Q3 2024 TMX Group Ltd Earnings Call

Speaker Change: For the morning, ladies and gentlemen and welcome to the TMX Limited 3rd Quarter 2020 4, financial results conference call. At this time, all lines are in a lesson only mode.

Speaker Change: Following the presentation, we will conduct a questioning answer session. If anyone has any difficulties hearing the conference, please press 100 for our system at any time.

Speaker Change: I would now like to turn a conference over to Amin Mousavian, the Indian University Relations and Treasury. Please go ahead.

Speaker Change: McZee Jenny, Bongeau A2

Amin Mousavian: Good morning everyone. We join you from our Montreal office this morning to discuss the 2024 third quarter results for TMX Group.

Speaker Change: We announce our results for another outstanding quarter late yesterday and copies of our press release and MDNA are available on TMX.com under your message relations.

Speaker Change: is one of the most important things in our life. This morning we have with us John McKenzie, our chief executive officer and David Arnold, our chief financial officer.

Speaker Change: Following the opening remarks we'll have a question and answer session.

Speaker Change: Before we begin, let's cover our forward-looking legal disclosure. Certain statements made during the call made relate to future events and expectations and constitute forward-looking information within the meaning of the Canadian Security law.

Speaker Change: Actual results made the firm material from these expectations and additional informations contained in our press release and pre-order reports that we have filed with the regulatory authorities.

Speaker Change: Now I will turn the call over to John.

John Mckenzie: Well, thanks, Amin, and good morning, everyone. Thanks for joining the Call today and it's a pleasure to be here in our Montreal. We're last night, we had the pleasure of joining with colleagues and celebrating 150 years of the Montreal Exchange.

John Mckenzie: Bonjour to Lamal, MSC, David Joinerado LaPelle, DJ Joey Ruiz.

John Mckenzie: See you in Plasier, Dr. AC and Notra Bureau, Demontrial.

John Mckenzie: and I happy Halloween to everyone as well. Listen in to you and your families. Our promise to you today is all treats in the call, no tricks.

John Mckenzie: So, as disclosed in last night's press release and the financial statements, TMX did deliver excellent results for the third quarter featuring strong performances across the enterprise in both traditional business areas as well as in our newer growth areas, and in both domestic and global marketplaces.

John Mckenzie: Our success in the quarter and sustain momentum during the first nine months of 2024, showcases TMX's core winning trades.

John Mckenzie: A diverse and dynamic business model made out of complimentary businesses, a strong balance sheet supporting our growth aspirations, a track record of strategic execution.

John Mckenzie: and leading edge technology with the unwavering commitment of TMX's people. Here in Montreal, across the country and around the world, to serving our growing client base with excellence and purpose.

John Mckenzie: Now at our investor and day in June, we identified four priority areas to leverage the foundation of our core business to accelerate growth beyond the fundamental concepts of listing, trading and market data and to reach beyond Canadians' mortars.

John Mckenzie: And before I turn to TMX's year-to-date performance, I want to highlight two recent investments we have made to help build on our position of strength well into the future, to move beyond the core, in global solutions in slight analytics and in capital formation.

John Mckenzie: Now as you know earlier last year prior to the acquisition, we made an initial investment in vetify, which included a commercial agreement.

John Mckenzie: It became pretty clear over a relatively short period of time working together that the TMS data links identify partnership as a potential to turbo charge our GSIA gross strategy and to bring new exciting and adaptive solutions to better serve the ETF community, a key segment of our client base.

John Mckenzie: Now, TMX Vedify, the team's commitment to seeking out competitive advantages for clients across the index and ETF ecosystem and determined and propulsive growth mindset has been a boost for providing to be a tremendous fit.

John Mckenzie: Since the founding of the company three years ago, VEDFI has focused on seizing the strategic opportunities to augment their suite of client offerings and expand the global footprint.

John Mckenzie: And earlier this month, TMX-edify acquired index research, an end-to-end index provider that designs and manages indices with more than 10 billion in late assets under management across both equities and fixed income markets.

John Mckenzie: It's the third suite acquired in the past 18 months following the 2023 acquisitions of Robo Global and the EQM in disease.

John Mckenzie: and the acquisition of index research fits squarely within TMX's long-term strategy and transformational growth objectives to expand internationally and bolster our GSA segment.

John Mckenzie: And importantly, Index Research brings new operational and client-surface capabilities focused on the Aminere region to TMX Vedify plus a talented team of professionals.

John Mckenzie: And we're always looking for ways where we can strengthen our value proposition. Our purpose is to make markets better and empower bold ideas, and be a part of that living purpose to survive every day to make the overall client experience better across the enterprise.

John Mckenzie: And this shows up in capital formation, we're rebuilding on our non-listing business or beyond-listing business, exploring solutions to better serve our almost 3,500 issuers on TFX and TFX venture, as well as the thousands of private companies beyond our immediate ecosystem.

John Mckenzie: Our non-listening business, which includes TSX Trust generated over a hundred million in 2023, and represented over 40% of the total cap form revenue in the first nine months of 2024.

John Mckenzie: In August, we further expanded our offering with the acquisition of NewsFile, a leading news dissemination and regulatory filing provider.

John Mckenzie: Newsfile provides client companies with an integrated, efficient way to meet certain disclosure requirements, including newswired distribution and multi-gearestictional filing solutions. And for those of you who received our press release last night, you will see now that we are also a client.

John Mckenzie: The addition of newsfile expands our public and private company solutions offering and advances our competitive position in a key growth area.

John Mckenzie: Newsfile served 2500 Clients Global in 2023 and nearly half that number were private companies.

John Mckenzie: They have a stellar reputation for service excellence, a client-first mindset, and a history of innovation, plus room to grow. And so I'd like to extend a very warm TMX welcome to our newest team members for Mindex Research and NewsFile.

John Mckenzie: Now, turning out of the results for the first nine months of 2024.

