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Executives

Shane Quinn – Manager, Investor Relations

Tom Kloet – Chief Executive Officer, TMX Group Inc.

Michael Ptasznik – Chief Financial Officer, Senior Vive President and Group Head

Analysts

John Reucassel – BMO Capital Markets

Paul Holden – CIBC World Markets, Inc.

Geoffrey Kwan – RBC Dominion Securities, Inc.

Justin Schack – Rosenblatt Securities, Inc.

Doug Young – TD Securities

TMX Group Inc. (OTC:TMXGF) Q4 2012 Earnings Call February 6, 2013 8:00 AM ET

Operator

Good morning. My name is Tracy and I will be your conference operator today. At this time, I would like to welcome everyone to the TMX Group Fourth Quarter 2012 Analyst Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. And I’ll now introduce and turn the call over to Mr. Shane Quinn, Manager of Investor Relations. You may begin your conference, sir.

Shane Quinn

Thank you, operator, and good morning. Thank you, everyone, for joining us this morning for the TMX Group fourth quarter 2012 conference call. As you know, we announced our fourth quarter results this morning. A copy of the press release is available on our website, tmx.com, under Investor Relations.

We’re all accustomed to hearing Paul Malcolmson’s voice on our investor calls. Unfortunately, Paul cannot be here this morning, due to a death in his family. Our thoughts are with him and his loved ones today. This morning, we have with us Tom Kloet, our CEO; and Michael Ptasznik, our CFO.

Following opening remarks from Tom and Michael, we will have a question-and-answer session. And before we begin, I would remind you that certain statements made on the call today may be considered forward-looking, and I would refer you to the risk factors outlined in today’s press release and reports filed by TMX Group with regulatory authorities.

In addition, we will discuss certain financial measures such as adjusted EPS and adjusted diluted EPS that do not have standardized meaning under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers.

Now, I would like to turn the call over to Tom.

Tom Kloet

Thank you, Shane, and good morning, everyone. Thank you for attending the call to discuss TMX Group’s fourth quarter and full year results for 2012. I’ll spend the next few minutes on our operational performance for the quarter and the year ended December 31. Then I’ll provide a brief update on our integration efforts. I’ll then turn the call over to Michael to discuss our financial results with you.

2012 was a transformative year for TMX Group with the completion of the Maple transaction and the ongoing integration of CDS and Alpha into the company. But there were a number of other important achievements during the year unrelated to the Maple transaction itself. CDCC launched its REPO clearing service. The technology solutions team completed the acquisition of Razor Risk Technologies and launched the TMX Quantum XA equity trading technology initiative.

The information services group expanded our co-location facility and launched several new indices with Standard & Poor’s. Montreal Exchange continued to enjoy strong growth in 2012, which was unique in our industry, and launched its option simulator and educational programs. NGX added three new clearing locations in the United States.

Looking at our listings business, according to the World Federation of Exchanges and our own analysis, together with the Toronto Stock Exchange and the TSX Venture Exchange, finished the year first in the world for a number of new listings for the fourth consecutive year, and third in the world by equity financing rates. This compares to 2011 when TMX Group was sixth in the world in financing rates.

Moving up so significantly in the ratings has proved positive that we are an important global destination for capital raising. 2012 clearly was a positive and important year for our company, but was also a challenging year. While there were certain bright spots, it is clear that the global market conditions continue to affect TMX Group’s operational and financial performance.

The fourth quarter of 2012 was somewhat improved in terms of equity financing and trading activity compared to the third quarter of 2012. There were 47 new listings on Toronto Stock Exchange, including five graduates and 35 new listings on the TSX Venture Exchange. Together, that represents an 82% improvement over the prior quarter, which is really good to see. However, new listings were down 15%, compared to the fourth quarter of 2011 and 29% on a year-over-year basis.

IPO financing was up on Toronto Stock Exchange in the fourth quarter of 2012, compared both to the prior quarter and to the fourth quarter of 2011. But it continued to be down significantly on the TSX Venture Exchange. In our experience, the TSX Venture Exchange is more sensitive to macroeconomic factors and somewhat slower to respond to economic improvement.

The level of total equity capital raised on both listings markets was up 8% in the fourth quarter, compared to the prior quarter, and up 32% compared to the fourth quarter of 2011. And importantly, on a year-over-year basis, financing was up 11%. A national increase in dollars financed on a year-over-year basis is a positive indicator that funding on public markets remains a preferred option for businesses.

