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Good morning. My name is Leandra, and I will be your conference operator today. At this time, I would like to welcome everyone to the TMX Group First Quarter 2018 Results Conference Call. [Operator Instructions] Thank you, Mr. Paul Malcolmson, you may begin your conference.
Thank you, Leandra, and good morning, everyone. Thank you for joining us this morning for the first quarter 2018 conference call for TMX Group. As you know, we announced our first quarter results last evening. A copy of our press release is available on the website, tmx.com, under Investor Relations. This morning, we have with us Lou Eccleston, our Chief Executive Officer; and John McKenzie, our Chief Financial Officer. Following opening remarks from Lou and John, we will have a question-and-answer session. Before we start, I'd like to remind you that certain statements made on the call today may be considered forward-looking, and I refer you to the risk factors in today's press release and the reports filed by TMX Group with regulatory authorities. Now I'd like to turn the call over to Lou.
Thank you, Paul. Good morning, everyone, and thanks for dialing in. As Paul mentioned, last night, we released TMX Group financial results for the first quarter of 2018 and following this morning's call, our AGM will be held here in Toronto beginning at 10:00. Q1 is a good start for -- to 2018 for us. We're especially encouraged by our profitable growth performance as we achieved record revenue and adjusted diluted earnings per share. John will discuss the numbers in detail but you can see strong evidence in TMX's result that we're on track executing against our strategic growth plans. We have clearly outlined 3 major areas of growth for TMX: one being Capital Formation, two is derivatives, and the third being data and analytics. And our performance in Q1 is a result of all 3 segments delivering. Over the last 3 years, we have done the large-scale work to adapt our business model to meet the needs of the markets we serve and execute on our long-term strategy for growth. At the center of Canada's investment ecosystem, TMX has effected a crucial shift from being an owner of traditional infrastructure to a client-first solutions provider. TMX has built a diverse business model that now gives us the greatest opportunity to deliver positive returns regardless of market conditions. At the same time, the important work we put into transforming TMX, positioned us to make a game-changing acquisition with the addition of Trayport at the end of last year. I'm going to start with a closer look at Capital Formation at the core of TMX, and a key element in the success of the Canada economy. First quarter saw a strong growth in a number of IPOs and new listings led by a continued surge in financing activity on the Venture Exchange. Over the first 3 months of the year, venture financing was up 23% in terms of dollars raised and 10% by the number of transactions. In fact, financings on venture topped $2 billion in Q1 2018 and that's the largest quarter since Q2 2011. In addition, we have listed 47 new companies so far this year and that's a 34% increase over this time last year. A strong venture market is crucial to the vitality of our Capital Formation ecosystem and to this country's economy. How a company chooses to finance their growth is a major decision for them, and we view our role as crucial to informing and supporting companies through that decision process. It's also a critical element of our public mandate here at TMX. Once the company does choose to list with TSX Venture, the role we take on is to support them along their unique path and throughout each stage of their growth. The extent to which we can help make that happen, TMX empowering and enabling client success is the ultimate measuring stick for our success. We are committed to finding ways to expand our ability to serve sectors of traditional strength like resources, and also in newly defined sectors like cannabis and innovation or new technologies. In fact, the first quarter of 2018 was one of the most active on record for the burgeoning innovation sector on both Toronto Stock Exchange and TS (sic) [ TSX ] Venture exchange. During the quarter, 17 new innovation companies from Canada, U.S. and Europe chose our markets to go public and that 17 is compared with 7 in the first quarter of 2017. These companies join our ecosystem at all stages from startup to mature. We are now on pace to exceed 2016, which was our biggest year on record in terms of new innovation listings. That year, we added a total of 41 new listings from a range of subsectors including medical marijuana, clean tech and life sciences. And last month, Ceridian, a U.S.