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The TSX Venture Exchange

Written By Brian Hicks

Posted July 20, 2007

TSX Venture listed companies were the beneficiaries of over CA$1 Billion in the month of June, bringing the total amount raised for 2007 to almost $6 Billion. That’s a billion dollars every month.

Last year, the combined TSX Group, which includes the TSX Venture, TSX, and NEX exchanges traded in excess of $ 1 Trillion in transaction value.

Since 2002, the TSX Venture has appreciated in value by in excess of 218%, which outperformed every other major stock exchange on earth by a factor ranging from 2 to 10.

What am I getting at here?

If you look at the comparative performance of the DJIA, the S&P500 and any other major index, the bottom line is this:

The TSX Venture Exchange is the greatest stock market on earth, in terms of appreciation and performance.

One of the greatest realities about the TSX Venture Exchange is its incompatibility with the requirements of huge institutional brokerage firms, who regularly compete with their clientele to extract profit from the equities they recommend.

TSX Venture issuers typically have two things in common:

1. Low share issuance: Since most of these companies are funded and organized as start-ups, they don’t come out of the chute with two or three hundred million shares. This means that the big banks can’t acquire a sufficiently large position to redistribute to their thousands of account holders, charging a commission for each transaction. This means that you, the individual investor, armed merely with an online discount brokerage account and a good advisory newsletter, can sidestep the marketing ballyhoo and misleading grand sweeping generalizations of the major brokerages, and trade for yourself. It’s not only profitable (when done correctly), but it’s a hell of a lot of fun.

2. Low share price: The massive public relations and “perception management” machine that is the mainstream media is controlled by its shareholders – the major investment banks and financial institutions. That’s why there is so much negative publicity around about “penny” stocks, and it is also why many major brokerage firms (Edward Jones, for example) prohibit their brokers from buying or selling any stock under $5 for their clients. They cite the “high risk” and “unsuitability” of these low price companies in their literature, and instead put their clients’ money into blue chip corporations like Enron and Tyco.


The major brokerages work on commission structures. That means a percentage of each transaction value. So if MEGAcorp wants to raise $200 million at $25 a share, and VENTUREcorp wants to raise $5 Million at $0.50 a share, guess which company is a more suitable risk for the Investment Bank’s clients?

It certainly won’t be VENTUREcorp, whose total commission yield, (assuming a 7% commission) is only $350,000. Why bother with VENTUREcorp when MEGAcorp’s transaction will deliver (even assuming a reduced commission in view of the sheer size of the transaction of 5%) $10,000,000.

Plus, what about the commission when the shares are redistributed to their clients accounts?

There’s far more to be made from the distribution of 8 million $25 dollar shares than there is from the distribution of 10 million shares at $0.50 a share.

So you can see why the major investment banks have a very strong incentive to find penny stocks “dangerous” and “high risk”.

Let’s face it – any investing is high risk.

As Mark Twain once said, the only sure fire way to double your money is to take a $100 bill out of your pocket, fold it in half, and put it back.

Here’s a quick history of the TSX Venture and how it came to be:

A group of Toronto businessmen met on July 26, 1852 with the intention to form an “Association of Brokers”. Although they may have traded in shares that were available at that time, no official records remain of the groups’ transactions.

On October 25th, 24 men gathered at The Masonic Hall. A resolution was passed that day and Toronto Stock Exchange was born. The cost of membership was $5.00. In its early years the Toronto Stock Exchange trading volume was very modest, amounting to two or three transactions daily. Trading hours were limited to daily half-hour sessions and the trading list consisted of 18 securities.

Toronto Stock Exchange had 14 member firms — each paid $250 to purchase a seat.

Toronto Stock Exchange became formally incorporated by an Act of the OntarioLegislature, and moved into its first permanent headquarters at 24 King Street East in Toronto.

The price of a Toronto Stock Exchange seat or membership rose to $12,000. Trading volume approached 1 million shares per year and 100 companies were listed. The Exchange moved to 20 King Street East and continuous auction trading was introduced.

The Exchange built and moved into its own building on Bay Street. Technological advances lead to the introduction of the first print-out-ticker which carried a series of trading prices as well as bid and ask offering quotations.

