TMX Group Ltd

TSX:X

Earnings Call Transcript 2017-Q4

[Operator]

Good day. My name is Jack, and I'll be your conference operator today. At this time, I would like to welcome everyone to the TMX Group fourth quarter results. [Operator Instructions] Thank you.Paul Malcolmson, you may begin your conference.

[Paul Malcolmson, Director, Investor Relations]

Well, thank you, Jack, and good morning, everyone. Thank you for joining us this morning for the Fourth Quarter 2017 Conference Call for TMX Group. As you know, we announced our fourth quarter and full year 2017 results last night. A copy of our press release is available on our 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'd refer you to the risk factors contained in today's press release and with reports filed by TMX Group with regulatory authorities. Now I'd like to turn the call over to Lou.

[Lou Eccleston, Chief Executive Officer and Director]

Thanks, Paul. Good morning, everyone, and thank you for joining us on the call today. As you all know, we issued our fourth quarter 2017 earnings release and financial statements last night, and John is going to take you through those numbers for the quarter and the year in a minute. Most of my comments this morning are going to be focused on where we need to be, the job at hand and the work ahead. In our 2017 results, we saw growth in some foundational elements of our business and that included Capital Formation as well as continued evidence of the benefits of implementing and maintaining cost management discipline. Supported by the fundamental strength of our business model, we continued to make strong progress in the transformation initiative we embarked on a little more than 3 years ago now. Importantly for the future of TMX, we accelerated our evolution from a collection of infrastructure parts into a client-driven solutions provider. And at the same time, we were able to expand our global footprint and our competitive position. The work we've done in 2017 to build the TMX of the future was to push beyond the traditional regional exchange, and this has made TMX today a true global business. In reading through the recent coverage and marketplace commentary, it appears that for those of you who follow TMX closely, the ambitious forward vision we first unveiled 3 years ago now has become more and more clear over time. And although this transformation work is far from complete, we did some heavy lifting last year. For TMX, 2017 will, indeed, be remembered as the year we acquired Trayport, a London-based world-leading provider of technology and software solutions for energy traders, brokers and exchanges. With Trayport, we have added a proven and profitable technology-driven data and analytics business as well as a very talented team of people to our TMX roster. As we continue to dive deeper into their business, we get more excited about how our combined assets and expertise can drive growth. This is a key priority for 2018 and a big win for TMX on many levels, both strategic and financial. We look forward to exploring all the ways we can leverage Trayport expertise to drive innovation across the markets we serve as well as into new geographies. Trayport immediately bolsters our Global Solutions, Insights and Analytics business. In fact, with the inclusion of Trayport on a pro forma basis, the 2017 revenue from this business increased from 26% to 36% of TMX Group's revenue. As you can see from our financial disclosures, we have significantly diversified our revenue base with the recurring non-transactional revenue streams, which now account for 52% of our revenue on a pro forma basis for 2017, and that's up from 40% in 2016. On the business side, the fusion of TMX, the world recognized leader in resource -- resources across our Capital Formation, Trading and Clearing businesses, with Trayport, the leading European energy network and a premier technology platform for data and analytics, will expand our global reach and provide cross-selling opportunities. We look forward to updating you on our progress later in 2018. In 2018, we'll also continue to focus on increasing TMX's global footprint. As you're all aware, Capital Formation is a core function we perform in the global marketplace and in the Canadian economy. We continue to seek out full-spectrum solutions for serving all clients at all stages from public venture capital through large cap based here in Canada and around the world. The overall number of IPOs and the dollar amounts raised were up significantly in 2017 compared with the previous year and the tech sector continued to thrive. In fact, 2017 was one of the strongest years on record for new listing activity by innovation companies as we welcome 35 new companies, including 6 from outside Canada and 4 more graduates to our markets during the year. Within those 35 companies, we're seeing a great deal of diversity, life science, clean tech, Fintech, biotech, all represented alongside even newer industries, like artificial intelligence, blockchain and cryptocurrencies. Innovation companies also had good access to funding in our markets in 2017 with over $5.5 billion raised. Cutting-edge sectors are using our markets as a means of growing their businesses. 