-based global human capital management technology company, began trading on Toronto Stock Exchange and the New York Stock Exchange. This is one of the largest ever technologies IPO -- IPOs in Canada, and it's among the 25 largest corporate IPOs in TSX's history. What's even more important here is that Ceridian's choice to pursue a North American public market strategy is testament to TMX efforts to play a leading role in helping Canada to forge a new global position as a leading technology center for Capital Formation. And the pipeline remains strong, our efforts to build that pipeline and fortify our leadership position around the world continues. We ranked #3 in the world in new international listings during Q1, according to the World Federation of Exchanges. TMX has also ramped up efforts to attract new U.S. issuers. We've hired 2 California-based TMX representatives to deepen our connections to the tech entrepreneurs in the region and have 2018 roadshows planned for New York, San Francisco, Orange County, Los Angeles, Seattle and Minnesota. This is also a very important point for our trading franchise. A premier global list of companies drives trading from within Canada and globally. So we're busy in Capital Formation. Another key area of growth is our Derivatives business, Montréal Exchange. The Canadian derivative story continued to gain momentum in Q1 as MX set a new quarterly record for overall volume. The record quarter reflected strong activity in our major products as well as sustained growth in single stock futures and equity derivatives. MX has some important new initiatives underway as they seek to increase liquidity in current products, seek out additional sources of liquidity and expand MX's global footprint. MX is currently partnering with clients to examine ways to boost participation in current product offerings and enhance functionality. They're also planning to launch extended trading hours in the second half of the year pending regulatory approvals. Aligning our trading hours with the U.K., a key global derivatives hub, represents an exciting opportunity. As it will allow domestic and international clients to manage their exposure to Canadian markets during nonregular Canadian business hours, and today already, approximately 40% of MX's volume is derived from outside of Canada. Over time, we expect that number to go up as new participants join our market, which should also have a positive them residual effect on all of TMX's markets into the future. The third area of our growth is our data and analytics segment led by Trayport, which reported a strong quarter, particularly, in terms of the core business, which generates recurring revenue and that was driven by an increase in trader subscriptions. John will discuss some of the Trayport performance metrics in more detail in a few minutes. So looking to the future, at Trayport, we're examining several areas of opportunity including new products from North America that are looking for the kind of European distribution that Trayport offers, and elsewhere around the world to the platform, expanding into additional regions of the New World, new commodities and asset classes and new analytics. The goal is to add new customers to expand the range of traders on the Trayport network as well as to provide more value to existing clients. Most recently, you may have seen that Trayport established important and long-term commercial relationships with both ICE and CME, similar to agreements in place with other major exchanges. Now on our next call in August, we'll be discussing Trayport growth plans in more details, as we've said to you in the past, we're looking at the end of Q2 for a more detailed longer-term growth strategy. And we'll be looking forward to discussing that with you in August. In the meantime, if you do want more detail on the business and product mix, we suggest you take a look at the list of products offered and venues covered on its network under the Market Matrix section of the Trayport website. There's a lot of detail there that you can take a look at in the meantime. We'll also be sending out a save the date for an investor information session covering all data and analytics offerings, that's a range of products not just Trayport, after our Q3 results. We have several new product offerings planned for the back half of the year, and we are looking forward to demonstrating those offerings in that session. So you can look out for that save the date. So with that, I'm now going to turn the call over to John.