Unfortunately, for the TMX Group, though, our revenue isn’t fully tied to the dollars raised in our exchanges. Just a reminder that some of the large transactions that occurred during the quarter would have reached the maximum fee level. The number of financing transactions is another important revenue driver for us. We did see good improvement in the fourth quarter in terms of the number of transactions both compared to the prior quarter and to the fourth quarter of 2011. However, on a year-over-year basis, there were 13% fewer transactions in 2012 compared to the prior year.

Turning to equity trading now, combined total volume on Toronto Stock Exchange, TSX Venture Exchange, Alpha, and TMX Select was up 6% in the fourth quarter of 2012 compared to the third quarter. However, it was down 21% compared to the fourth quarter of 2011 and down 27% on a year-over-year basis.

Trading activity on Toronto Stock Exchange and TSX Venture Exchange closely correlates to the total trades processed at CDS. So, on the fourth quarter of 2012, exchange trades processed was up more than 4%, compared with the prior quarter and down 24%, compared to the same period of 2011. Again, it’s important to note that the decline in equity trading volumes in 2012 was not unique to our markets. This continues to be very much a global phenomenon.

In the depository element of the CDS business, the number of equity positions was up very slightly in the fourth quarter of 2012 compared to the fourth quarter of 2011. It was also up on a year-over-year basis. Now, in the fourth quarter of 2012, activity in our derivatives business, Montreal Exchange, decreased compared to the prior quarter. Volume was up 3%, compared to the fourth quarter of 2011.

As for the full year, MX volume was up 4%, compared to the prior year. This compares very favorably to the 13% reduction in futures and options volume in the rest of North America as reported by the Futures Industry Association. At December 31, 2012, the level of open interest on MX was down 7%, compared to the December 31, 2011, measure.

In the fourth quarter of 2012, CDCC cleared 8,337 REPO transactions, comprised of 99 eligible instruments with a notional value of approximately $368 billion. CDCC recently surpassed $1 trillion cleared since it launched the REPO facility last February. We expect the business to continue to grow with the planned addition of expanded functionalities.

While BOX trading volume in the U.S. options market was down 20% in the fourth quarter of 2012, compared to the same quarter of 2011, on a year-over-year basis, BOX volume was up 4%. Again, this compares quite favorably to U.S. option market volume as a whole, which declined by about 13% in 2012.

In our energy business, NGX trading and clearing volume was down 21%, compared to the fourth quarter of 2011 and down 8% for the year compared to 2011. An increase in the North American supply of natural gas and slower growth of demand has led to lower natural gas prices and less price volatility, which contributed to these lower volumes. NGX also experienced a decline in the crude portion of the business, but it’s worth pointing out for a moment that our subsidiary, Shorcan Energy, picked up a good portion of that volume. So, clearly, TMX Group’s market performance reflects the global economic factors that continue to dampen investor confidence.

I’ll turn to our business initiatives for a moment now. As you’re well aware, the Maple transaction closing was the main initiative pursued during the last half of 2012. Our integration work continues to be a key priority. Regarding Alpha, we are continuing our efforts to migrate its outsource technology into the TMX data center and on the TMX Quantum technology platform.

Not only will this deliver important cost savings for us, it will also deliver considerable benefits to our equity trading customers. We continue to expect that this work will be completed at the end of the second quarter of this year. The equity’s trading team is also in the process of incorporating Alpha’s products into the TMX product suite.

In terms of our efforts at CDS, corporate support functions are in the process of being integrated, which will deliver both operational efficiencies and cost savings. We recently announced the appointment of CDS’ new CEO. Jean Desgagne’s first day on the job will be February 19. We are very happy to have such a solid executive join the TMX Group and lead CDS.

With the benefit of having seen more of CDS since the deal was closed, I remain convinced that there are exciting products and services TMX can add as a result of having this entity within the group. I look forward to adding a person of Jean’s background as we explore and capitalize on these opportunities. Our integration work today continues to be in line with the target we set out earlier, which is to achieve annual cost savings of approximately $20 million on a run rate basis in the first quarter of 2014.

Clearly, we cannot control the macroeconomic and global political factors that affect our operating results. However, what we can control are the quality and depth of the products and services we provide to our customers. So, that has been the main focus of management and our employee team. We are carefully evaluating and managing our costs to be sure. While we were also continuing to make prudent investments in our future, to design our products, to anticipate our customers’ needs, to seek new customer relationships, and to focus every day on making certain our service to our existing customers is exemplary.