2017 also marked the resurgence of the resource sector and mining, in particular, where new listings were up 66% on Toronto Stock Exchange and up 75% on TSX Venture Exchange over 2016. We are the world's premier mining exchange. In fact, over the past 5 years, 46% of mining capital raised globally has been raised by TSX and venture-listed issuers. And the competition isn't even close with the nearest peer being at 17% versus our 46%. Our business development effort to build future pipelines across sectors and throughout the world to gain momentum in 2018, we're building off an outstanding 2017 together with our Capital Markets partners, where we reached almost 20 countries in searching for new listings clients. Our work to increase the profile of TMX exchanges and inform the world's entrepreneurs about the benefits of our unique ecosystem and world-leading markets is, indeed, a perpetual campaign. We are relentlessly working to establish a pipeline to new issuers around the world. And Canada has a very real and growing reputation now among the world's investors, viewed less and less as a niche resource market and more as a growing sophisticated diverse and dynamic marketplace for investors of every portfolio profile. In fact, through November 2017, there was a 20% increase in net foreign investment inflows into Canadian equities compared with the same time period in 2016, that's at $52.9 billion compared with $44 billion. Another important global growth area for us lies in our Derivatives business. A 2018 priority for Montreal Exchange is the coming launch of extended trading hours. This is a move designed to broaden the global appeal of our marketplace and increase foreign investor exposure to Canadian benchmark derivatives products. So given the experience of other exchanges in extending hours, we are confident that this initiative will contribute to increased volumes over time. Turning to our organization. We recently took measures to better align our structure to meet the needs of the industry and deploy our resources in ways that efficiently and effectively address the changing market landscape. We have made moves to reconfigure and augment, where necessary, our deep roster of talent to improve the organization's operational agility and the speed of our execution. At the beginning of the year, we divided equity trading and Capital Formation into individual business units. All trading business activities, equities, derivatives and fixed income, are now consolidated under Luc Fortin. His title is now President and CEO of Montreal Exchange and Global Head of Trading. Kevin Sampson, a TMX veteran and seasoned equity trading executive, was elevated to President, Equity Trading, and now reports to Luc. As market dynamics evolve in an unprecedented pace and challenging new myriads emerge, we thought it was crucial for TMX Capital Formation to operate as one cohesive business unit. In continuous pursuit of traditional and nontraditional finance and liquidity solutions for clients, Loui Anastasopoulos has been appointed President, Capital Formation and TSX Trust, reporting directly to me and is now responsible for leading the listing functions of Toronto Stock Exchange, TSX Venture Exchange, TSX Company Services as well as TSX Trust. Loui takes over Ungad Chadda, who has moved to a newly created position as Senior Vice President and Enterprise Head of Corporate Strategy, Development and External Affairs. Ungad's primary focus is on developing TMX Group's overall corporate strategy and expanding our investor base and profile in the global marketplace. Ungad now reports to John McKenzie. Another 2018 priority is to implement an integrated global digital sales and marketing capability. Shaun McIver has moved into the role of TMX Chief Client Officer reporting directly to me. Shaun's mandate is to accelerate and enhance the effectiveness of our efforts to connect new client communities and new geographies around the world. These changes are all important success stories for TMX. The elevation of so many internal leaders is an indication to clients, our employees and stakeholders across the marketplace that we have a talented group of people here and that TMX is fully committed to adapting and shaping our business to compete and thrive over the long term. For TMX investors, the post-Maple era has begun as some original Maple acquisition shareholders have sold down ownership positions, which was expected. Large positions selling into the marketplace have been met with an increase in demand and have had a positive impact on liquidity with no negative impact on the value of our shares. The effect has been a diversification of the TMX shareholder base, which now includes an increasing global institutional presence. For example, U.S. share ownership in TMX grew by 4% year-over-year. Along with equity investors, we're seeing a favorable response from the broader marketplace to our business plan and strategic direction. For example, the debt deal to partially finance the Trayport transaction was approximately 6x oversubscribed. The work our team has done, supported by our first full-scale branding campaign, has helped the world embrace and validate the TMX story. Now we're moving on to chapters where TMX becomes one of the most agile and digitally savvy companies in the world. We received the leadership position in blockchain initiatives that can revolutionize and invigorate our existing businesses and the exchange industry. Last week, John Lee, who heads up our innovation initiatives, was appointed a new member of the OSC Fintech Advisory Committee, a leading advisory group tapped with addressing the unique challenges within the securities industry. We continue to pursue new growth initiatives that can combine insights from digital technologies with an integrated customer experience approach. We want to better engage and service all our clients to help them extract maximum value from our solutions. 2018, it's fair to say the future is well underway at TMX. We're developing new data and analytics solutions and multi-asset class trading capabilities that deploy breakthrough technologies, including blockchain as well as artificial intelligence and machine learning. At the same time, we're executing strategies to bridge traditional capital markets, private investors and peer-to-peer networks into a public growth investment model for the future. Thank you. And with that, I'm going to turn the call now over to John.

[John McKenzie]