Well, thank you very much, Lou and good morning, everyone. I'm sure most of you have read our earnings release at this point, and you will see the reported, recorded record quarterly revenues and adjusted earnings pressure. Now this record revenue with the year-over-year growth of 21% was a function of both the Trayport acquisition and the fundamental strength of our core business. Organic growth in Q1 excluding Trayport and divestitures was up 9% over last year. We experienced growth in every segment of our business. Expenses were up 16% mostly due to the impact of Trayport. And once again, with the operating leverage in our business model, income from operations at $95.7 million grew by 27% over last year. On a diluted basis, EPS at $1.13 grew by 33% and adjusted diluted EPS at $1.33 improved by 20% over last year. As a reminder, last year we classified the sale of NGX and Shorcan Energy Brokers as a discontinued operation. Accordingly, we have represented our financials to show discontinued operations separately from continuing operations. The increase is in diluted GAAP EPS and adjusted diluted EPS were largely driven by the higher revenue from Trayport, somewhat offset by their expenses and the 9% growth in our core business. The increases were partially offset by the impact from a higher number of weighted average common shares outstanding and higher net finance costs. As I mentioned, revenue was up in all of our business segments led by Global Solutions, Insights and Analytics or GSIA, where we had a 45% increase in revenue due to Trayport, which reported $27.3 million in revenue in Q1 '18. This was partially offset by a $6.5 million decrease in revenues from TMX Atrium, which was sold last April. On our last call, we had promised more metrics around Trayport, and you'll notice in our MD&A that we have provided a summary of Trayport subscribers over the last 7 quarters including those related to traders, which drives over 50% of Trayport's revenue. We also provided Trayport's revenue for the same periods in sterlings, and so you'll be able to see that revenue in Q1 from the core subscriber business grew by about 6% year-over-year. Turning to cost. Operating expenses in Q1 were up $15.7 million or 16% from last year. About $10 million of the increase was due to the addition of Trayport cost, net of costs related to TMX Atrium. Another $3 million of the increase related to higher severance costs in the period. These severance costs were driven by organizational changes as well as the shutdown of AgriClear. As mentioned on our last call, the organizational changes are expected to generate an annual savings of approximately $2 million starting in Q2 2018. As part of the active management of our investments and innovations businesses, we decided to discontinue the AgriClear business operations and focus on other opportunities. Looking at our results on a sequential basis. Revenue in Q1 was up over $36 million from Q4 '17, reflecting increases in all segments including an increase in Trayport revenues of $22.8 million. Operating expenses before acquisition costs were up by $24.4 million in Q1 compared with Q4 reflecting an increase of $14.6 million in Trayport expenses, higher severance costs of $4.9 million, increased payroll taxes of $3.1 million as well as higher employee performance incentive plan costs of $1.8 million. Income from operations increased from Q4 '17 to Q1 '18, reflecting the higher revenue partially offset by the higher operating expenses. Now just a comment on the balance sheet. We did reduce our debt by $37 million in Q1, and then with the sale in April of our 24.2% interest in FTSE TMX Global Debt Capital Markets Limited for over $70 million, we're able to further reduce our debt. Today, our commercial paper outstanding is currently $273 million, which is down $85 million from the $358 million reported at the end of March 31. On a pro forma basis including Trayport's adjusted EBITDA for the last 12 months ended March 31, our leverage, as defined by our debt to adjusted EBITDA ratio, was 3.1x at March 31 and is now under 2.9x today. We also held over $210 million in cash and marketable securities at March 31, over $40 million excess of the $170 million we target to retain for regulatory and credit facility requirements. In terms of CapEx, just a reminder on 2 items that will continue to require cash outlays over the next several years, these relate to the integration of our clearing houses, CDS and CDCC as well as the consolidation of our offices in both Toronto and Montréal. With respect to the CDS, CDCC systems integration, our current estimate of cash outlays continues to be about $55 million to $60 million from 2017 to 2019, of which, approximately, $9 million was spent in 2017 with an additional $1.7 million spent on CapEx in Q1 of this year. Substantially, all the costs will be related to CapEx, and we expect that about half of that total spend will occur this year. The annual savings in OpEx on a run-rate basis compared with our current cost structures continue to be expected to be about $6 million to $8 million starting in 2020. On the consolidation of our office premises in both Toronto and Montréal, we spent approximately $6.8 million of capital expenditures in Q1 and expect to spend no more than $13 million in total in 2018. The move into our new Toronto offices was completed in February, and we expect all of our Montréal employees to be in their new officer during June. The expected annual savings will result in reductions of operating expenses of approximately $2.4 million to $2.8 million on a run-rate basis starting in Q3 of this year. But as mentioned before on our last call during Q2 of '18, we expect to record charges of approximately $4.6 million related to lease terminations. Turning to capital allocation and in keeping with our commitment to target a payout ratio that's consistent with our domestic and international peers, last night our board declared a quarterly dividend of $0.58 per common share to be paid on June 8 to shareholders of record on May 25. This represents a 16% increase in our dividend, and at 44% this payout ratio is within the range of our domestic and international peer group. We remain committed to monitoring that range and maintaining a payout ratio consistent with our peer groups over the long term. Now at this point I will turn the call back to Paul for the question-and-answer period.