John Mckenzie: Our overall revenue increased 20% including 101 million from TMX Vedify and reflecting year-over-year revenue growth from TMX Trayport, Drivers Trading and Clearing, and Aquities and Fixing M. Trayton and Clearing, with Gaines partially offset by lower revenue from capital formation.

John Mckenzie: Organic revenue, excluding TMX-Vedifying News File, increased 8% and diluted earnings for share on an adjusted basis increased 10% for the first nine months of 2023.

Speaker Change: Total operating expenses increased compared to the same period last year, reflecting the inclusion of TMX Vedify expenses, and David will take a closer look at expenses later on with his remarks to follow.

Speaker Change: Now moving to our business areas. Revenue from GSA increased 43% for the first nine months of 2023 or 10% in excluding TMX edify.

Speaker Change: TMX identifies revenue was 18% higher in US dollars compared to the same period last year prior to acquisition.

Speaker Change: and TMX-Vetify Growth has been primarily driven by higher indexing revenue, reflecting organic growth and assets under management, revenue from the 2023 acquisitions of rubble global and EQM indices, and higher revenue related to events, including February's exchange conference.

Speaker Change: The TMX-Fedify integration is largely complete and the most significant of the Romanian projects combining our new year offices to central IR's centralized our TMXU operations is well underway.

Speaker Change: Now, staying with GSA, TMX Traport has been the driving force for Enterprise Growth in 2024.

Speaker Change: Revenue increase 20% compared with the first nine months of last year, or 16% in pound sterling, driven by a 25% increase in total licensees, annual price adjustments, and higher revenue from data products.

Speaker Change: The strength of TMX Traport Network continues to grow, serving a vital role in linking participants to execution venues and clearing houses across global energy markets.

Speaker Change: We have more than 9,500 licensees or end user applications and over 26,000 network connections. And a participant demand for data analytics to support their strategies continues to grow.

Speaker Change: Today, TMX Traport offers clients a suite of adaptive, customized tools, insights and analytic capabilities. And data and analytics represents 11% of its overall revenue.

Speaker Change: Now looking beyond the core, the TMX trade port is pursuing global opportunities to replicate the success of our network and leverage our expertise in new geographies and asset classes, including climate markets and power markets in North America and Japan.

Speaker Change: and I'd like to turn the Capitol Formation.

Speaker Change: Revenue here was 2% lower compared to the first nine months of 2023. Reflecting lower level, let lower revenue from additional disinfecting fees due to prevailing and challenging conditions in the marketplace.

Speaker Change: And in Vester Day, we outlined our strategic growth plans for listings and beyond.

Speaker Change: Our year-to-date performance illustrates that Toronto Stock Exchange and TSX Venture Change are powerful, two-tier growth engine for helping small companies become big success stories, is a story that reads, IPOs and beyond.

Speaker Change: While macro factors continue to negatively impact capital raising conditions and weigh on going public activity, our cap forum team is always focused on building our ecosystem stronger by attracting new cross listings from international markets and seeking out graduate prospects from other Canadian markets.

Speaker Change: Recent success stories include the T.S.X listing of West Gold Resources in August.

Speaker Change: Westgold is an ASX-listed Australian gold producer who joined our ecosystem to gain direct access to North American investors.

Speaker Change: The company came to the TMX Market Center in Toronto to take part in our market open ceremony and to mark the occasion, the CEO put it really well when asked why they sought out a listing in Toronto as well as their home market in Australia. And I quote

Speaker Change: This is the best of both worlds, both of these markets love gold and understand it.

Speaker Change: That's a powerful testament to the reputation our equity markets have earned all around the world and particularly in the resource sector.

Speaker Change: We now have more than 225 international companies on TSX and TSX Venture, including 62 foreign-based dual listings.

Speaker Change: Our competitive edge remains as sharp as ever domestically as well, as we work to attract companies that meet our listening standards from other Canadian marketplaces.

Speaker Change: Recent wins of these include big digital assets and international battery metals, who graduated to the TSX Venture Exchange in September and October respectively.

Speaker Change: And over the past five years, more than 14 billion in market cap has entered our ecosystem from other Canadian markets.

Speaker Change: and Toronto Spocket Changes ETF franchise continues to flourish.

Speaker Change: We've welcomed over 100 new ETFs to the market this year alone, an increase of more than 25% from 2023 and from 25 different providers.

Speaker Change: On October 1, JP Morgan asked at Management, the World Second Largest Active ETF Provider by Assets Under Management, launches 1st Canadian ETFs with 2 new active ETFs listed on TSX.

Speaker Change: and just last week, Cappell Group Canada launches first suite of active ETS on TSX, including two equity and two fixed income strategies.

Speaker Change: Now turning to our derivative markets, we continue to see impressive growth here. Trading and clearing revenue, excluding box, increased 13% year-over-year.

Speaker Change: These increases included 6% higher revenue from MX due to 12% higher overall volumes and highlighted by strong activity in interest rate derivatives.

Speaker Change: Revenue from CDC increased 25% as a result of larger repo volumes and overall higher clearing revenues.

Speaker Change: Some key MX highlights for the first time months of 2024 included double digit year-rear volume growth in interest rate products, ETF options, single share futures, and our two five and ten year government of Canada bond futures.

Speaker Change: is a very important, overall interest rates remain strong as of September 30th, 23% higher compared to the same date last year.

Speaker Change: Sorry, overall open interest remains strong.

Speaker Change: Revenue from Equities and Fixed Income Trading and Clearing was also up 8% higher than the first nine months of 2023, driven by higher volumes on a equity markets and a favorable product mix.

Speaker Change: Now at the beginning of my remarks this morning, I mentioned the two TMX recent investments, the acquisitions of index research and newsfile, with a strategic focus on building our success, looking beyond the scope of our traditional businesses.