Well, thank you, Lou. And good morning, everybody. I'm sure most of you, at this point, have read our press release from last night. So following a quick recap of our quarterly and annual results, I'm going to focus my remarks this morning on 2018. As we're already almost 1.5 months into the year, we think, at this point, it's helpful for us to share some details on our forward direction with you. Also, just before we get into the results, I'll spend a moment on our treatment of the sale of NGX and Shorcan Energy Brokers. TMX Group has classified the sale of NGX and Shorcan Energy as a discontinued operation. Prior to the sale, the operations of NGX and Shorcan Energy were included almost entirely within the Energy Trading and Clearing operating segment with a small portion in the Global Solutions Insight and Analytics segment. The classification as a discontinued operation occurred at December 14, 2017, which was the date of disposal of the operations. Accordingly, we have prepared the comparative consolidated income statements to reflect the discontinued operations separately from continuing operations. As you will have seen, we reported quarterly diluted earnings per share this past quarter of $3.53 compared with $0.95 last year. Adjusted diluted EPS was $1.22, up 3% over Q4 '16. Now the adjusted EPS excludes the costs associated with the acquisition of Trayport and the gain realized on the sale of NGX and Shorcan Energy Brokers, but it does include the operating results of NGX and Trayport up to December 13 and the results of Trayport from December 14 onwards so that we are reporting on the basis that is consistent with the past periods. The increase in GAAP EPS was largely driven by the gain of $2.82 per share -- per diluted common share relating to the sale of NGX and Shorcan Energy Brokers as part of the Trayport transaction. The increase in our adjusted EPS reflects lower operating expenses before acquisition costs in Q4 '17 compared with last year. This increase was partially offset by lower revenue and the impact from an increase in the number of weighted average common shares outstanding. Now while reported revenues this past quarter declined 2% year-over-year, our top line was actually up 2% when excluding divested businesses in the Global Solutions, Insight and Analytics segments, previously Market Insights. There was a $1.4 million decrease in revenue from Razor Risk, which was sold in December 2016 and a $6.7 million decrease in revenue from TMX Atrium, which was sold in April 2017. And this was partially offset by revenue from Trayport from December 14, 2017 on -- of $4.5 million in Q4. There was also declines in Derivatives Trading and Clearing revenue and other revenue. Other revenue declined largely due to the impact from recognizing net foreign exchange losses on U.S. dollar net monetary assets in Q4 compared with net foreign exchange gains in the previous year. These decreases were partially offset by an increase in Capital Formation revenue as well as CDS revenues. Now turning to costs. Operating expenses before strategic realignment expenses and acquisition costs in Q4 were down 9% from 2016. There were reduced costs related to Razor Risk and TMX Atrium of approximately $2.2 million and $8.3 million, respectively, as well as lower compensation and benefit costs in the quarter. These decreases were partially offset by higher occupancy costs due to a rent recovery in Q4 2016. Higher expenses were approximately $1.9 million related to our global marketing campaign and increased costs related to the inclusion of Trayport. Looking at our results on a sequential basis. Revenue in Q4 was up 12% from Q3 '17, reflecting increases in almost all segments of our business, including Trayport revenues of $4.5 million in the Global Solutions, Insights and Analytics segment. Operating expenses before strategic realignment expenses and acquisition costs were up in Q4 compared with Q3, reflecting operating costs from Trayport, a write down of assets, higher external fees as well as increased marketing and occupancy costs. The increases were partially offset by lower severance costs and reduced depreciation and amortization. Income from operations increased from Q3 to Q4 '17, reflecting the higher revenue partially offset by slightly higher operating expenses. Now looking at the full year. Our GAAP earnings were $6.60 per common share on a diluted basis compared with $3.58 on a diluted basis for 2016. As was the case with Q4, the increase was largely driven by the gain of $2.82 per diluted common share related to the sale of NGX and Shorcan Energy Brokers. On an adjusted basis, earnings per share increased by 4% from $4.47 in 2016 to $4.65 in 2017. The increase reflects the significantly lower operating expenses before strategic realignment and acquisition expenses, excluding amortization of intangibles related to acquisitions and partially offset by lower revenue. Revenue was down 2% on a reported basis and up 2% when excluding the divested businesses. We also incurred lower financing costs in 2017 compared with 2016. The increases were partially offset by the impact from the increase in a number of weighted average common shares outstanding in 2017. Now just to comment on our balance sheet. We increased our debt by $384 million since the end of last year to support the Trayport acquisition. On a pro forma basis, including Trayport's adjusted EBITDA for 2017, our leverage as defined by our debt-to-adjusted-EBITDA ratio would have been about 3.2x for 2017, up from 2.9 at the end of 2016. We also held $225 million in cash and marketable securities at the end of the year, including $55 million in excess cash, excess of the $170 million we target to retain for regulatory and credit facility requirements. As Lou mentioned, we had a highly successful bond deal at the end of 2017 in which we financed $300 million of this incremental debt for 7 years at a sub 3% interest rate. As we've discussed before, we have a very strong track record over the last 5.5 years of deleveraging and that continues to be our plan going forward. Now looking to the future, I want to spend a few minutes on a number of items we've highlighted in our disclosure document that will impact Q1, the rest of 2018 and beyond. Now starting with revenue. We highlighted that there was an increase in additional listing fee structure for the Toronto Stock Exchange effective January 1, 2018. These amendments include an increase to the maximum additional listing fee payable by corporate issuers from $190,000 to $250,000. Based on historical data from 2017, we estimate that the revised fees can result in an increase in revenue of approximately $5 million to $7 million on an annual basis starting this year. And as many of you would have noted, there was an increase in the aggregate market capitalization of issuers listed on both TSX and TSX Venture Exchange from the end of 2016 to the end of 2017. However, we also made changes to the TSX fee structure that would impact eligible secondary market issuers. In addition, there was a reduction in the annual sustaining fee payable by Special Purpose Acquisition Corporations in their terminal units. We estimate that these increases in market capitalization on TSX and TSX Venture, net of the impact of some of these other changes in fee structure, will result in an increase in sustaining fees revenue of about $1 million for 2018. In terms of operating expenses. While we have no immediate plans to provide detailed expense guidance, I do want to mention several items for you to consider in Q1. We want to remind investors that we normally see an increase in payroll taxes from the fourth to first quarter. Last year, that increase was $3.2 million from Q4 '16 to Q1 '17. For compensation and benefits, we will also expect to have higher severance costs related to organizational changes in Q1 in the range of $3.5 million to $4.5 million, which is also expected to generate an annual savings of approximately $2 million per year starting in Q2 2018. In terms of CapEx. Just a reminder on 2 items that will require cash outlays over the next several years. These relate to the integration of our clearing houses, CDS and CDCC, as well as to the consolidation of our offices in both Toronto and Montréal. With respect to the CDS-CDCC 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 on CapEx last year. Substantially, all of the costs will be related to CapEx, and we expect that almost half of the total expend will incur this year. The annual savings in OpEx on a run-rate basis compared with our current cost structure are expected to be about $6 million to $8 million starting in 2020. As we transition to the new platform, it is likely that operating expenses will increase over the short term before we start to realize those savings in 2020. On the consolidation of our office premises in both Toronto and Montréal, we spent approximately $17 million of capital expenditures in 2017 and a further $13 million to spend -- expect to be spent in the first half of 2018. The expected annual savings will result in a reduction in operating expenses of approximately $2.4 million to $2.8 million on a run-rate basis starting in Q3 of this year. During Q2 of '18, we also expect to record charges of approximately $5 million related to lease terminations to effect this change. Now finally, on taxes. With the acquisition of Trayport, we expect to see a reduction in our statutory tax rate from 27% in 2017 to 26% in 2018. Last night, our board declared a quarterly dividend of $0.50 per common share to be paid on March 16 to shareholders of record on March 2. At 41%, this payout ratio is within the range of our domestic and international peers, and we remain committed to a payout ratio consistent with that peer group. At this point, I will now turn the call back to Paul for the question-and-answer session.