Thanks, John. Leandra, could you please outline the process for the question-and-answer session.
[Operator Instructions] And our first question comes from the line of Jaeme Gloyn with National Bank Financial.
I just -- I -- first question is -- I just want to dive into Trayport a little bit, and hopefully you're able to answer some of these questions today as opposed to maybe later on in the year at the Investor Day. By my math, it looks like revenue growth was up 5% year-over-year driven by unit growth of 2% and revenue per unit growth of about 3%. Can you just dig into what's driving, maybe first on unit growth, are these clients coming from new geographies, new products or is it simply increasing market share in existing markets?
I think you've got a combination of both there. There is -- we're still at the beginning of actually laying out the strategic plan. So you're largely seeing a growth in new clients with existing products and existing products moving into new markets.
And remember, Jaeme, I'll just add -- I'll add to that. As our clients grow, Trayport grows with them. So you could move with an existing asset class into a new region because the client expands into a new region. So it's a combination of growth within the client base in the existing subscriber base. But then also, the reason I had mentioned to take a look at that product matrix because there are a lot of -- there's a lot of functionality that Trayport has that they list as products, and so -- and clients add those on a pretty much regular basis, quarter-over-quarter. So it doesn't even have to be a brand new client. You can add new product to an existing subscription. So there's a several ways that they can add value to the client base. But there are a lot of -- there's a lot of functionality as well as just adding new regions.
Right, okay. And then on revenue per unit growth. I guess would a subscriber who's selecting a new product from that product matrix, would that count as increase in the revenue per unit of that client or would that count that as a new client?
It's going to depend on the -- Jaeme, to be [indiscernible] , it's going to depend on the relationship and the contract with the client in terms of how it's priced for both additional products and additional users of the client base. And [ to be fair, ] we've spent a lot of time thinking about what was the right way to provide extra disclosure and data around Trayport. And at this stage, it's just kind of the limitation of what we were comfortable giving because as we go forward, any farther than that, you really start to get into commercial sensitivities in terms of client relationships, Jaeme. And so that's why we have limited the disclosure to what you're seeing in the documents.
All right. I think [ it's a ] disclosure actually. I guess the bottom line here is this is mostly, let's say, legacy growth as opposed to TMX enhancing growth on the revenue side, is that fair?
Well, but the business inherently has that built-in, which is why it's so attractive. I mean, as there's different activity, changes in the market, new participants are added, that's one of the great things about Trayport is that's got a natural growth mechanism built-in, which is why you saw such strong historical growth. Originally, when we looked at it. I mean, it's a very strong franchise in terms of activity on the platform between the participants, between traders, between brokers and exchanges as well. You've also noticed that we've added content, and when you add content you increase activity too. So when we talk about a new commercial relationship with ICE and CME, we've already started to add content from CME. So as you add more North American product into that platform, you by definition see more activity, more functionality is required, you add new users but I think your original question is, you can make a distinction, I think, it's fair between adding a user and a revenue per unit, which is more revenue for each user, and that was also one of the very attractive things about Trayport is that the -- not only are the user base grown, but the revenue per user or per unit has grown as well.
Great, great, okay. And just shifting to the margin story. Looks like margin's a 57.5%. That's a pretty big step-up from 54% in 2017, and I guess sub-50% years prior to that from Trayport. How sustainable is that 57.5%. Is there some OpEx, I guess, things going on in there, what drove the 57.5%?
