And as we are acutely aware, vibrant public markets are crucial to the success of the economy. Access to capital throughout the markets during this most challenging year has helped many companies adapt and persevere, and provided them with opportunities to build stronger for the futures, and we pledge to continue that support. As we move forward, TMX will be stepping up our advocacy efforts, leveraging our position at the center of Canada's markets to pursue meaningful ways to help our clients succeed and to make our markets the markets of choice for connecting companies, investors, and traders to growth opportunities. We've made our position clear at the federal and provincial levels of government, including equal treatment and burden reduction for small public companies. Advocating for fair treatment for public companies is a professional campaign for TMX. And there are other forums and topics where we can work closely together with our capital market stakeholders to effect meaningful change. I strongly believe TMX has a key role to play in leading the way, helping to strengthen Canada's competitive standing in the world stage and a part to play in shaping the economy of the free future. Our purpose is simply to make markets better. It's in our core values. It's intrinsic to what we do. And with that, I will turn the call over to Frank, who will provide additional details on our third quarter results. Thank you.