[Paul Malcolmson, Director, Investor Relations]

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

[Operator]

[Operator Instructions] Your first question comes from the line of Paul Holden with CIBC.

[Paul David Holden]

So Lou, I want to ask you a couple of questions on Trayport to start. And I guess the first one is, I appreciate you said you'd provide us a further strategic update later in 2018. But what I'm curious about is what are the kinds of things we should be benchmarking along the way? Or put another way, maybe ideally, what would you like to be able to tell us later in 2018 in terms of what you've been able to accomplish with Trayport?

[Lou Eccleston, Chief Executive Officer and Director]

Yes. Okay. I mean, remember, we just closed end of December. So what we've done is spend a lot of time with our team and Trayport team, really trying to prioritize what are the growth opportunities, and they're across a range of categories, which I'll mention for you. So what we want to do -- and I think it's -- when we get to our next call in Q2, when we're talking about Q1, is to be able to give you more detail around the kinds of things that we're going to do to generate the growth. I could tell you that we're very comfortable with what we've seen so far in those 6 weeks that we've been able to dive deep inside because remember, we were -- during the entire process, because of the competition authority focus on this thing, we couldn't go in and start talking about strategy and growth. We had to actually wait until we closed. So once we closed, we dove in there. We were in there before Christmas, trying to do the work to figure out exactly what are the priorities. So it's not trying to figure out how to grow, it's really how do you prioritize the opportunities to grow. And that's what we want to really nail down. But we can -- I can tell you that what we see is everything we laid out for you when we talked about the acquisition, in terms of how they have done historically, remains very consistent where we think they can go and will go in 2018 and then beyond. So this is really about how can we accelerate the growth that they've shown over the last 4 years as we talked about in the acquisition. And those are things that run the gamut of -- in their existing core business, which as you know, is very strong What are the additional services that we can provide that will continue to keep revenue per client growing as it has been. And that's a really important part of that business because even though they're in such a preeminent position in their marketplace, there are a range of new services and that kind of range from new analytics, more charting, more implied pricing, more technical analysis, ways to give insight into what is an enormous amount of data that sits within their platform. Because of all the broker participation, because of all the trading participation, all the exchanges are all involved in those asset classes that they're in. So how do we give more insight into that data. And even things like using artificial intelligence, which I talked about we're doing here, visualization, application. So a number of ways to bring more value and more revenue per client. Then when you start thinking about expansion, then you start to get into what are the geographies where we should look to expand first. Whether it's Mexico, whether it's the U.S., whether it's Japan, they're all very viable growth opportunities. And at the same time then, what are the asset classes we expand into, new products. So we're talking to now lots of clients that, because there was a competitor as an owner before, weren't very anxious to deal with Trayport; and now in fact, they're very anxious to deal with Trayport and TMX. So there's a whole range of things that we're working through that we need a quarter to really get set on, but that won't prohibit the continued growth that you've seen in the past as we go to 2018.