There was a couple of things in there, Jaeme. You certainly saw the continued revenue growth as we talked about, but with a generally flat expense base. There's also some lift in the period with respect to FX in terms of the value of the pound versus the Canadian dollar in the period versus what you would've seen in the economics when we bought the business. In terms of margin going forward, our guidance is the same as we've had in previous calls. We are going to look to spend, to support the growth. So margins consistent with history are good guidance and wouldn't want to commit to you in terms of anything in terms of further expansion to growth at this point, because we do want to invest and to continue to grow the products.
Right, okay. So is it fair to say then that's -- some of the expenses are -- I guess, are fixed or contract-based and they won't float with the pound the same way revenues would?
They generally would but from a margin standpoint, you're seeing the lift from the pound impact.
Okay. And last one for me on Trayport, just around the seasonality in the business, just seeing that quarter-over-quarter basis, subscribers did decline in Q3 '17, and on our -- on the revenue side, that declined quarter-over-quarter in Q4. Is there some seasonality in this business despite being like 98%, 99% recurring their revenue and solid retention levels?
No. There's generally not a seasonal issue, Jaeme. If you've seen it change like that, that's more likely a result of a business consolidation or a specific client issue as opposed to any seasonality. The -- as you said, the recurring nature is very strong and you would see those businesses generally in continuity.
Your next question comes from the line of Nik Priebe with BMO Capital Markets.
First question's for John. You said some comments in your prepared remarks on the leverage ratio. I was just wondering how investors should think about the use of excess cash flow and the pace of debt repayment from here. I can understand you're sort of at the upper end of the range where you feel comfortable in terms of debt-to-EBITDA, but is debt repayment expected to be a continued focus this year?
Well, the primary focus is shareholder return. And that's going to continue to be our primary focus in terms of our ability to identify new opportunities to invest going forward. But at the same time, and you hit on it right in the question. Our leverage area ratio and our guidance on that has been 2x to 3x but with our -- where I call I -- my kind of comfortable operating level being in the lower end of that range because that simply gives us more balance sheet flexibility to do things like Trayport. So in the absence of a right price and meaningful investment opportunity to accelerate the business, you would expect to see that incremental cash flow continued to be used to reduce debt over the short-time period.
Okay. And then just switching gears, I was wondering if you could provide a bit of color just around the decision to extend trading hours on the Montréal Exchange. It sounds like it's motivated by a desire to capture a bit greater activity from international participants. Just some insight on that and how impactful that you hope it might be to trading volumes, would be helpful.
Well, I'll start, and then John can add. I mean, that's exactly right. I may have mentioned that, Nik, it's already 40% of the business for MX, it's from outside of Canada. They've got a very global business already today, and if you look at precedent, when other exchanges in similar situations have extended hours, they've gotten a nice lift in business because all of a sudden, you've greatly expanded the number of firms that can trade in their normal trading hours. So that's -- the idea, I mean, look in an ideal world, we want to -- we'd love keep going and be able to trade at MX around the clock. This is the first step in being able to make this not just a global market but an around-the-clock market, but step 1 is to get approval as we're working on now to go into the European hours, and there's a lot of businesses, a lot of clients both based in Canada as well as other clients that manage Canadian assets that would like to see the ability to trade in normal trading hours on MX.
Okay, yes, that's great. That's good color. Last question before I requeue. Just wondering, with Trayport in the fold now, can you give us a sense of what the cost structure looks like. Is that largely a fixed cost platform?
Yes, it largely is. I mean, as we've said in the past, they had begun their move to a SaaS platform before the acquisition, and we're already 90% of the way there. We will complete that transition this year it's almost complete now, before the year's out, it will be a completely SaaS platform. So deployment of the new client anywhere in the world doesn't require any capital. It's literally an entitlement. So you've got to have people on the ground to help train and build markets and service clients, but literally to add a new region or a new asset class doesn't require a capital investment. We'll continue to grow the capabilities of the network and the system and capacity is we want to add high volume products onto it. So we'll do things within the existing capital structure to strengthen that platform and actually the collaborations between all the technology work we've done here, they will benefit from. So everything from the capacity in the system, cybersecurity, everything we've done, we'll transfer right over to Trayport, they'll benefit from that. It's not new work, they'll simply benefit from the work we've already done at TMX. So they are actually, again think about it, we said we wanted to go from infrastructure to intellectual property and this is a perfect example of that. This is a deployment of software from the cloud, not about capital.