Specifically in 2013, we will continue to develop and implement the TMX Quantum XA technology, as well as enhance our other technology platforms. We will also explore developing linkages between asset classes and create products to capitalize on various regulatory reforms. And of course, we’ll carry on our efforts to ensure our brands and our offerings are well understood by our current and potential customers around the world with the ultimate goal of increasing participation in our markets.

For example, last year, our equities business alone completed more than 200 events in 45 cities in 15 countries. We have found it to be a great time to be waving the Canadian flag on international stage, so we will continue to do so as often as we can. The impact of these efforts is dramatic. If we contrast 2012 to 2008, when TSX Group and Montreal Exchange combined to form TMX Group, TSX posted 339 international companies in 2012 with a combined market capitalization of $182 billion, compared to 273 international companies with a market cap of $56 billion in 2008.

In the case of MX, in 2008, total volume was 38 billion contracts and in 2012 it was over 64 million contracts. These are clear indicators of the success of our business development efforts. We aspire to continue to build on these success. We do this work because we remain optimistic that activity in public listed markets will grow as the economic recovery takes hold. And when they do, our careful investments in our infrastructure and business development will leave us well positioned to capitalize on the opportunities presented by improved market conditions.

Several times since I joined the company in 2008, I have highlighted the benefits of our diversification strategy, particularly during these more challenging times. The fact is, today’s TMX Group is an even more diversified company than it was a year ago with the addition of CDS and Alpha. Today, we are a stronger, more globally competitive company. Today, we have an even broader range of opportunities for future growth.

With that, I will turn it over to Michael to review TMX Group Limited’s fourth quarter 2012 financial performance. Then, of course, we’d be happy to take your questions. Michael?

Michael Ptasznik

Thank you, Tom, and good morning, everyone. I should open with a brief explanation of the reporting method we have used in the financial statements, Q4 earnings release and MD&A, and it’s our first full quarter following the completion of the acquisitions of TMX Group, Inc., CDS and Alpha.

Our audited financial statements include the operating results of TMX Group, Inc., CDS and Alpha for five months in 2012. The comparative financial statements for 2011 include only TMX Group Limited. In order to present meaningful operational comparatives, our discussion of Q4 2012 revenue, expenses, net income attributable to non-controlling interest and cash flows is compared to what we had reported as TMS Group, Inc. prior to the addition of CDS and Alpha for Q4 2011.

Revenue was $181.1 million in the fourth quarter, up 12% compared with $161.7 million in Q4 2011, due to the inclusion of $22.4 million of revenue from CDS and $4.7 million of revenue from Alpha, partially offset by lower revenues from trading and issuer services resulting from decreased market activity. Operating expenses were $105.3 million, up 31% from $80.6 million in Q4 2011, due to the additional operating expenses included from acquisitions, including $16.7 million of expenses from CDS and $3.8 million of expenses from Alpha. The results of the increase in expenses related to the incremental amortization of intangible asset related to our acquisitions of TMX Group, Inc, CDS and Alpha of $9.8 million.

In addition, the increase was also attributable to the inclusion of an aggregate of $3.1 million of incremental expenses related to Razor Risk acquired in Q1 2012 and ir2020, the assets of which were acquired at the end of December 2011. These increases were partially offset by lower costs associated with year-end adjustments to employee performance incentive plans and higher capitalization of cost associated with some of our technology initiatives. Overall, income from operations in Q4 2012 was down 6.5%, as compared to TMX Group, Inc. in Q4 2011.

On a reported basis, diluted earnings per share was $0.61 in Q4 2012; Adjusted diluted earnings per share was $0.95, excluding $0.18 per share of Maple acquisition and integration costs and $0.16 per share of amortization of intangible assets related to acquisitions.

On a sequential basis, as compared to Q3 2012, revenue, excluding Alpha and CDS, increased $9.7 million, mainly due to increases in issuer services revenue. Expenses excluding CDS, Alpha and amortization of intangibles related to Maple acquisition were lower by approximately $2 million, mainly due to the lower compensation and benefits. The combination of a higher revenue and lower expenses resulted in approximately 18% increase in income from operations as compared to Q3. CDS and Alpha then contributed an incremental $6.6 million in income from operations for the fourth quarter as compared to only $1.4 million for the two months in the third quarter of 2012.

