On the Competitiveness of the Canadian Stock Market

Even if the competitiveness of the Canadian securities market is a central argument in the ongoing debate related to the proposal of a single securities commission, the exact level and the evolution of this market are largely undocumented. The numerous changes that modified the structure of the securities market during the last twenty years probably explain this lack of evidence. Two dimensions of the market's competitiveness deserve attention. The first one is the proposition that the Canadian market is unable to compete with other markets in attracting and keeping new listings and transactions. The second one is the proposition that a discount penalizes firms that finance in Canada relative to the U.S. We address the first proposition by carefully analyzing the evolution of the Canadian market from 1990 to 2007 in terms of market capitalization, number of listed companies and trading volume. We then compare the increase observed in Canada with similar data from other countries. We analyze the discount argument in light of recent studies that explain this phenomenon, and document this discount on other markets. The objective of this paper is to provide documented evidence that could ground the debate on the optimal regulatory structure for the Canadian market