[Paul David Holden]

Okay. Good. That's lots of good stuff in there. And the second question kind of comes from a different angle. And it's one that comes up when I talk to investors about the Trayport acquisition, and there is some pushback from certain clients regarding potential integration challenges. So it's an operation that's putting up good growth, operating very effectively and so there's a view that maybe there's potential for disruption under new ownership. So maybe you can kind of talk about the things you've done to make sure Trayport continues on the current trajectory.

[Lou Eccleston, Chief Executive Officer and Director]

Yes. Well, I think that comes from, Paul, what I just mentioned. Remember, the ownership has been a little bit rocky. If you go back the last 5 years, the CME and IEs were in there. And while they appreciate the business greatly, other participants in that platform were concerned that a competitor would be an owner. And so that's all gone now. And as a fact, just last week, I was over there with Jean Desgagne, who the business reports into. And we spent the entire week seeing the top clients, the biggest clients across the brokerage and trading community. And they're all very much committed to the Trayport platform and very comfortable with us as owners. And I think it's going to open up a lot of discussion, so I think that whole thing is now clear. I think that -- you can tick that box and move on with it. And in terms of integration with clients. Once a client is comfortable with the direction, the strategy and the ownership, they're much more willing to do further integration with you. And by the way, we're almost now complete on a transition from a deployed service to a software service, software solution. It's almost completely done. So they've met the MiFID II requirements. They've done a great job of migrating their folks. And it was a lot of work and I think by the time we get to mid this year, they're going to completely be a services business, which means deployment is an IP address. There's virtually no integration to do. And as we improve APIs and different ways to integrate with clients, it'll get even easier. So I think whatever noise there might have been in the past, that's all going to be gone very quickly.

[Paul David Holden]

Okay. Good. Next question. There's been some change or that there will be some change in terms of the fees you can charge for corporate action events. So maybe you can talk about that 50% discount that was in place for 2017 going to 25% in 2018 and then I guess 0 in 2019. And so what I'm curious about is kind of what's the potential revenue growth related to that change?

[John McKenzie]

Well, that's actually a good one. We haven't talked about that one in a while. As you know, those fees went into place on March 1. And then you're right, there was a transition plan that went in that, with 50% from the previous year and then winding off. So if you look at the results and the detailed disclosure we gave in the last year in terms of the impacts on CDS revenue, you should be able to get a good sense of what that migration looks like. It's not an area where we're going to provide some specific guidance on, so I'm going to direct you to the disclosures on it. But you should see that lift up going from 50% to 75% as we get into the second year starting March 1 this year.

[Paul David Holden]

Okay. And then final question. We've seen some very, very nice progress in terms of EBITDA margins over the last couple of years. So I'm not going to ask you to provide guidance, but maybe a general sense of what's the potential here. Like where could you ultimately take EBITDA margins? My guess is it's something higher than where we are today. So maybe help us a little bit with that.

[John McKenzie]

So you're asking for a not specific guidance, but general guidance. In both the meetings that we've had with you guys and the meetings that Lou and I have talked with investors, we've really talked about what the focus is in terms of how we determine success in the organization, how we drive the organization in terms of results. And we continue to look to continue to grow the business at mid-single digits in terms of revenue growth while maintaining a discipline around our cost base. That gives you a natural lift to margins. We're going to continue to focus on that approach for a couple of years, but I can't give you specific guidance as to where they're going.

[Operator]

Your next question comes from the line of Jaeme Gloyn with National Bank Financial.

[Jaeme Gloyn, Analyst]

My first question's a -- I just want to focus in on the operating expenses. And specifically, the selling, general and administration line, up year-over-year. And some of that looks like it's related to, obviously, the marketing campaign and I guess a -- of some rent recoveries in Q4 '16, which weren't previously disclosed in that quarter. Can you just -- can you give us a sense as to what the sustainability of this level of SG&A is? I.e., is that marketing campaign done now? Is this the right level to think of if we just adjust for that campaign? Maybe some color around that, please.

[John McKenzie]

Sure. I mean, first of all, I think if you go back to the disclosure, there was some disclosure last year around the rent recoveries. It was in the Q4 disclosures last year. On a go-forward basis, what I would guide you towards is to not look at just one line in terms of our expense mix. We do manage the portfolio as a whole. If you'd looked at our expense and our spend base as a whole, including both G&A, comp, benefits, technology and look forward with the inclusion of Trayport, that gives you better guidance of what we're doing. Because even within the marketing spend, although we spent roughly $2 million on that in the quarter, it still was funded out of [indiscernible] flat run rate. And that is our intent going forward where we will continue to have spend on developing our brand and our marketing campaign in 2017 -- sorry, 2018 that may be more spread out, but it'll be part of our general run rate.