The fear of financial panic when World War 1 was declared prompted Toronto Stock Exchange to cease operations for three months, beginning July 28, 1914.Trading was also halted on the New York Stock Exchange.

As corporate profits rose during that war, so did stock prices. The 1918 Armistice marked the beginning of a highly speculative and inflationary period in the economy. This was followed, in 1919, by a recession characterized by sharp declines in commodity prices.

Canadian corporations issued securities worth more than $700 million. The number of shares traded in 1924 was 908,000. Five years later, the number of shares traded grew to over 10 million a year.

A worldwide depression inflicted financial hardship on Canadians. In the United States over 2000 investment and brokerage firms closed. No Toronto Stock Exchange members defaulted on their obligations to clients.

Toronto Stock Exchange merged with its key competitor, The Standard Stock and Mining Exchange. The merged markets adopt the name, Toronto Stock Exchange. Yearly trading value exceeded $534 million.

Toronto Stock Exchange became North America’s third largest exchange.

Toronto Stock Exchange moved to a new facility at 234 Bay St., the first building in Toronto to have air conditioning.

The price of Toronto Stock Exchange membership was $100,000 and a record 1billion shares traded worth $2.6 billion.

For the first time, the Toronto Stock Exchange Board of Governors required listed companies to file statements disclosing any change in the company’s affairs, which might affect the price of its shares.

Lieutenant General of Ontario, Howard D. Graham, became the first outsider to be appointed President of Toronto Stock Exchange. All prior presidents were appointed from Member Firms.

Toronto Stock Exchange launched the world’s first Computer Assisted Trading System (CATS). The same year the TSE 300 Composite Index® was launched.

Volume of shares traded on Toronto Stock Exchange reached 3.3 billion, valued at $29.5 billion, and Toronto Stock Exchange accounted for 80% of all equity trading in Canada.

On October 19, 1987, stock markets around the world suffered a major correction. The TSE 300 Composite Index dropped more than 400 points in very active trading.Trading for the year topped $100 billion for the first time ever.

Toronto Stock Exchange became the first exchange in North America tointroduce decimal trading.

Toronto Stock Exchange became the largest stock exchange in North America to choose a floorless, electronic (or virtual trading) environment when its trading floor closed.

Toronto Stock Exchange announced the appointment of Barbara G. Stymiest to the position of President & Chief Executive Officer. She became the first female president of a North American stock exchange. Through a realignment plan, Toronto Stock Exchange became Canada’s sole exchange for the trading of senior equities. The Montreal Exchange assumed responsibility for the trading of derivatives and the Vancouver and Alberta Stock Exchanges merged to form Canadian Venture Exchange (CDNX) handling trading in junior equities. The Canadian Dealing Network, Winnipeg Stock Exchange, and equities portion of the Montreal Exchange later merged with CDNX.

Toronto Stock Exchange set yearly trading records of 29.3 billion shares, valuedat $529 billion.

Toronto Stock Exchange monthly trading topped $100 billion for the first timeever in March 2000.

Daily trading value topped $15 billion for the first time ever in May 2000.

The Toronto Stock Exchange completes the acquisition of the Canadian Venture Exchange. CDNX renamed TSX Venture Exchange in 2002.

TSX Venture Exchange stock list migrated to the Toronto Stock Exchange trading platform in December 2001.

S&P/CDNX Index was launched on December 10, 2001. The Index was renamed S&P/TSX Venture Composite Index in May 2002.

Standard and Poor’s agreed to take over management of the Toronto Stock Exchange 300 Composite Index on May 1st.

In September, TSX filed a preliminary prospectus for an initial public offering of its common shares.

TSX sets new monthly trading record in January 2004 with over 7.2 billion shares changing hands.

February 2, TSX Markets launches U.S. dollar order book for trading in selected stocks.

In January, TSX Group sends a delegation to China to attract international listings.

In November, TSX surpasses all-time trading value record of $944 billion. In December, for the first time ever, trading on Toronto Stock Exchange topped $1 trillion for the year. TSX total value traded in 2005 was $1.1 trillion, up 29% from 2004.

Long live the TSX Venture Exchange , the most transparent, profitable, and individual investor-oriented stock market in the world.

To learn more on the TSX Venture Exchange, please go to .

Until next time,

James West