The increase in income from operations was partially offset by a full quarter of intangible amortization as compared to only two months in Q2. As Tom mentioned, we remain on track with the integration of CDS and Alpha, and our targeted annual cost synergies of approximately $20 million on a run rate basis in Q1 2014.

Finally, TMX Group Limited held cash and marketable securities totaling $313.4 million at December 31, 2012, and the board declared a quarterly dividend of $0.40 per common shares to be paid on March 8, 2013, to shareholders of record on February 22, 2013.

With that, I’ll turn the call back to Shane for the Q&A session.

Shane Quinn

Thanks, Michael. Operator, could you please outline the process for the question-and-answer session?

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of John Reucassel with BMO. Your line is now open.

John Reucassel – BMO Capital Markets

Thank you. Michael, just a clarification, on the depreciation and amortization of the $19.6 million, is $10 million of it related to the acquisitions?

Michael Ptasznik

Yes, $9.8 million is incremental due to the acquisition.

John Reucassel – BMO Capital Markets

Right, just $10 million in the quarter, and is that tax deductible?

Michael Ptasznik

It is not tax deductible, but there is a future tax – a deferred liability that’s set up. So, when it runs through the P&L, it looks like you get the full tax reduction, but that’s set up through balance sheet.

John Reucassel – BMO Capital Markets

Okay. And then just for Tom, the dividend policy when you look at TMX going forward, are you going to look at the payout ratio or the board are going to look at the payout ratio on reported or adjusted numbers?

Thomas Kloet

Well, I think the important number is the cash flow, and we certainly focus on that a great deal. But as we’ve said in past, there are kind of three things we have to weigh. One is our clear interest to do the best we can at returning cash to shareholders, but also, we have to make sure and bring down the debt in accordance with the schedule we’ve created with the lenders. And finally, we continue to see opportunities to reinvest in our business, and if that gives us the best opportunity, we’re going to focus on that as well. So, we’re juggling those three factors, John, as we look at it. But the thing that we’ll look at mostly is cash flow.

John Reucassel – BMO Capital Markets

Okay. That’s helpful. Then one last question for each of you. First, Michael, could you comment on the sustainability of that cost, I guess, at $105 million in the quarter? Looked like comp and benefit costs were down. Obviously, that goes up when the market is getting a little better, but are you comfortable there’s nothing in the quarter that makes the numbers a little lower than you expect, or is this a good representation of what it takes to run the business?

And then after that, I was hoping, Tom, could you just comment as you were approached to a strategic view of TMX or its products change with the ICE-NYSE merger, I guess your views on that.

Michael Ptasznik

So, with respect to the overall cost and specifically the compensation of benefits there were definitely some adjustments at year-end that were reflected in the short-term and long-term incentive plans to reflect the results of the operations for the year as you know where are markets down and the results were down on a comparative basis. So, that was definitely had an impact in the quarter as well we had a higher level of amortization, certain amortization for capitalization due to the number of projects that we had running through the P&L. So there were some items in the quarter that reflected specific things that happened in this quarter.

Tom Kloet

I’ll go on to the second question. Obviously, like everybody else we are in the industry where we’re watching the ICE/NYSE merger and potential integration and watching what happens as a result of that.

ICE as you know, has been a valued partner of this institution, and I talk to Jeff periodically. I think the relationship we have is excellent with ICE, and I would expect to continue to develop the NGX business with him as a valued partner.

And I don’t think anything in their transaction changes that. But we will watch to see what the global landscape does as a result of this transaction. But I’m not – to be very clear with you, John, our focus is on continuing to integrate our businesses.

In my comments, I said that the more I’ve had a chance to get an inside look at CDS, not just the CDS as an entity, but how it fits into the TMX Group. I see opportunities both within CDS and within other parts of our business that will integrate with, that will present opportunities for us to build businesses with CDS, and I’m excited about that.

But we as I’ve said in the past will continue to keep our eye on things that are going on around the world. But I think that – much of that’s still to develop.

John Reucassel – BMO Capital Markets

Okay. Thank you.

Michael Ptasznik

John, if I just could add – just an added comment to what I said earlier, again, we don’t look forward obviously and talk about run rates. But again, just to help keep it in perspective, it is probably worthwhile not taking Q4 in isolation when you look at the expenses.

I would look back at some of the previous quarters, because again there were some adjustments in the quarter reflective of specific items. So it is worthwhile taking a look back, and then obviously, adjusting for CDS and Alpha, you’d have to take that into account.

