By Dr. Allen Alper, PhD Economic Geology and Petrology, Columbia University, NYC, USA
Richard Carleton, CEO of Canadian Securities Exchange, CSE (PDAC Booth # 2542)
We talked with Richard Carleton, CEO of Canadian Securities Exchange, CSE. Operating since 2003,
they provide a platform for early-stage companies to raise public capital. They modernize the
listings process and work with the companies to meet post-listing requirements and help them make the
required continuous disclosure process more efficient and streamlined. With now over 300 securities,
they were the first exchange in Canada to trade TSX and TSX Venture Exchange-listed issues on a
competitive basis. The Canadian Securities Exchange had a booth at the Cambridge House Vancouver
Resource Investment Conference on January 22-23, 2017.
Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-chief of Metals News, interviewing Richard
Carleton, CEO of Canadian Securities Exchange, CSE. Richard, tell our readers/investors a bit about
your Canadian Securities Exchange and its strategic direction.
Richard Carleton: Yes. We are a 12- or 13-year-old startup at this point. We began
operations in 2003 and were recognized as an exchange by the Ontario Securities Commission in 2004.
The driver behind the creation of the exchange was to provide a better platform to enable early-stage
companies to raise public capital. We're looking to do that by streamlining the listings process and
working with the companies to also streamline the continuous disclosure process and a variety of
other things that they're required to do after listing.
In the intervening time, we have grown the exchange from our modest start of three issuer
companies to now more than 300 individual securities that are listed on the exchange. We were also
the first exchange in Canada to trade TSX and TSX Venture Exchange-listed issues on a competitive
basis, much like the National Market System in the United States. We are a venue that, in fact,
trades all of the listed equities in Canada. We're looking to assist the dealers in low-cost and
effective execution as well as working with entrepreneurial companies, especially early-stage
companies, in helping them get into the public markets in Canada.
Dr. Allen Alper: That sounds great. I noticed I've interviewed and written featured articles
on quite a few of your listed mining companies, like Pasinex, Argo, Asante and a half-a-dozen or a
dozen more, so I'm very interested in what you do. Could you tell me what your plans are for 2017?
Richard Carleton: We work very closely with our listed companies to help them get
broader access to trading and to capital. We've worked a lot in Canada to raise the profile, not just
of the exchange itself, but of our issuers. Increasingly, we're doing that work internationally as
well. A number of our issuers are quoted on one of the two regulated boards offered by the OTC
Markets Group in the United States. We actually encourage our issuers to take up that option if
they're interested in adding to a U.S. shareholder base.
There are a number of things that the companies can do to ensure that their securities are
tradable by retail investors on the discount brokerage networks in the U.S. Because of the linkages
between the Canadian and the U.S. clearing and settlement system, that trading can be quite seamless
We also have a number of companies that have quotations and in some cases actual listings on
the Frankfurt Exchange. In that way, there's a euro-denominated quote for those companies during
European market hours. There's always been an appetite, institutional and retail, in Europe for, in
particular, Canadian mining and technology stories.
In 2017, we're going to do a lot of outreach work to institutions and retail investors
outside of Canada to raise the profile of individual companies and of course the exchange itself. On
the domestic front, we're looking to introduce a variety of new features to the marketplace that will
support the activity of market makers, and so a hybrid market model, where yes we offer a continuous
auction market, but we think it's important, especially for companies that may not be as liquid in
their early days as they hope to be, to have the participation of a market maker contributing capital
to ensure that there's a two-sided market, that the spread is reasonable, and that retail investors
can always get in and out of a stock without paying a punitive cost via the spread.
Dr. Allen Alper: That sounds very good. Could you tell me a little bit more about your
management team and board?
Richard Carleton: I'll start with the board. Our chair is Tom Caldwell. Tom is the CEO
of Caldwell Securities, Caldwell Investment Management, and Urbana Corporation, which is a Canadian
publicly-listed investment fund. Tom is well-known in Canada for having built from the ground-up an
independent investment dealer.
We also have Mr. Ned Goodman, who serves as our deputy chair. Ned needs no introduction to investors
in the mining space. He has been one of the major figures in Canada, financing and developing some of
the largest projects in Canadian history. We have a number other experienced corporate finance
professionals on the board.
Our management team is made up of deeply experienced folks in the Canadian public capital markets, in
particular with exchange operations. A number of the team members I worked alongside with at the
Toronto Stock Exchange some years ago, so we have a real depth of experience and talent. I get very
positive feedback from potential and existing issuer companies on the depth of knowledge and
experience that we bring to the table when we're working with the companies.