Speaker Change: I want to book in my comments this morning with reference to two more initiatives we are working towards. Set for launch in 2025 in both trading and clearing.

Speaker Change: Our trading team has been focused on enhancing execution quality for our clients, particularly for the institutional bidside.

Speaker Change: We launched AlphaX late last year here in Canada, and we have more than 40 participants now sending orders every week with a couple of large liquidity providers consuming data and working on an AlphaX specific strategies.

Speaker Change: Not surprising, similar client needs exists beyond our borders and actually below can as borders in the largest market in the world. And we continue to make excellent progress with our plans to develop a U.S. equity trading initiative aimed at improving execution quality for biceye clients.

Speaker Change: The response from participants thus far has been very positive and we have started to execute our agreements.

Speaker Change: We are set to launch early in the new year to ensure industry readiness as we work to complete client testing and secure our regulatory approvals.

Speaker Change: An important initiative on track for 2025 launch is our modernization of the CDS Clearing Platform, which includes the replacement of certain legacy systems related to clearing and settlement as well as the entitlement payment systems.

Speaker Change: Following the successful transition to T-plus 1 in May of this year, the majority of participants are Zoom testing in the third quarter, and we are near completion. And we expect to go live near the end of T-1 of 2025.

Speaker Change: We're grateful for the partnership of our industry stakeholders and helping to advance this complex modernization project.

Speaker Change: The initiative isn't merely to keep pace with our global peers. It will bring new leading edge solutions to Canadian marketplaces, designed to create efficiencies and competitive advantages for our clients.

Speaker Change: The new platform will serve as a substantial foundation to upgrade.

Speaker Change: and to help power existing initiatives, including the recent launches of the Canadian collateral management service and SGC notes. Both which we launched earlier this year and will facilitate additional global investment in Canada via future projects.

Speaker Change: and closing as always, I'd like to thank the TMX employees all around the world for their continued and outstanding contributions to our success. And that steadfast commitment to making markets better and empowering bold ideas.

Speaker Change: We are working together to build on TMX's proud history to advance on a proven track record of growth and innovation, strategic execution and leadership throughout all market conditions. And I am most excited for what will come next. With that, let me pass a call over to David. Thank you.

David Arnold: May Siege John, a Brazilian Montreal. Thank you, John. Good morning from Montreal.

David Arnold: is John mentioned TMX's performance year to date has been excellent and that continued into the third quarter, undepended by a powerful and diverse business model.

David Arnold: Our revenue in the third quarter was $353.8 million, marking a 23% increase from the previous year.

David Arnold: Field by the addition of TMX Vedophile and organic revenue growth of 12% over the same period.

David Arnold: This growth was primarily driven by TMX Traeport, as well as notable increases in volumes for trading and clearing across all of our markets for derivatives, equities and fixing come.

David Arnold: 1.0%

David Arnold: Our adjusted diluted earnings per share increased 17% from Q3 of 2023 or reflecting 24% with 30.2 million dollars higher income from operations, partially offset by higher net finance costs.

David Arnold: Turning now to our businesses, I will start with the segments that had the largest Euro-Vier increases.

David Arnold: Revenue in our global solutions insight and analytic segment or GSAA, grew by 41% in the third quarter, reflecting $31.1 million from the inclusion of TMX Vedophile.

David Arnold: Excluding TMX Verifying, Revenue Group by 11% over the same period, driven by strong growth from TMX Trayport.

David Arnold: Revenue in TMX-Vedify was up 7% in Canadian dollars or 6% in US dollars this quarter compared to the same period last year prior to the acquisition of TMX-Vedify.

David Arnold: The increase continues to be driven by indexing revenue, reflecting organic growth in acetunda management and revenue contribution from the 2023 acquisition of EQM indices, as well as higher analytics revenue, partially offset by lower revenue from digital distribution.

David Arnold: Tim Xverterfiz SS under management continued to show robust growth, ending the third quarter at $37.8 billion, which represents 5% growth sequentially and 15% growth in 2024.

Speaker Change: Revenue from TMX Trapport increased $22 per cent in Canadian dollars or 16 per cent in pound sterling this quarter. From Marley driven by 27 per cent increase in total life and seas.

Speaker Change: The revenue increase in Q3 also benefited from our annual price adjustments, incremental revenue from data analytics and other trade products.

Speaker Change: TMX Trapport ended the third quarter with annual recurring revenue of $234.5 million Canadian dollars, or $131 million pound sterling, which represents a 16% growth in average recurring revenue for the quarter on an annualized basis.

Speaker Change: Turning to TMX data links, revenue in the business group by 1% reflecting higher revenue from data feeds, colorcation and benchmarking indices, driven by the new term core benchmark.

Speaker Change: In addition, a positive impact from the price adjustments implemented earlier this year, and favorable FX impact of 0.4 million Canadian dollars due to a stronger US dollar.

Speaker Change: Somewhat offsetting the growth was lower subscriber and usage base revenue due to a client's for the specific reduction in enterprise agreement renewals that occurred in Q2, which we spoke to on our last earnings call.

Speaker Change: Turning now to our derivatives trading and clearing segments.

Speaker Change: Revenue excluding box screwed 23% this quarter reflecting a 19% increase in the Montreal exchange, fueled by record volumes in Q3, as well as a 31% increase in CDC.

Speaker Change: The increase in CDC revenue was driven by higher clearing volumes and the impact of pricing changes which came into effect earlier this year.

Speaker Change: Revenue from box increased $23 in Canadian dollars or $21 in US dollars this quarter. Grieve and buy a higher rate for contract reflecting a favorable product mix as well as a 5% increase in volumes.

Speaker Change: In our equities in fixed income trading and clearing segment, revenue was up 13% in the quarter, driven by 22% increase from equities in fixed income trading and 4% from CDS.