John Reucassel – BMO Capital Markets

Sure.

Tom Kloet

And I’ll just add to state the obvious that, certainly the variable comp has an adjustment too associated with our results. And as the leader of the organization, I think, I can speak for all 1,400 members of the organization, and say, none of us want to be in a position where we’re not increasing the operating earnings and the important factors that drive our variable comp. So, the market has had a slowdown this year, and our numbers reflect that. But I remain very bullish on this as a business.

John Reucassel – BMO Capital Markets

Okay. Just – sure but Michael, just it probably wouldn’t be fair to say that the higher capitalization cost, and I guess the adjustments in variable comp given the lower market activity, would those be offsetting the quarter or is that not a fair characterization?

Michael Ptasznik

Would those be offsetting the quarter? Those are definitely reductions in expenses in the quarter.

John Reucassel – BMO Capital Markets

Wasn’t the capitalization expenses higher?

Michael Ptasznik

Yeah. If you capitalize those, and those end up...

John Reucassel – BMO Capital Markets

All right. The other way around? Okay.

Tom Kloet

It’s the capitalization of expenses.

John Reucassel – BMO Capital Markets

It’s early in the morning. Thanks, Michael.

Michael Ptasznik

No problem.

Operator

Your next question comes from the line of Paul Holden with CIBC. Your line is open.

Paul Holden – CIBC World Markets, Inc.

Thank you. Good morning.

Tom Kloet

Good morning.

Paul Holden – CIBC World Markets, Inc.

So Tom, you did a good job talking about the derivatives markets in context of North America. Maybe trying to look forward a bit, what do you think could increase the volumes here? Is it simply a matter of more volatility both in equity markets and interest rates that will stimulate more trade?

Tom Kloet

Well, I think there’s kind of a couple factors. The macro thing would be additional volatility. We’ve experienced a period where the VIX index is exceptionally low, below 20 often in the equities market. That impacts our equity derivative market.

Obviously, if you think what our derivative market is, we sell risk management products and there is less need to risk-manage in a low-volatility environment. And then couple that with a near-zero short-term interest rate environment with little volatility, and you have the ingredients for a reduction in volumes.

Now, with that I guess what I was trying to say in my comments is, I’m exceptionally pleased that we’ve actually increased volume on a year-on-year basis, where if you go through the list of futures and options markets around the world, that’s a bit of an anomaly.

And I think there’s a couple of factors there. One is Canada, to be clear; Canada is a place that is attractive for people to invest. There is investment flow coming into Canada. And as a result, people will use our risk management products to hedge their exposure.

In addition to that, I think, we’ve done a pretty good job at improving the underlying ingredients of our markets to make spreads more narrow, whether it’s in the interest rate products or in the equity derivatives products by things like our Market Maker Program that we’ve been involved in particular on the Canadian government bond contracts, and the short-term interest rate products.

And in addition, putting a marketing person in London has helped that business. It’s not a surprise that we’re getting more business out of Europe as we promote those products. We’ll be going to Asia towards the end of the month to do a tour through there promoting the product.

As you do that, you naturally, will get – if you succeed at it, you’ll get more volumes. So what’s interesting about MX is, the product has become an international product – has become a product with international appeal, not nearly domestic appeal.

Paul Holden – CIBC World Markets, Inc.

Okay. And so you continue to be happy with the turnaround at the BOX?

Tom Kloet

Yeah, we are. Again, BOX has introduced some novel things into the options market. We’re excited about the potential to bring complex orders to BOX. That’s something we’re working with the SEC on, and we hope to do that. Yet it operates in a highly competitive market as one of – I think, if I counted right this morning, there were ten exchanges. It might be 11, I don’t know.

There are so many formed all the time, it’s hard to tell. But the point is, it’s a very competitive marketplace. And we have to continue to introduce new features in the BOX that keep it at the forefront. So it continues to be a challenge to operate in that very competitive space, but we’re quite pleased with the results for the last three years, and hope to continue that trend.

Paul Holden – CIBC World Markets, Inc.

Good. And then with respect to the energy markets, I want to get your thoughts on how the growth in oil production in the U.S., and the potential over the next 10 years for demand for Canadian crude to decline. How that might impact your business specifically?

Tom Kloet

Well, I think a couple of factors. One is; while the United States is working on increasing its own crude development and building its crude market, I think there’s still going to be a significant dependency on oil from Canada. The U.S. gets almost twice as much oil from Canada as it does from Saudi Arabia, for instance. And I don’t think that trend is going to change in the near future.