[Jaeme Gloyn, Analyst]

Okay. And then on the revenue side, just shifting to the change in the sustaining fee. Can you explain what the changes are related to the -- to some of the eligible secondary offerings that kind of keep sustaining fees a little bit contained in 2018 versus 2017?

[John McKenzie]

Yes. The biggest change that we made with respect to issuers that are interlisted, so listed both in Canada and in the U.S., recognizing that, that's a competitive marketplace and an issuer that is basically paying a sustaining fee twice in 2 marketplaces. We want to recognize that so there are some discounts in place there. So that is not just 1 plus 1 equals 2 in terms of more fees. So it's again, anytime we look at the fee structure, we're looking at places where we've got opportunities to make changes and increases as we did on the additionals. And we look at areas where we may be a bit exposed, we made a change around the sustaining fees for interlisted to ensure that we remain competitive on the North American basis.

[Jaeme Gloyn, Analyst]

Okay. Great. And getting back to or just looking at the Trayport's performance, $4.5 million of revenue. Are you able to give us what the breakout of OpEx was for Trayport, specifically? And I guess as a -- it follows, the EBITDA on Trayport in those 2 weeks?

[John McKenzie]

Yes. The operating expenses over that period was about $3.1 million in total. That includes 0.7 or $700,000 in terms of intangible amortization, which we know -- you know we adjust out in terms of our adjusted EPS. So 3.1 in total, including 0.7 of intangibles.

[Jaeme Gloyn, Analyst]

Okay. That's great. And lastly, just on the guidance around the dividend payout ratio. At the low end of, I guess, the peer group in that sort of 50 -- 40 to 50 range. You mentioned that's a comfortable level, but is there appetite to increase to the mid to upper end of that range against the peers?

[John McKenzie]

Well, if you saw where we were at the end of Q4, I believe we were actually kind of at the midpoint of the range in Q4. I mean, over the long term -- I'm going to continue to guide you to the long term that we want to be right in that range. And yes, we recognize that we're in the low end right now. We recognize also that we actually had just completed the transaction in terms of bringing Trayport in the middle of December, issuing new debt. But the guidance that I would give you around dividend and dividend growth and payout range is that as we're maintaining the guidance around the range, as the business grows and accelerates with the Trayport component built into it, it does give us the ability to do more. And that's the guidance I'll give you for now.

[Jaeme Gloyn, Analyst]

Right. So strength in the business generating dividend growth as opposed to a shift in strategy around dividend payout ratio?

[John McKenzie]

That's correct.

[Operator]

Your next question comes from the line of Nik Priebe with BMO Capital Markets.

[Nikolaus Priebe, Analyst]

First question is just on the listing fee changes. And I was just wondering, do you see any other areas in your business that where you might be conducting a review to fee schedule and making possible adjustments going forward? Or do you think this is a bit of a one-off change?

[John McKenzie]

No. I think in any business, you're constantly looking at your fee schedule. So we are constantly every year looking at the different fee schedules of the business and making sure they continue to be competitive, looking how they benchmark both internally and with external benchmarks as well. And we would make changes from time to time. So I wouldn't call it a specific exercise or an annual exercise, but a regular business review.

[Nikolaus Priebe, Analyst]

Okay. And I think you had pointed out, John, in some of your comments that you'd expect to see a little bit of short-term OpEx growth as you transition towards the clearing house integration in 2020. I recognize that most of those expenses are going to be capitalized. But I was wondering if you could just maybe try to quantify the OpEx part for us. Like should we be thinking of low single digit expense growth? Or do you expect that to be relatively immaterial?

[John McKenzie]

On a quarterly basis, it's likely relatively immaterial. When you think about the whole overall envelope of spend guidance that we've given you, the $55 million to $60 million. That is inclusive of both Capex and OpEx pieces, of which the CapEx is the large majority. So that should give you the indication of kind of how much OpEx in a range we were thinking about over that period of both '18 and '19.

[Nikolaus Priebe, Analyst]

Okay. And then one last one for me. I was wondering if you could talk about some of the recent volatility that we've seen in equity markets and how that sort of impacts your earnings profile. I mean, I think we saw a strong reading for turnover activity in January, and I guess to the extent that, that persists, we should expect to see some upside at earnings. I'm just wondering if you could talk about historically what you've seen when the VIX goes parabolic like we have. Should we perceive that to be positive from the perspective of trading volumes but maybe a bit of an impediment for issuance activity to the extent that it makes prospective issuers more reluctant to access public markets. Just any color around those dynamics will be helpful.