Dr. Allen Alper: That's great. Could you tell me a little bit more about your background,
Richard Carleton: I came into the exchange space almost 30 years ago at the Toronto
Stock Exchange. I had a variety of positions originally with the Office of the General Counsel, which
I suppose outs me as a reforming lawyer. I moved on to the business management side of the
organization with market data, index development, new product services, and corporate communications.
I've also worked for a number of private companies on a consulting basis in quantitative
finance and capital markets-related projects. I joined this organization slightly more than 10 years
ago to deliver the system to trade the TSX and venture stocks competitively, so doing the technology,
the regulatory work, and building out the team required to support that business operation. I've been
CEO now for five-and-a-half years, and looking forward to a number of more years in the role.
Dr. Allen Alper: That's excellent. You have a very good background. Also your board has an
outstanding background, too. Could you tell me what else you would like to add about the CSE?
Richard Carleton: I was thinking in advance about what your readers might be interested
in. Some of the raw statistics, as far as the mining space goes, about a third of our companies are
in the mining space, about 110 at the end of year 2016. They've also been very active in financing.
We counted 122 separate financing transactions in 2016, raising a total of $72 million. The vast
majority of those were done by companies residing in British Columbia and Ontario, about equally.
There were nine IPOs in Canada total in 2016. Five of them were done on the Canadian
Securities Exchange and two each on the TSX and the TSX Venture Exchange. Of our five, three of them
were conducted by mining firms. The market cap collectively for mining stocks on the CSE is about
slightly north of $400 million, which tells you that they are, generally speaking, three to four
million-dollar-valued exploration companies, by and large, although you mentioned Pasinex. They're
the rare hybrid of a company that's both producing and conducting an exploration program
Clearly, the mining space has been beaten down for some years. It's roughly 13% of the market
cap of our index, which is approximately our 90 or 95 largest companies on the exchange. But, we have
seen something of a rebound in the last three, four months. Certainly, it's my observation from
having attended a number of events with the issuer and corporate finance community in the mining
space that there does seem to be some cautious optimism in the sector.
As I mentioned, the companies are beginning to be able to raise funds again from both
institutional and retail investors. That's always a positive sign, so we certainly look forward to a
continuation and a strengthening of that trend in 2017. It would be really great, after all these
difficult years that the industry has had, to see the sun shining on these guys again. It really
would be great.
Dr. Allen Alper: It's been a tough five years, and it looks like things are improving. There's
a degree of optimism in the mining sector now.
Richard Carleton: That's true.
Dr. Allen Alper: By the way, I interviewed Steve Williams, the CEO of Pasinex, about four
times already. I'm very impressed with his company and what they're doing, operating in Turkey and
doing a great job.
Richard Carleton: Steve is quite possibly the most enthusiastic, optimistic human being
I've ever encountered.
Dr. Allen Alper: True. He’s a terrific person and an outstanding CEO!
Richard Carleton: Yep, absolutely.
Dr. Allen Alper: Is there anything else you would like to add, Richard?
Richard Carleton: We only had nine IPOs in Canada last year. The IPO seems to be out of
fashion in the United States as well. We see more and more money coming into junior capital markets
from private sources or the so-called exempt markets. In Canada and the United States, these are
basically institutions and high-net-worth individuals. Under certain provisions of the Jobs Act in
the United States, individual investors can participate in certain offerings.
We'd certainly like to see individual investors, subject of course to appropriate limits, be
able to participate in these offerings, because it is getting more and more difficult to find a
public distribution of securities that a retail investor is able to buy into. The vast majority of
the money that was raised, including the mining money that I was talking about before, was done from
these private sources.
We think it's important for the future growth and relevance of the public markets to
companies that are looking for growth capital that we continue to find ways to have the retail
investor participate in these markets in a meaningful way. If we turn it into a small, private club
for the institutions and the one-percenters, I don't think that's a sustainable model, in particular,
for small-cap finance going forward.
We are going to engage with the folks in the private markets, to see what we can do to extend
their ability to work with and engage retail investors in small-cap finance and make sure people are
able to participate in these growth stories. The sector will rebound at some point in a meaningful
way. We think it would not be a positive development, if the retail investors, who for so long have
supported this space, were not able to participate in that growth.
Dr. Allen Alper: That sounds like a very good objective for your company, helping junior
companies getting startups and funding and helping retail investors as well. That sounds great.
Address: 200 - 1090 West Pender Street
Vancouver, British Columbia, V6E 2N7
For General Inquiries Contact: firstname.lastname@example.org
For Listing Inquiries Contact: email@example.com
For Trading Inquiries Contact: firstname.lastname@example.org