So I think that’s – I think that the macro trends there are good. And then you add the issues around Dodd-Frank, which are clearly promoting more price discovery on visible transparent markets like ours. I think that produces a certain tailwind for the business as well from regulatory side. So we’re working very hard on that.

But the thing to remember about NGX is that, at its core, it’s largest businesses in the nat gas side. And I think the driver that I would look for, for expected growth there is clearly volatility in nat gas, which is both a supply issue and a use issue, which I commented in my remarks.

So as we get more use for nat gas, I think, we will see additional price volatility as well as the overall supply. So I think it’s much more dependent on nat gas right now than it is crude.

Paul Holden – CIBC World Markets, Inc.

That’s very helpful. And then last question, any comments you can provide on acquisition potential? I know you made – on the last conference call; you said that you’re actively engaged in a number of transactions including one that could be of decent size. Any update on that front?

Tom Kloet

No, I think, I responded to that earlier with John’s question. We’re watching what’s going on. First and foremost, we’re integrating our institution, and we’re making sure there is, in my view, a lot of opportunities to harvest in what we have.

There are some things we can add on to that and enhance that even better. And that’s our primary focus, but we’re going to be opportunistic in looking at global opportunities. But that’s on an opportunistic basis.

Paul Holden – CIBC World Markets, Inc.

Okay. Thank you.

Michael Ptasznik

And with a sharp pencil.

Operator

Your next question comes from the line of Geoff Kwan with RBC. Your line is open.

Geoff Kwan – RBC Dominion Securities, Inc.

Hi. Good morning. Just wanted to follow-up on John’s questions on the comp expense side. I just want to make sure I’m understanding it. So the changes that were – or maybe – sorry, the comp scheme in the quarter, it was just due to the performance of the business as opposed to the change in the plan, and separately with that was, I would have thought that you kind of accrue for the expense throughout the year, and it’s not like everything sort of got a lot worse in Q4?

Michael Ptasznik

No, I think you’re right, but there were some. So, it wasn’t changes to the plan. The adjustments reflected the final results of the year, and it’s – the short-term plan is based on a balanced scorecard, and then there are a number of factors that came in. And so, we do adjust throughout the year, but there were some final adjustments that have happened obviously in fourth quarter as you get determination and finality of all those numbers. So that’s where the ultimate adjustments were made, although, we do obviously make – we do adjust those throughout the year as well.

Geoff Kwan – RBC Dominion Securities, Inc.

Okay. So I guess the way – I know you haven’t – you won’t talk about necessary run rates you’re looking forward. But if we take a look at what happened in Q3, and the big drop in Q4, it sounds like what we saw in Q4 may not be somewhat representative that some of the factors were – may not recur in future quarters. Is that a fair statement?

Michael Ptasznik

Yeah, as I said to John, I think you need to – I don’t think you can just isolate on one quarter. I think you need to take a look at some of the history, obviously, add in the impacts of CDS and Alpha, and the other effects due to the acquisition. But looking at just one quarter, and given the impacts of that, and the higher capitalization would probably not give you the best results. I think you need to take a broader view.

Geoff Kwan – RBC Dominion Securities, Inc.

Okay. Next question I had was just the reference to the CSA, the tender for SEDAR, SEDI and NRD. Can you – I’m assuming that contract that you had with them was profitable, if you can confirm that?

And then the wording change where it sounds like you’re just expecting that you’re not going to get it. Just wanting to understand what happened in the process. Was it your decision that you just didn’t feel it was something you wanted to do going forward?

Michael Ptasznik

Yes. So the answer is yes. That was profitable business. It – the wording change is correct that we currently anticipate that those contracts will not be renewed with TMX. The current contracts expire at the end of October; although there are some – there may be some renewals of that for a short period of time. But you can think of it as the contracts expire at the end of October. And so, that’s why we put that disclosure in the documents because that’s the current status of those arrangements.

Tom Kloet

And just to add to the second part of the question, yes, Geoff, we did want to continue to operate it. We believe we have operated it responsibly and pretty well. This was a decision of the CSA to re-tender a long-standing contract, and but we wanted to continue.

Geoff Kwan – RBC Dominion Securities, Inc.

Okay. And the last question I had was, I know that I ask it typically every quarter, but Tom, can you talk about the pipeline on the issuance side? Is it getting better? Are there other early signs that may give some indications as to what we might expect in the coming year?