[John McKenzie]

Well, if you actually looked at -- it's been interesting to look at the daily trading activity for our markets and the Canadian market, in general, over the first part of this year. And regardless of where the VIX has been and there are lot of different components that have led to news and interesting noise in the marketplace. We've seen, I think, 2 of the 4 highest trading and clearing days in the Canadian market happened in the last 2 weeks. So in terms of positive list to the business, you'll see significantly higher trading activity now, although I will caution you that trading revenues are roughly only 9% of our revenue base. So it's not a huge component of our revenue base anymore, but it also impacts our clearing fees. It also impacts potentially our derivative areas as well in terms of how that translates into liquidity there. Whether or not that'll have an impact on the ability of folks to raise capital, we're yet to see that yet. It's certainly in historical experiences we've seen time frames where high volatility has left some issuers kind of holding back for a bit in terms of when they do their issuance. But it's too early to tell for that whether or not this impact will have that this year.

[Lou Eccleston, Chief Executive Officer and Director]

Right. But the main thing, I think, you can count on is that the diversified portfolio we have will go into action again, right? So if you go back to the closest period, I think, that might be similar with the [indiscernible] in early '16 where we had huge volatility and you had Montreal setting record volumes, but it wasn't great for IPOs. That settled down; IPOs have come up. So in the end, what's carried us through consistently is having that diverse range of portfolios. And also just to remind you that now, we are again in a different situation having moved from 40% to 52% of our revenue being recurring. That was one of the major reasons we wanted to smooth and make our revenue more consistent and more global so that you're not -- you're far less susceptible to major shifts because of one change in the VIX or in the volatility of equity markets.

[Operator]

Your next question comes from the line of Graham Ryding with TD securities.

[Graham Ryding, Research Analyst of Financial Services]

Maybe -- I appreciate you're going to give us more color on sort of the outlook and the plan for Trayport next quarter. But some of the areas you mentioned around expanding into geographies, and asset classes and also increasing revenue per client -- I understand revenue per client has been driving some of the growth in Trayport to date. But how successful have they been in expanding into asset classes and geographies? Has that been a driver to date?

[Lou Eccleston, Chief Executive Officer and Director]

I think they've been successful, Graham, based on what they've done. They weren't really free to do much, I mean, for 4 years. So if you look at, for example, they have begun to nicely develop the Italian market. They've actually created a foundational client base in Turkey. And so -- and they've done a number of things. There's a -- the beginnings of a marketplace resulting now in Mexico. And this is all with the -- basically, the range around their efforts to really not invest in the business and go out there. And by the way, we're not talking about huge investment. You talk about people more than anything because with the Software-as-a-Service, there's not a lot of -- there's basically no infrastructure at all. So from what they've done, I think they've actually done pretty well in planting seeds in markets. But to make that really happen now, you'd have to pick those priorities and get more aggressive about which ones are the top. For example, they just did a trade -- they do what they call trading exercises, which lets participants -- potential participants engage in what exactly is Trayport and how do I use it. They just did one of those in Japan a couple weeks ago without ever leaving London. There's one person on the ground in London. So they've done a lot of work trying to seed those markets, which what we're excited about is to be able to accelerate those and we're just trying to prioritize now. So I think you're right about a real driver has been the revenue per client, but that's really what's been in their purview. But they haven't lost the focus around how do I grow in geographies and markets. And the strength of the relationship with your partners is what you -- will put you in a big market like a Japan or the U.S. So I think all those things, strong relationships, understanding where those potential markets are -- and now with us coming together to try and figure out how to prioritize those and us helping them with different resources, like technology and other things, we think we can accelerate that. We just need a quarter to get the plan down.

[Graham Ryding, Research Analyst of Financial Services]

Okay. Got it. And the listed revenue per client. Has that largely been new products and applications offered as opposed to just price increases?

[Lou Eccleston, Chief Executive Officer and Director]

Yes. There had been -- I mean, they've got long-term enterprise agreements in many places. But the bulk of those increases in revenue per client has been new product.

[Graham Ryding, Research Analyst of Financial Services]

Okay. Got it. The new clearing platform that you're rolling out. Any potential for distributed ledger technology to be deployed within that platform? Like is that a -- something that's an option that's being built in? Or how are you thinking about that in terms of the development of that certain technology?

[John McKenzie]

Well, it's actually twofold. So we are actually absolutely looking at distributed ledger as potentially a next generation on that platform. We are working with our partners that are bringing the solution to Canada on what that next generation looks like. But the first iteration of this is really fixe the plumbing in the Canadian marketplace. The distributed ledger technology that's available today or available in the near term, really isn't purpose built or scalable for high volume, highly-reliable-transaction-based activity in the type of activity that we're talking about. So our approach has been to get the platform replaced with the global standard, which is why we've gone with a global provider to do that. And work with that provider as to what the next-generation DLT-based version could be that they could deploy across multiple countries. It was one of the real benefits when we decided not to develop this type of technology in house and partner with the global solution provider, is it gives Canada the benefit of being able to participate in those upgrades that are going out across the world.

