Toronto Stock Exchange parent sees stronger IPO market heading into 2026

TMX Group expects a meaningful pickup in Canadian listings into 2026, citing a deep pipeline and the recent C$704 million (US$499.01m) Toronto IPO of Brookfield-backed Rockpoint Gas Storage amid a stronger U.S. IPO market that has raised about US$30 billion YTD (+~13% YoY). The exchange is expanding U.S. operations—opening a New York office, growing its AlphaX US off-exchange platform and exploring an alternative trading system for fixed-income—while remaining cautious on prediction markets; capital-market experts also point to U.S. tariffs on Canadian imports as a headwind for domestic IPO activity. TMX generates more than half its revenue outside Canada and has pursued strategic moves such as the ~US$1bn acquisition of VettaFi to capture cross-border issuance and trading flows.

Analysis

Market structure: TMX (X.TO) is positioned to capture an outsized share of incremental Canadian listing fees and data/connectivity revenue if the IPO pipeline executes into 2025–2026; a single C$700m+ IPO (Rockpoint) signals deal size and fee density that can move quarterly revenue by mid-single-digit percent. U.S. liquidity leadership means cross-border flow will set pricing — TMX’s AlphaX US and Trayport expansions plus VettaFi give it optionality to earn trading, data and index fees beyond listing cycles.

Risk assessment: Key tail risks are tariff escalation (Trump-era changes raising cross-border activity costs) and regulatory pushback on prediction markets — either could compress deal flow or require provisioning; quantify triggers: a 5–10% CAD/USD shift or a 6–12 month regulatory freeze would materially delay revenues. Near-term (days–weeks) watch IPO cadence and CAD liquidity; short-term (3–12 months) watch US IPO pricing and Fed rate path; long-term (12–36 months) watch ATS launch execution and market-share gains in fixed-income trading.

Trade implications: Tactical overweight in X.TO and adjacent Canadian capital-markets infrastructure and data plays, offset by selective shorts in higher-valuation US exchange incumbents whose new prediction‑market bets face regulatory uncertainty. Use options (9–12 month call spreads) to express upside through 2026 listings while capping drawdown; increase allocation if quarterly listing volumes rise >25% q/q.

Contrarian angle: The market is underestimating TMX’s non-listing revenue optionality (VettaFi, Trayport, AlphaX US) — consensus may price X.TO as a pure cyclical exchange; if Canadian listings recover to 50–75% of comparable US IPO cadence by 2026, valuation multiple compression risk reverses and could drive 15–30% multiple expansion. Conversely, a rapid surge in listings could create secondary supply and short-term pressure on newly listed issuers, reducing immediate upside for brokers but not for the exchange operator collecting fees.

Key Decisions for Investors

• Establish a 2–4% long position in X.TO (Toronto-listed TMX Group) over the next 30 trading days via equity or 6–12 month call spread (debit) to capture expected 2025–2026 listing pickup; target 15–25% total return in 12 months, set hard stop-loss at -12%.
• Implement a relative-value pair: long X.TO 3% vs short ICE (ICE.N) 2% over 6–18 months to play TMX’s listing/data optionality vs ICE’s higher exposure to prediction-market execution/regulatory risk; rebalance if ICE outperforms X.TO by >8% in a month.
• Buy a modest 0.5–1.0% notional 9–12 month call spread on X.TO (long lower strike, short ~10–15% higher strike) to leverage volatility around IPO calendar releases; exit if TMX reports <10% y/y listing fee growth or implied vol drops >30%.
• Cap new allocations to pure prediction-market plays (exposures via ICE/CME/CBOE ventures) to <1% until regulatory clarity or demonstrated demand curve over 90–180 days; if a US federal regulatory approval occurs, re-evaluate and consider small long exposure up to 1.5%.