Tom Kloet

Yes, it’s mixed, Geoff. I think that some of the uncertainty in the macroeconomic climate is starting to be reduced as the U.S. economy shows some signs of recovery. That’s coupling some confidence. But it’s still a bit mixed, frankly. I would say the pipeline is good, but not great, but good.

Geoff Kwan – RBC Dominion Securities, Inc.

Okay.

Michael Ptasznik

Geoff, if I could just add something on the expense side again. And this is something that’s just occurred, which is typically in Q1 of the year, if you’re looking at your modeling, there is additional expenses related to things like CPP and EI, which grew obviously at the beginning of the year when they get attracted to the higher competition especially when we pay our bonuses, et cetera.

So that’s always been the pattern. If you look back to the last 10 years historically, so there is a bit of an adjustment there. Again, if you can look back at the results to see the impact, but that’s not a huge change, but that is something you have to take into account if you’re doing the quarterly modeling.

Geoff Kwan – RBC Dominion Securities, Inc.

Quite, correct. Yeah, I remember that from prior years. Okay, perfect. Thanks, guys.

Operator

Your next question comes from the line of Justin Schack with Rosenblatt Securities. Your line is open.

Justin Schack – Rosenblatt Securities, Inc.

Good morning, guys.

Tom Kloet

Good morning.

Justin Schack – Rosenblatt Securities, Inc.

Sorry to belabor at this point, but just a quick follow-up on the questions earlier on the impact of ICE/NYSE and kind of your outlook on M&A particularly with ICE/NYX. There’s an asset in Euronext that’s becoming available potentially there on a subject to some discussions right now on the M&A front, as they contemplate IPO-ing it.

Certainly you guys are in a better position to lead the ongoing consolidation of the industry than you were before Maple. Any thoughts or comments on whether this is something you do want to get involved with?

Tom Kloet

Yeah. I think, Justin, we’re very careful about not talking about specific types of transactions. So I’ll politely duck that one, frankly, and just say that we do look for opportunities where we think we can add value and be the best owner of the business. And that’s kind of a macro statement, if you will. But I’m not going to comment on Euronext’s business and our specific interest at this point.

Justin Schack – Rosenblatt Securities, Inc.

Okay. Fair enough. Thanks, Tom. That’s all I have.

Operator

(Operator Instructions) Your next question comes from the line of Doug Young with TD Securities. Your line is now open.

Doug Young – TD Securities

Hi. Good morning. Thanks. And Michael, thanks for the info around the comp expense. I would say that, I think, there still seems to be some confusion, and I don’t want to belabor the point. But would you mind quantifying what the impact was from the two items that you did pull out, just so we can get a better sense of where the expenses would be? And it’s not looking forward; it’s just what the impact was in quarter?

And the second question is, Tom, just – I know there’s been some chatter and some reviews on the regulatory side around the market data. I just wanted to know if there’s any updates on that file?

Michael Ptasznik

Yeah, Doug, it’s Michael. Sorry, I can’t provide the quantification. It’s not in the disclosure that we provided. All I can do again is point you to look at historical quarters to see roughly where our expenses have been running, and that will give you a sense of it. And again, expenses will fluctuate quarter-to-quarter based on the initiatives that we have, the level of capitalization, if there’s any specific marketing events or other things.

So we will get quarterly fluctuations in the numbers. I know, this quarter, it seems a bit of a surprise for some because of the adjustments specifically on the comp side. But I think we provided some information in the MD&A and in the press release. And again, you have to look back at some of the history to sort of a rougher determination of what that is. Sorry, I can’t provide more at this point. It’s something we’ll take into account for the future, if we’ve got something that discloses that.

Tom Kloet

So the thing with respect to the market data file, we continue to believe that we offer great value with respect to our market data, and it’s a price appropriate relative to the value. The OSC has an ongoing request for public comment that I think is still alive. And obviously, we’re interested in reviewing the comments that come back on that. But I don’t have any specific information on market data that’s new other than what was in the OSC’s report when they put out the public comment and I think they referenced our market data offering in that report.

Doug Young – TD Securities

Thank you.

Operator

There are no further questions at this time. I’ll turn the call back over to the presenters.

Shane Quinn

Thank you for listening in today. The contact information for media and as well as investor relations is in today’s press release, and we’d be happy to take further questions. Thank you.

Operator

This concludes today’s conference call. You may now disconnect.

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