Your next question comes from the line of Paul Holden with CIBC.
So I think someone probably has to ask you a question on the event of last Friday in the early market close so, I guess, it might as well be me. I can only imagine how some of your competitors are going to respond to this. So my question would be, how do you convince regulators that TMX should be the lone solution for market on close orders?
Well, you've got to look at a track record, right? And if you look at that track record, you've seen the first event anywhere near this is 10 years plus, right, at this point. And I think the reality of where should a market on close be, should be what's the preferred venue for trading, where the majority of the trading takes place, where the best-bidder offer happens over 90% of the time, and then where people can get the best liquidity and the broadest list of companies to trade from and that's what we've done. So look we've got work to do, to work through this and regain confidence and trust. The first thing we had to do was be back, business as normal on Monday morning. We've done that. We attacked this problem as fast as we could, and it is an unprecedented event. And so we went after that and worked through the weekend with the manufacturer, not only have we replaced the appliance, the permanent patch is in, tested, fixed, this problem is behind us, and now we've got to work to regain that confidence and trust but it's something you just have to work through. But I think you've got to rely on the track record at this point. We've gotten great kudos from the client base in terms of communication and decisions we made. We've made a decision to have an orderly close in order to have a robust full market open on Monday, which we did. So I think all of those things factor into it. And on top of that, we've already started testing not just looking at, testing alternative structures and technologies that'll make sure you could never see anything like this happen again and I think that's what a client looks for. What clients look for is response, reliability, trust and the ability to put confidence in a company going forward, and that's what we've tried to do.
Okay. So 2 follow-on questions to that then. One is, have you noticed any difference in trading market share since that event? And then two, in terms of putting the new hardware backup systems in place. Is there any materiality to that cost?
We have not seen any change in market share. As again, since we opened Monday, it's back to business and there is no material expense in changing the technologies.
Okay, good. In terms of building out the Capital Formation business, one of the initiatives over the last 18 to 24 months has been the mutual fund listings business, NAVex. Wondering if you can provide us with an update on any kind of momentum in that business.
Well, there's momentum in terms of discussions with the industry and clients. It's a change for the way the business works today. So it's taking a bit of time but what is, is positive, and I've actually gone out and talked with lots of with clients personally around the demand, the need for this, and so we continue to do that, we continue to build it, it's a component of what we offer. I don't think I'm going to -- anytime in the near future, we're going to tell you to look at that as a great revenue driver. But it is -- it's important and as part of the dialogue we have with our clients on different ways that we can provide solutions, and we've got a number of discussions, yes, we had our trading conference yesterday, almost 500 clients showed up for that and that's all about discussion across the board, right. I mean it's about what new offerings should we have, whether it's NAVex or other things what other things could we do to strengthen offerings we have today, like a market on close or to make sure we strengthen our distribution of data, an access for that into the market. So we've got a range of conversations going on with clients and I think NAVex is in that category.
Okay, okay, good. And then last question from me. Maybe you can provide us a little bit more color on how and why TMX is able to attract so many international listings? I know you talked about SHOP in the past as an example of a major win for TMX as a dual listing, you've mentioned Ceridian now. So why are some of these larger cap names deciding to dual list in Canada.