Speaker Change: The revenue increase in our equities and fixed income trading business reflected, reflected, and 11% increase in the overall volumes of securities traded on our equities marketplaces.

Speaker Change: The strength and equity trading continued this quarter with double digit growth in both trading volume and value compared to last year.

Speaker Change: Trading volumes were up 14% on TSX and 8% on TSX Venture Exchange, partially offset by 5% decrease in volumes on Elferex Exchange.

Speaker Change: A combined equities trading market share for TSX and TSX Venture Listed Issues was approximately 64% this quarter, down 2% from Q3 last year, but unchanged sequentially from Q2.

Speaker Change: On the fixed income trading side, revenue increased from Q3 a year ago. From early reflecting increased activity in government of Canada bonds, driven by a more active interest rate environment.

Speaker Change: The increase in CDS was driven by higher issue, issuer, event management fees, higher interest income on short-term deposits, increased exchange traded volumes, and higher revenue from our account transfer online notification service, partially of state by higher rebates.

Speaker Change: Turning to capital formation, revenue in the segment increased 2% in the quarter, reflecting $1.7 million for the inclusion of news file, which was acquired in August.

Speaker Change: Excluding Mousvow, revenue in the segment was downed slightly compared with Q3 last year, primarily due to lower additional listing fees.

Speaker Change: driven by a decrease in total financing dollars raised on TSX, as well as a decrease in the average fee for financing below the maximum fee on TSX Venture Exchange.

Speaker Change: So, staining listing fees and initial listing fees remain relatively flat to last year due to lower activity on TSX Venture Exchange, partially offset by increases on TSX.

Speaker Change: These decreases were partially offset by revenue growth of 5% in TSX Trust, reflecting high-end net interest income, dealer services, and transfer agency revenue.

Speaker Change: Turning to our expenses, on a reported basis, our printing expenses increased by 22% in Q3. This increased was driven by the following items.

Speaker Change: First, we incur $28.1 million of additional expenses related to new acquisitions, namely

Speaker Change: 12.8 million dollars of operating expenses related to TMX Vatifying Newsfall 11.8 million dollars related to the amortization of acquired TMX Vatifying Tangibles

Speaker Change: 1.7 million dollars in acquisition and related expenses for TMX, verify, news file and index research.

Speaker Change: 0.9 million dollars of integration cost related to TMX better-fine newsfile. As well as 0.9 million dollars for the accrual of deferred contingent payments related to newsfile.

Speaker Change: Second, we incurred $1.7 million of expenses in the third quarter, related to our U.S. expansion initiative.

Speaker Change: and lastly, somewhat offsetting these increases with lower expenses of approximately $5.2 million related to box-adestimate of expenses for services provided by box exchange due to a true up in Q3 of last year.

Speaker Change: Now excluding these items, our printing expenses increased by approximately 7% on a comparable basis.

Speaker Change: from Marley Driven by increased employee performance in scent of plant costs, driven by the increase in our share price and stronger performance in some of our businesses.

Speaker Change: More specifically, the main driver for the increase was related to our stock price outperforming the SNP TSX composite index, which determines the multiplier for our performance share units.

Speaker Change: Excluding the increase in long-term incentive programs due to the TMX stock out performance versus the SNP TSX composite index, third quarter operating expenses wrapped 5% compared to last year.

Speaker Change: looking at our results sequentially.

Speaker Change: Revenue decreased 13.3 million dollars from the second quarter reflecting lower revenue from capital formation, as well as equities and fixed income trading and clearing.

Speaker Change: The lower capital formation revenue was primarily driven by lower additional listing, listings due to fewer transactions and lower dollars raised on exchanges from Q2 to Q3.

Speaker Change: as well as lower transfer agency and net interest income revenue in TSX Trust, which are seasonly higher in Q2.

Speaker Change: EQUITIES TRAITING VOLMS DEACREES BY 9% compared with the second quarter, which drove revenue decreases in equity trading and CDS.

Speaker Change: Now these decreases were partially offset by revenue from our derivatives trading business.

Speaker Change: which benefited by a 2% increase in volumes on the Montreal exchange, higher box revenues driven by higher rate per contract from a more favorable product mix quarter of a quarter.

Speaker Change: and Revenue Growth in TMX Trapeorde reflecting a 3% increase in Trapeorde licensees as well as the favorable FXM pact from a stronger pound sterling compared to Canadian dollars.

Speaker Change: Operating expenses in Q3 were down $4.9 million from Q2. Primary reflecting $3 million of lower integration costs, lower operating expenses related to TMX Verifying, lower project spend and directives fees.

Speaker Change: These decreases were partially offset by $1.4 million of higher acquisition costs related to news file and index research.

Speaker Change: They will also hire employee performance in Santa Plan Coss compared with the second quarter driven by a stronger share price that I referenced earlier.

Speaker Change: Turning Naruto Abanachik.

Speaker Change: On the Balanced sheet front, we completed the strategic acquisition of NewsFile in the third quarter. We acquired NewsFile for $22.3 million in cash and $4.7 million in deferred consideration with additional contingent payments of $18.6 million over the next three years.

Speaker Change: For the first nine months of 2024, revenue and income from operations for news file was $10.1 million and $4.3 million respectively.

Speaker Change: Subsequent to the close of the quarter, TMX Verify acquired index research for $25 million US dollars in cash and up to $6.3 million US dollars in contingent consideration.

Speaker Change: for the first nine months of 2024, revenue and income from operations for index research was $3.3 million, and $1.5 million US dollars respectively.

Speaker Change: Now as John mentioned, these acquisitions have not only expanded our product offerings, but also strength in our operational capabilities, particularly in the areas of news dissemination, regulatory filing, and index management in new geographic, new geographic, and asset classes.

Speaker Change: These transactions were structured to include contingent considerations and payments to reduce transactional risk and align key business leaders for shared success and commitment on growth.

Speaker Change: Both acquisitions are expected to be a creative to adjust the DPS in 2025.

