TMX Group’s Luc Fortin discusses customers’ rush to the yield curve and leading by example in ESG

John Lothian

John Lothian

Executive Chairman and CEO

Luc Fortin, president and chief executive officer of Montréal Exchange and global head of trading at TMX Group, sees the launch of extended hours at TMX last year as an important step in the exchange’s globalization. “We had our hours in Europe where we were seeing more and more demand as we saw growing pools of capital requiring liquidity and Canadian derivatives over the Asian hours,” Fortin said. “So when we launched this in the fall, obviously, we’ve seen a very good uptake to it, particularly around all the crazy volatility that we’ve seen since the beginning of this year.”

Fortin spoke with John Lothian News at FIA Boca 2022.

Between 6.5% and 7% of daily volume is traded during additional hours that extend the exchange’s operation to 20.5 hours per day. The exchange says the extended hours mean investors from around the world can begin trading on the Montréal Exchange at the same time as their local exchange hours.

Given the pandemic issues in Hong Kong, TMX has been using Singapore as its base in Asia. “Singapore seems to be another hub right now that’s blossoming in Asia and our teams have been through the region, most recently to keep commercializing and talking about the opportunity,” Fortin said.  

Client demand has brought new bond products to the TMX Group. TMX’s clients were asking for derivative products that emulate strategies such as convexity plays and yield curve shifts. “So really completing or filling out the yield curve, as we’ve been calling it internally, was a necessity in our view,” he said. “The 2-year and the 30-year now fill out the entirety of the yield curve and they meet very different needs.”

With offerings that reflect the underlying curve, TMX is looking at new instruments such as credit derivatives and others that will allow portfolio managers to emulate cash portfolio strategies.

Fortin sees sector futures and cryptos emerging in the future. “I think we have a unique ecosystem,” Fortin said. “We’ve got a lot of regulatory credibility and it is absolutely an area in which we have a right to play.”  Market makers and participants are looking for tools to hedge, and regulatory clarity is emerging around ETF issuance and crypto. “I would say in Q3, Q4 this year, you can expect to see some cash-settled crypto futures launched on the Montreal exchange to again help in the management of these ETF positions that market makers and participants have,” Fortin said.

Fortin welcomes other exchanges, such as Cboe, entering the Canadian market if they bring something new to the marketplace. “We welcome competition,” Fortin said. “I think if we have  good competitive, thriving Canadian capital markets, I think that’s going to be a good thing.”

Getting the story out and advocating for Canadian markets globally is bearing fruit. “I just look at some of the commercialization activities that we’ve had over the last two, three years. The number of international participants that we’ve brought to the table that are new clients in the Canadian ecosystem roughly represent 20% of our volumes in our derivative business.”

TMX had cloud systems in place for internal operating systems and remote working that helped during the pandemic. “That allowed us to leap to home and within less than a week or two we were at 96% of our staff working remote as seamlessly as when they were in office,” Fortin said. But the remote work is getting old now. “I think now we’re a little over two years into this and everyone is getting a little bit tired. … I see everyone’s got a spring in their step and it feels very good to get a semblance of normality coming back,” he said. TMX will be looking at different types of hybrid work relationships. ”We’ll have to be flexible,” he said.

TMX is working to lead by example in ESG. “We started slowly in terms of our sustainability report, and we’re adding more and more material in our disclosures around this. And I think you know, the big part of why it took me all of 30 seconds to participate in the Sustainable Stock Exchange derivative component is the advocacy piece,” Fortin said. “When you look at climate change, and you look at ESG in general, this is not a local problem. This is truly a global problem and we have to find global solutions.”

“There needs to be some unique means to transform our marketplace,” Fortin said. ”And obviously, by being very vocal about it, [I hope] some of my peers will take me up on my offer to collaborate.”

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