Well, there's fundamentally 2 underlying factors and I'm going to take this opportunity to really give a compliment to our team, because we have a team that is unbelievably effective in communicating the second part of what I was going to talk about, which is a very unique system. We sit right in the middle in Canada and this is a result -- it's actually developed as a result of the reliance of the country on the resource base and wanting to help these resource companies raise money. Today, you find an ecosystem that has lots of advantages for companies that are looking to raise money. And I look at us as sitting in the center of what's a trend for the coming together of different legacy things or existing platforms like a traditional exchange, like venture money or angel money, which has traditionally been private and credit funding. And when you think about the convergence of all of those things, we are the most unique place in the world to raise, what I call, public venture money. Not only that, we support a company through its lifetime. So when you talk about 20% of the senior index being companies that started on venture, people come here, companies come here because this is not a one-shot IPO. They're here, we support them through their entire lifecycle, and you've got companies that have been with us for 16 years starting on venture, and then finally sell to a larger company or go to next phase of their development. So we've got a very supportive, unique method that combines a public approach to traditional raising of venture money. It's very unique in the world, and we've got a team that knows those benefits, really articulates them, and we're building a community that brings people in. I think we're at the beginning of that franchise as well as continue to support the resource franchise. So I think you've got a unique ecosystem. You've got some unique things in Canada that people can in order to raise money as a smaller company, you've got a company like a Ceridian that I mentioned, they'll look at us and see, "Wow, we actually can expand our trading pool with the North American public market strategy versus just one market or the other" and that's another really important one. So we're part of the North American approach as well as the global approach for raising money for growth companies.
Your next question comes from the line of Graham Ryding with TD Securities.
John, I'll start with you. Just the comment around Trayport's margins in line with history. Is there a reference to the 54% margin in 2017 or a reference to, sort of, a longer history how should we interpret that?
I was referencing what you've seen in 2017, the scope of the history we've provided with you.
Okay. Jumping to Montréal Exchange. The move to extend the trading hours. Can you give us a feel for today, what's the percentage of your volume that's from outside of North America not just outside of Canada but outside of North America that your -- it sounds like you're targeting with this extended hours initiative.
Well, yes. So that's what -- I think it's past -- it's -- you're pretty close to the 40%, I think most of it outside of Canada is actually from Europe.
Okay, okay, that's helpful and what sort of lift have you seen in other exchanges when they've gone this route? Is there any you could quantify that you think is a reasonable expectation?
Yes, in terms of the other markets we have seen in the U.S. that have done this, we have seen the list as high as 30% in terms of their overall flow. Can't predict what'll happen in terms of our core market but that's what we've seen in other marketplaces, and it's a tried and tested path, these most of the major Europe -- U.S. futures market are all now operating on European hours as well.
Okay, that's helpful. And then we've seen lift in the number of subscribers, Montréal Exchange year-over-year, I think it was up 8%. Is that -- should we interpret that as international participation is driving that?
I think there's a number of things driving that. I think the new products, I mean you've got single stock futures have been very successful and there have -- a lot of new participants and that would be U.S. as well as Europe. So but I think it's a combination, I think we've also added business development capabilities to MX. So we now have people in the U.S. and in Europe actively promoting what the contracts and the trading can do for clients on MX. So I think it's a combination of new product, new business development and an awareness.
Okay, great. Lastly, I think single stock futures now represents about 1% of your volume on the Montréal Exchange. Is it reasonable to think that, that represents 1% of your revenue? Or is that too simplistic? [ You might -- ] derivatives revenue?
Yes, I mean, some of the different derivatives products have different pricing schedules to them in terms of futures or single stock futures or options. So we need to look at it in terms of the mix of the pricing, I wouldn't be able to give you a direct answer in the call because I haven't done the math but [ it's ] something we can look back for you. Yes . But the -- sorry, but the piece I will to point you about to ask -- answer more than you asked me, but always look at also when we're building new businesses like single stock futures, it's important to look at the growth in the open interest as well. That's the -- really the future indicator of where future volumes would come from. So you look at if not just single stock futures but all other components of the product suite within the Montréal, growth in open interest is what often will precede and look at as an indicator to future growth in volumes.
Got it. And then just lastly on the listings front. This quarter was a good example of how the Venture Exchange Activity can -- the Capital Formation activity can be an offset for a quieter quarter on the senior exchange. Within the TSX Venture, what percentage of that activity can you attribute to sort of these innovation sectors that you're targeting versus your more traditional resource -- the resource sector?