Speaker Change: Our Pro-Former did to adjust the EBITDA ratio on September 3, with three times. Down 0.6 times from March 31st, when we first included our TMX Vedify Acquisition in our results.

Speaker Change: As of September 30th, we also held over $518 million in cash and marketable securities, which is approximately $314 million in excess of the $25 million we target to retain for regulatory and related purposes.

Speaker Change: So, net of XS Cash, I'll leverage with 2.6 times, which is 0.6 times lower compared to the end of the first quarter.

Speaker Change: We remain well on track to deliver on our DeLeveraging Plan to return to our targeted leverage range of 1.5 to 2.5 times by the end of 2025. Want at the same time pursuing businesses like Newsfall and Index Research.

Speaker Change: Lastly, I am pleased to announce that last night a border proved a quarterly dividend of 19 cents per common share, payable on November 29 to share all this record as of November 15.

Speaker Change: This represents a 46% dividend power ratio in the third quarter. And our last 12 months power ratio of 47% remains in the upper half of our target power ratio of 40 to 50%.

Speaker Change: 9 conclusion, our Q3-2024 financial performance is a product of a disciplined and strong operational performance, effective execution of our growth strategy and our commitment to delivering value to our shoulders.

Speaker Change: Our financial performance in this quarter underscores our ability to generate returns and create shared value. I'd not like to turn the call back to Amin for a Q&A period.

Speaker Change: Can you please outline the process for the Q&A session.

Speaker Change: Thank you. Ladies and gentlemen, we will now begin the Quest Shitting Answer session. Today have a question. Thanks press the star, followed by the one on a desktop phone.

Speaker Change: Questions will be taken in the order received.

Speaker Change: The Jewish-to-Cancel Nori Quest, please press the star, followed by the two. If you are using a speakerphone, please let the website be for pressing entities.

Speaker Change: Also, we clearly asked the two limit ourselves to two questions only. We have additional questions, finally we'll be with you.

Speaker Change: Your first question is from Nick Prayneb from CIBC Capital Market. Your line is now open.

Nick Prayneb: Okay, thanks. Seeing you guys just doing a bunch of your all-to-day, I'll kick this off with a few questions on MX.

Speaker Change: Um, average RPC with up sequentially as you've guided to, um, you've also alluded to the prospect of market making incentives rolling off the two year contract and the Chora product.

Speaker Change: is just wondering if there's any visibility you can provide on the timing there and just also wondering if you'd foresee a comparable benefit to the roll-off on the five years well.

Speaker Change: Good morning Nick and thanks, that's a great question. And thanks for leading with a Montreal question as we're here with the team. So you're absolutely right in terms of some of the step up that we're seeing in terms of the RPC. I can't give you specific timing around those roll-offs because again, those are commercially, they're commercially sent to the agreements with participants that are working with us. But they, you know, they are in a reasonable near term that you're going to start to see that impact and you're absolutely right in terms of the kind of net impact on the revenue on those products will have similar step ups.

Speaker Change: to what you saw on that rule off of the five years. So, you know, we're looking forward to continued step up in RPC growth over the next couple years.

Nick Prayneb: OK, very good. And under-ributives more broadly, you know, that segment has been a perennial growth engine for an extended multi-year period. I'm just wondering, what is it about that market that enables it to sustain a higher rate of growth over time? Like, if you look back over the past decade, what have been the key drivers there? Like has been just natural growth in the demand for hedging instruments has been, you know, better penetration in the retail visor channel like that. How would you sort of break it down or attribute it?

Speaker Change: Well, I would have gone yes, yes and yes. But let me break it down because there is a number of pieces there. So there is natural growth in terms of as you said, the use of hedging instruments, use of derivatives by clients.

Speaker Change: If you look at global growth rates around derivatives

Speaker Change: and other marketplaces, they are very strong. And then the unique piece that allows us to really outperform and outgrow the volumes in terms of the Montreal Exchange is, in some cases, we're catching up to global markets. We launched our initiative around international trading times zones a number of years ago. That continues to be a driver of growth. The products that have been in that...

Speaker Change: Extended Times on Regime for the entire time are actually now more in the 8 and 9% of our mix.

Speaker Change: We've got newer products that are in there now, like the Korra, like the two year, like the five year, that are still only in the two to three percent. I continue to build because we're getting investor adoption, expand over time. And then the more liquid the products become, the more other people will come and use them.

Speaker Change: Now, when you add that, the fact that we are also continuing to add products along the curve, like the two in the five, that adds long-term growth as well. You know, those products a couple years ago had essentially zero trading on exchange, they're trading non-Average 60,000 contracts a day each, and are still relatively underdeveloped when you compare them either to the back or I know the new core, a short-term product, or the CGB products, which both trade well over 100,000 of P's.

Speaker Change: All these things are mutually reinforcing the investor appetite to actually use these products, the global interest in them, and as you add more products, the ability to provide a range of solutions that go across.

Speaker Change: Yield curves in different strategies, so they're mutually reinforcing and gives a lot of confidence as a directory that we can continue for a long period of time.

Speaker Change: Okay, good color, those are my two, thank you.

Speaker Change: You're welcome, thank you.

Speaker Change: [inaudible]

Speaker Change: Thank you and good morning on the back of 150 years, it sounds like a great time to ask questions in a Montreal exchange. So lots of success, as you've talked about launching new interest rate products across the yield curve.

Speaker Change: As you mentioned, these are now, these have now a recharge your scale. Where do you see the next opportunity in terms of introducing new derivative products? In other words, what are the building blocks in order to achieve?

Speaker Change: The High Single Digital Organic Rails for Disco Business.

Speaker Change: Yeah, there's a couple of pieces there, which is first of all, as I mentioned, I do want to reinforce a piece, even the products that we have launched are not at full maturity yet. So you're going to see that be a contributor to growth going forward. There are other additional products that we were working on around them. So, in our core, a future is thus largely driven by the three months we've got 30 day capability. We've got the additional ability to do different terms.

