45% of all TSX trades were from retail investors in January, CEO says

Retail investor participation at Canadian exchange operator TMX Group Ltd. rose to 45 per cent of total equities trading in January, from 35 per cent a year ago, on the back of the Reddit-driven trading frenzy, its chief executive told Reuters on Tuesday.

“The positive strength in trading, equity trading particularly, and what’s driving it in terms of retail interest, is something that we could see for some time,” CEO John McKenzie said in an interview.

TMX reported 9 per cent growth in adjusted fourth-quarter profit on Monday.

Retail investors who followed the popular Reddit forum WallStreetBets flocked to some U.S. shares over the past few weeks, driving an unprecedented short-term rally followed by sharp falls.

TMX trading statistics reveal that more than 20 million shares changed hands in January 2021 across various TSX exchanges, including the main index, the venture and TSX Alpha. In the same month a year ago, TSX exchanges traded 11.3 million shares.

Over the past year shares in the company that owns the TSX have climbed a mere 1.4 per cent, in contrast to nearly 20 per cent gains in Intercontinental Exchange Inc (ICE) and the London Stock Exchange Group.

“I’m surprised that the stock has been going nowhere,” said Barry Schwartz, who holds TMX shares as chief investment officer at Baskin Wealth Management.

“The market is at all-time highs … and that’s great for the TMX.” 

“TMX have not been the best marketers of their story,” he added. “It doesn’t have the same pizzazz as a real big name, but it is one of the most consistent businesses around.” McKenzie attributed TMX’s recent underperformance to its diversified business model.

“Our business tends to be a bit more balanced and we don’t get those big valuation moves that other marketplaces” that are geared to a specific business get, he said, adding that over a longer period, the company has fared better.

TMX shares have risen about 241 per cent over the past five years versus ICE’s 139% gain. TMX still plans to extend derivatives trading into Asian hours beginning on May 30, but will lengthen it only to 20.5 hours instead of the originally planned 23 hours, McKenzie said. It is hiring 13 staff members to support the move.