I think if -- and Paul, check me on the numbers, but I think we said out of the 47%, it was 17%?
This year. End of this year.
This year, yes, this year. So I think that's a rising percentage of that just pure innovation. Remember there are other companies in there too, there are industrials and so it's not just either -- it's not binary versus resource or innovation. But the innovation is, I think 17% versus 7%. So when you -- quarter-over-quarter, Graham, it's 17% versus 7% and that's of the 47%.
Your next question comes from the line of Phil Hardie with Scotiabank.
I think first and foremost, again, I'd like to say thanks again for the disclosure on the Trayport, that was excellent it was exactly what we're looking for. Turning to my first question, just back on the Montréal Exchange. Can you talk a bit about maybe managing the potential risks to offering and extending trading hours and clearly, I think you've articulated well the plan being to attract greater participation for volume, but I guess the other side of that risk is what if there's no incremental volume gain and it's thinner trading over longer hours?
The -- we've -- certainly [indiscernible] -- that's first and foremost, whenever you're looking at either adding new products or new capacity or new trading hours, this is how we -- do you have a strong market to support them. So the process has not just been about the technology, the clearing capacity, the regulatory framework we need to do this. It's been in-depth client conversation, Phil, in terms of clients on the Canadian side of the border as well who can be available to trade in those periods and make markets and support liquidity. So that's been ongoing at the same time. We wouldn't be doing this if we didn't know the clients would be there to support the volume. So it's doing exactly as you said in terms of building an incremental volume as opposed to just spreading the volume out.
Okay. And what kind of time horizon do you give before you take action on either end of that. If it does go forward volumes don't increase and you get the thinning, how long do you operate before you do something?
That would have to be the -- also the impact of what are the clients telling us at the time and what kind of feedback are we getting. From a marketplace investment for us to provide the operation, it's a very limited investment. So it's really going to be about client feedback over time.
Okay, fair enough and then other question is more related to -- if we can get a bit of granularity. I thought the 40% participation on Montréal Exchange outside of Canada was certainly higher than I think many would've guessed and I'm not looking for granularity down to the 1%-type range on the product. But any color on that measurement product mix, where the activity or what type of activity that's coming from?
Yes, the biggest drivers of international interest have historically been the futures business. So the fixed income futures and the index futures for foreign investors to get access to the Canadian marketplace. It's something that we can look deeper in terms of product by product, but that's where you see the largest interest of the futures as opposed to the options businesses.
[Operator Instructions] And your next question comes from the line of Geoff Kwan with RBC Capital Markets.
I just had one question. Was -- we've seen I think about 2 to 3 quarters of sequential improvement on the subscriber growth on both equity and derivatives. I was just wondering if you have any color on that whether or not it's just stabilizing and improving employment trends whether or not it's maybe some marketing initiatives that's improving that subscriber count?
You're talking about for our market data, Geoff, right?
Sorry, yes, on the market data side.
Market data, yes. Yes, I mean, a big part of it is a stabilization of the client base. The consolidations have backed off, and we've done a lot of work as well to actually lower the cost of integration of our data feeds, we've added more data in, we continually add more data into our data feeds. So I think it's a combination but primarily, it would have to be from the stabilization of the client base.
And your next question comes from the line of Jaeme Gloyn with National Bank Financial.
Asked and answered.
And there are no further questions at this time. I will now turn the call back over to Mr. Malcolmson for closing remarks.
Thanks, Leandra, and thanks everyone for listening today. As Lou mentioned earlier, just a reminder that our AGM is at 10:00 today in the Design Exchange here in Toronto. You can attend in person, virtually or listen in on our webcast. And we would be very pleased to have you if you could join us. The contact information for media as well as for Investor Relations is in today's press release and we would also be happy to take further questions throughout the day. Thanks again for joining us and have a great day.
Thanks everyone.
This concludes today's conference call. You may now disconnect.