Speaker Change: We've historically had other things around credit derivatives we're looking at. We've got the ability to potentially do options on futures as well as we had on the backs and the past. So there's a number of different product initiatives that team is working on with clients based on client demand to continue to add products to the curve.

Speaker Change: The addition of that is also, we talked a bit in the analyst's day about post-strait.

Speaker Change: and so the interruption between...

Speaker Change: Mx, the CDC is obviously there's a big part of what we do in CDC that's driven by the trading activity on exchange, but it's not limited to that because we actually can do a lot of clearing around OTC products as well. So you are seeing the big step up in repo clearing activity that was driving the results this year and really the early stage of the new launch of new capabilities. So the first of which was the Secure General Collateral Notes.

Speaker Change: and what's interesting about a product like that is...

Speaker Change: It has multiple points.

Speaker Change: of penetration in terms of using capabilities at TMX. So not only is it something that becomes a cleared product.

Speaker Change: on CDC, but it's also utilizing the capabilities in our trust company. So you're going to see more of that, where the teams that are on the post-frizzide are actually looking to how do we use this capability that we've built, and even more so when we launch the land, the post-trade modernization program, how do we use those capabilities to solve more problems for the client community. So you'll see that continued expansion in the traded products, but also an new expansion in the cleared products that are on the OTC side, or in the funding side.

Speaker Change: Okay, very interesting, and to circle back on, on, on, verifies acquisition of index research as you look at consolidating this market.

Speaker Change: What's the complexity of integrating?

Speaker Change: Indexed businesses with different technologies and maybe different marketing approaches.

Speaker Change: Well, the nice thing about this, and we do a lot of that thinking prior to making the transaction.

Speaker Change: and so, you know, first all the index research team is a really good team. They've built a really nice business.

Speaker Change: The technology platform use there is actually quite complimentary to what we have built within TMX VETIFI. So, you know, SASPASE systems designed to be scalable, where we were looking to continue to build out is, so our capabilities are more limited.

Speaker Change: in the European Middle East Asia region. And so our technology is scalable and fast-paced. Having the operation capability in the times on the surveillance there was one of the things that we had a gap. So this not only did this in the opportunity, add to the suite of indices, the suite of products, add to the talents and the team with complementary technology. But it gave us that regional capabilities well to serve in the European region, which was something we were looking for to continue the growth expansion. So all those things were looked at as part of our investment thesis. And this very much like the other two we did, will be ones that will be able to completely integrate into a common shared platform.

Speaker Change: I believe a portion of the A1 is fixed income are competitive dynamics in fixed income different relative to equities.

Speaker Change: I mean, competitive dynamics at say the difference in 16th and globally is there actually fewer providers.

Speaker Change: of the fixed income products and they tend to be very large operators. This is another space from an asset class standpoint. We're very high on our priority list to have capabilities in. So it's a new capability for us.

Speaker Change: is certainly something that we want to do more of. If you recall, actually TMX actually was in fixed-thinking indices many years ago, those moved to Futsi Russell, and it's definitely a space that we want to continue to explore not just in the European region but around the world, so a really good asset-class expansion for us.

Speaker Change: It can very much.

Speaker Change: You're welcome.

Speaker Change: Thank you. You are a nice questioner from Arabenda, the Laplagia from Anne-Cord, Jr. with me. You're along with that, open.

Speaker Change: Good morning, thanks for taking my questions. I'll ask the two questions back to back. So, both in the PSIA, this morning, that's why I'm obviously continuing to see good AUM numbers.

Speaker Change: wanted to dig a little deeper into the revenue trends in Q3 and know that.

Speaker Change: The organic number looked like it was probably in the low to mid-tingle digits.

Speaker Change: wanted to set a gear yet, but there obviously we're looking for the run rate has been stronger than that. I know you've referred to some easing in the digital distribution side of it. Maybe some clarity there. And secondly, on data links.

Speaker Change: I think you've explained to the headwinds there in the prior call but how should we think about the shape of recovery there and maybe some initiatives too.

Speaker Change: to sort of rebound that growth to its the rates I know that you want to get to.

Speaker Change: Okay, that's good. So here's the deal. I'm going to try to handle all of that and if I miss some by the end, you know, stay back in the call and make sure that you re-cute and make sure I get all these pieces. So let me start with the VETA-FI piece. You know, there's a reason why we talked to both the cordolese and the full year to date and we talked about in the commentary that the actual year to date VETA-FI numbers are actually up 18% year over year. One of the pieces that, and over time, we're going to help you get more predictive around this.

Speaker Change: While the business is largely recurring revenue-based driven by AMin and next piece, you know, call that essentially 80-ish percent recurring, that other component that's really driven by things like events or digital distribution deals.

Speaker Change: can be quite a bit lumpier because it's really more driven by clients decisions around their marketing spend when they're doing it. So it's less predictable period by period and we can't have lumpiness period by period. So we're always going to guide to the long term on more on an annual basis than a quarter by quarter because of those types of trends.

Speaker Change: So there's nothing in the trends or in the quarter quarter as you talked about that are unexpected for us. The business is performing as we'd wanted to. This is a year going to recall. We're targeting double digit growth for this franchise over the long term. It's delivering in line with that expectation and we expect that again as we move into next year. So that's kind of how we do better on this. We'll be able to demonstrate kind of more of how these different products work.

Speaker Change: The other piece that's going to be always challenging though is some of these products are complementary.

Speaker Change: So, you know, the deal that we do on a digital distribution in transaction may be designed to help land a new index and vice versa.

Speaker Change: and so though again those periods, quarter to quarter maybe lumpy and driven by what's going on in the client activity. So let's over time, these things will get smoother, we'll be able to give you more disclosure, you'll have more historical periods, but that's why we're trying to guide to look at the full years and not necessarily the period by period.

Speaker Change: Now when comes to the second question you had around data links.

Speaker Change: You definitely identified one thing that what has been ahead when, that's why we were telegraphing it in the second quarter. And this was a large global client with a large retail presence that made a strategic change to no longer offer real-time pricing for international markets for their client pace.

Speaker Change: and that is really the large impact that's actually flown through, you know, fucking a float through into the third core. It's started in the second quarter. It's now fully baked in. So this actually gives you a good jump in off point in terms of the runway because it is a specific client event and not indicative of a trend.

Speaker Change: Where we look to the trend pieces, and even you look kind of beneath the lines in terms of some of the actual components around subscriptions. You know, you've picked that piece away. The subscription strength was actually fairly strong, and particularly around the derivatives piece. I think we're up at other four points in subscriptions year over year.

Speaker Change: There is actually a market base impact as well, you know, for those that have been with us for a long time. When you've got marketplaces that are softer or quieter for a period of time, you can have some contraction around data users. And we've seen that over the last couple of years, equity markets has been softer. When those markets recover and start to pick up again, you will see firms expand their use of particularly real time data, both domestically and globally. And that's been the typical trend in any markets like us even through, in terms of the all the time I've been here in the last 24 years. So that's kind of the way to think about it. The, you know, the step that had wind in kind of Q2 and into Q3 was a unique client piece that is now largely baked in.

Speaker Change: Have I covered everything there? Yes, that's great. Okay, thank you, John. Thank you. Thank you.

Speaker Change: and I'm a member of the National University of California.

Speaker Change: Hi, good morning.

Speaker Change: Maybe we'll start with just the recently SEC vote and to reduce the cap for access fees.

Speaker Change: still proposes, but looks like it may come through next year. If it does get pushed through, what's the expectation that's can't the fall of suit? And if so, maybe you could just give us some thoughts on what you think the implications would be if that does flow through into Canada.

Speaker Change: Yeah, that's a great question. So that's when we've been very active on and you know one of the really important things for us to have very strong relationships with our regulatory partners. So this is something we've been in dialogue and for a while. I'll give you a couple thoughts on that. First of all, the Canadian marketplace we've already got actually a different regime around this. So when it comes to the interlisted companies, we actually are aligned with the US market. We've got the same rate structure as the US market and it's important to to be able to have that competitive dynamic. We actually already have lower access fee caps on the non-interlisteds.

Speaker Change: [inaudible] So there is an element that we need to wait and see on the ability for this to actually get enacted.

Speaker Change: You know, our dialogue has always been that in terms of the interlistened marketplace, we need to be very competitive with the US.

Speaker Change: which means either that we work, you know, Perry Presuted, we do the same thing. Or we also look to see, you know, can we deviate to potentially create better liquidity in Canada as a way to draw some more of that order, float north of the border, and to improve liquidity here. So those are part of the discussions we're having. And similar to the discussion around the non-interlisted is that, you know, that's a standalone market. We can, we can choose something to do unique for the Canadian marketplace.

Speaker Change: So again, we don't think this is a material risk either way, but we want to have good discussions because...

Speaker Change: You know, recognizing that with 3,500 companies, you know, all of them have the same liquidity as a large blue chip company and vehicles that are in there that help provide liquidity like Mark and making regimes or like, you know, passive order flow payments through access fees are still important for liquidity. So all of it's on the table, not a material risk but something that we're going to want to make sure that we move in step with the US market and we don't get out of step.

Speaker Change: Okay.

Speaker Change: I appreciate the full semester on that. Maybe David, I'll jump to you on a expense growth just if you exclude the one-time items. A lot of couples, it seems to be trending around 7% year or year. Can you give us some context of what you think is a reasonable expectation as we're looking into 2025?

Speaker Change: for Expense Growth F.

David Arnold: Thanks Graham, so let me first unpack the quarter and then we can talk about 2025. So as I mentioned in my remarks, just a little earlier, right? So the 7% is absolutely correct.

David Arnold: But then we've seen really strong share price performance at Tier TMX and we obviously have performance share units that are linked to the performance relative to the composite index.

David Arnold: and we've out performed that significantly so that accounts for another two points on that and that's kind of why the number is more round five.

David Arnold: But then what I've also touched on is we've got really strong business performance and relatively speaking our incentive comp program numbers.

David Arnold: would be much higher than Amin Lossger. So...

David Arnold: If we adjust for that in the quarter it's kind of around 3%. So that's kind of the way I, with my team spend a lot of time with John and the management team looking at kind of the core expense growth and then we kind of look at that relative to inflation, right? So inflation in around the quarter is 2.1% core expenses off we deal with the performance related items around 3% so pretty reasonable.

David Arnold: As we hit into 2025, I'm the lot of moving parts. We're busy working on kind of objects and our numbers and our strategic plan updates for the board.

David Arnold: and so it's a little early for me to kind of signal that but as we've said before right we really want to target when you look through the noise kind of that low single digit kind of expense growth number obviously relative to where inflation is going right so inflation ticks even lower we want to try and be a little closer to that if a tick's a little higher we obviously will track little closer to that so stay tuned I think in Q4 we'll be able to give a little bit more of an indication to the 25th.

John Mckenzie: John you want to add? Yeah the only thing I'll add in is we do have a couple of

John: You know, kind of unique items for next year as well. And today's point, we're going to try to give really good clarity. We've talked about the fact that our post-traid modernization program scheduled to go live next year. So there's going to be a point in time where the amortization of that finally kicked in. That's a non-cash item.

John: but that will start to roll through expenses. At the same time we're actually going to have some cash expense savings as we sunset and retire the legacy system. So we're going to try to give you better disclosure and understanding on that. What does it mean from a transition standpoint, one time costs of actually executing it and then what is the kind of the go forward from there. But the discipline in the organization remains as David said we are looking to target that kind of inflation, their low single digits, that's the challenge to all of our teams. And looking forward where do you find opportunities to save to fund new areas for growth at the same time and that change that DNA doesn't change here.

Speaker Change: Okay, that's all for thank you.

Speaker Change: Thank you. Your next question is from James Gullin from Nathaniel Bank Financial, Caroline Thelvin.

James Gullin: Yes, thanks. First question, I guess for David, just want to get a sense of the box true of that occurred in key three last year, but maybe not in this year. Like, with this.

James Gullin: was this quarter the more real number or maybe walk me through some of that, some of the details around the box.

David Arnold: Yeah, so I think the short answer to your question, James, this would be a more reflective kind of quarter. Last year in the quarter there was really a catch-up to true up for the first kind of nine months.

David Arnold: So I think this would be more indicative of the quarterback kind of going forward. But you know the visibility into, you know, the exchange kind of SRO expenses is somewhat limited. So obviously the management team of the market receive analysis from the SRO indicating expenses and so forth. So it seems to be pretty stable, but to the extent they might be something that, you know, pops up in the fourth quarter and then that would be accounted for in the fourth quarter and I will talk to it.

David Arnold: and the right now the third quarter would be very indicative and we seem to have kind of a smooth glide path.

Speaker Change: Yep, understood. Okay, on the PSX Trust Fitness, you know, just think it about how we're shaking up for...

Speaker Change: For the upcoming quarter, it's safe to assume the sensitivity to rate cuts is similar and so putting that, putting it in every non-day ones and it's like rate cuts volumes, new file, now included, like we should see.

Speaker Change: and David Arnold, who was a man in the world, was a man in the world.

Speaker Change: I mean the starting point around the rate impact is yeah that will have an impact. The piece that's going to be difficult more difficult to predict is too full because it's not just

Speaker Change: The rates themselves, it's the balances.

Speaker Change: and so while that 25 beeps is worth about 2 million per year, the bounces have actually been improving. And one of the pieces, again, when you kind of think about outlook and potential, while the new issue activity, we've talked about new issue, new financing activity continues to be soft across capital markets. We are seeing more what I'll call corporate action, M&A activity. There are more potential transactions for CSX trust to bid on in terms of winning that new business. So there is potential for new business in the next quarter that I know the team is working hard on, and it's a good pipeline. But all things being equal, if there's kind of business at the same as this quarter, yeah, you would expect to see some...

Speaker Change: stepped down from an interest rate standpoint.

Speaker Change: and just speak one more in on the equity trading side of the equation here. You know revenue portrayed or revenue put contract.

Speaker Change: looking a little stronger in this quarter than we've seen in recent quarters. How much is Dick's income trading activity? You know, it's hard to separate the two, but how much is Dick's income trading activity driving?

Speaker Change: that increased revenue versus maybe some price initiatives or other factors.

Speaker Change: is a good question James. So we don't really get into that level of granularity so I'm going to disappoint you there but I'm going to indicate to you that you are correct right. One of the things that has definitely helped is fixing come activity given the kind of rate complex movements has been very robust and so that is absolutely contributing to the kind of growth that you see there.

James Gullin: Alright, thank you.

Speaker Change: Thank you, and your next question is from Van Boudditt's Drama Workings. Please ask your questions.

Speaker Change: Hi, I'm Gmorting and thanks for taking the question. Wanted to check on VEDA-FI first. You mentioned earlier that some of the revenue bits can be a little bit more lumpy than expected, and I know you tend not to give specific guidance, but just thinking about the $100 million USD target for the year. Anything you could point to for Q4 to help us think about how achievable that is clearly there's the AUMP that we can track that you indicated you'd be giving some more color on, helping you make a little bit more for the Q4. Just thinking about how Q4 should shake up in the context of your prior expectations.

Speaker Change: I mean again in the absence of providing forward guidance on one quarter and I want to be careful how I answer the question. This is an area where we continue to have strength. We've got confidence in the business. We've got a lot of things that are actually working in our favor in terms of doing that. I cannot give you an absolute indication of where we're going to lend you four. But then the target is continued to be what the team is working towards.

Speaker Change: and then maybe one more, I just done some of the new MNA news file and index research. You've given some helpful disclosures on what the year-to-date contribution would have been from a revenue and I think operating profit perspective. Could you maybe talk about what the historical growth profile, what that looked like over the last few years, and then how are you thinking about either cross-selling or what TMAX can do to accelerate growth? Or how you think about embedding them into the business of that new file and index research. Thanks.

Speaker Change: Yeah, that's a great question and you actually got right to the heart of our what'll call our strategic thesis on both of these. Both of these organizations led by really strong teams are been double digit growers. We expect them to continue to be and once that can grow at rates above.

Speaker Change: Additional capability, which I mentioned earlier, which is really important as we expand more in the European Middle East and Asian region to have that on the ground capability to operate in the time zone of the clients. Because you know sometimes you need to address a client issue concerns sales opportunity and it gives us the ability to do that so.

Speaker Change: We're excited to bring both these teams into the organization, they're both kind of pretty lean and efficient teams and we were able to do transactions that were good value for both them and for the investors in T. M X.

Speaker Change: And with some nice as David mentioned.

Speaker Change: Components that are tied to keeping leaders in the business and committing to our shared success together. So we couldnt be happier with how these two things came together.

Speaker Change: Got it thanks, so much for taking my questions.

Speaker Change: Thank you.

Speaker Change: No further questions at this time. Please proceed.

Speaker Change: Thank you everyone for joining our call today.

Speaker Change: If you have any further questions our contact information for Investor Relations as well as media is in our press release and will be more than happy to get back to you I wish you all the happy Halloween and until next time Goodbye.

Speaker Change: Okay.

Speaker Change: Thank you ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect your lines.