[Graham Ryding, Research Analyst of Financial Services]

Got it. And then my last question is just around the cannabis sector. I know there's been some regulatory issues you've put on the press release around CDS. You just provided an update on sort of where you stand on the regulatory front. With that issue, is it -- you can now clear trading of any cannabis-related stocks, but you still have some restrictions around listings or what's your position?

[Lou Eccleston, Chief Executive Officer and Director]

Yes. I mean, first of all, yes, we're very happy with the outcome of that. And that's exactly what we wanted. We were completely in favor of moving the responsibility to that company to the listing venue. And that's exactly what we got. Given the importance, obviously, of what CDS does for the entire marketplace, we didn't think that was the place that should be responsible for vetting or maintaining listing requirements. And so we're very happy about that and very happy to be able to fulfill our public mandate on CDS as we're supposed to and want to. So that's a great outcome and it's done as far as we're concerned. Everything has a good sign off, but we're in good shape. So in terms of listings, I think you can consider that. It's not an evolving issue. It's done. I mean, I know everybody likes to say that we've developed a new policy, we have not. All we really did was reiterate a policy we have, which is that we ask companies to please operate within legal guidelines in the jurisdictions in which they operate. That's regardless of any product you might be engaged in. We're completely agnostic to products. That's not our job. We're not in the judgment business of whether a product is appropriate or not. We purely look at whether or not a client is operating within legal guidelines. And in fact, it's fair to say that our position has been pretty well justified, given what just happened in terms of talking about retracting the entire Cole Memo and a comment from the Attorney General in the U.S. that literally says, please pursue cannabis activity like you would any other crime. And we had to make sure that we protect investors and our employees. And we did that and it proved to have had the right position on it. So it's done. We'll continue to -- there wasn't any particular issue. We have ongoing listings reviews. That doesn't change. And that's true for any company and any product and any region that we operated as long as we're listed here.

[Graham Ryding, Research Analyst of Financial Services]

Got it. Appreciate that. Maybe just one last one related to that. I know the CSA does an annual review of market data pricing. And it's part of that review or methodology as sort of market share, given that the -- some of your competitor exchanges have gained so much market share related around cannabis-related trading, do you feel like that's going to be a factor at all? Or when does that review happen?

[Lou Eccleston, Chief Executive Officer and Director]

Well, the market data review is basically done. And it went on for quite a bit, about 4 years. But we think that's basically done and had an impact on one part of our business, which was Alpha, which has been addressed. So we don't, at this point, see another review coming anytime soon. So I think from the market data side, I don't think that's anything at the moment that we see in the radar. But the other side of it, Graham, just to address a comment you made about market share, it's an interesting one. And it's one you have to put in context, because what has happened in our marketplace is volume in the marketplace, in general, has gone up. And what you need to look at is where that's come from. It is very much in a cannabis-related move and around volumes increasing at CSE, right? So the thing though that you have to understand in that is, most of that volume that happens on the CSE would not even qualify a list on our venues. We don't pursue that. So if you take a bit of a different perspective on that and take a look at what has happened to the markets where we compete, in other words, where we list, right, where we list companies, believe it or not, that market share has gone up. So I know everybody talks about it going down. And it's true on a pure number standpoint. But literally, if you look at combined TSX and they announced the share of trading and TMX listed issuers, it was up 67.5% to 68.5% between Q3 and Q4. And that's the perspective, I think, we have to have on this because remember there's -- it's nowhere near the left or direct line between volumes and revenue. And if you're trading high volumes in very tiny issues, it's not necessarily worth a lot of revenue. But in the end, it's hard to -- you're not going to go after that. It's not like we lost it. It's most of those stocks would not even qualify to list in our venues.

[Operator]

Your next question comes from the line of Phil Hardie with Scotiabank.

[Phil Hardie, Director, Diversified Financials and Analyst]

So most of my questions have been answered. But maybe just a quick question for John, just around some of the future disclosure. Can you just give us a sense in terms of disclosure in terms of how investors can quantitatively measure some of the success in Trayport? So obviously, key metrics, some of the subscriber volumes or revenue per unit. And again, you've got some complication as well with, I think, 95% of the revenue within pounds, sterling, so you've got some FX on there. So maybe any color on that in terms of again just metrics in terms of how investors should measure this success of the acquisition and growth going forward.

[John McKenzie]

Yes. I mean, we're looking at it very much from a growth standpoint so the ability to continue to grow the revenue. And as Lou mentioned earlier, the revenue per client piece, those will be part of our tracking. We'll see what the right kind of disclosure we can provide around that is. We expect to continue to have strong margins in that business. So even though Lou said that were going to be continuing to invest in the growth, it's investing in additional run rate as opposed to material CapEx. So we're looking to maintain that margin profile of the business that we acquired. The -- I would guide investors to, as Lou talked earlier, around when we're going to be able to give more guidance as to what we're going to execute on is to how we're performing and executing against that plan. So where are you seeing in terms of expansion of the business and how that translates into revenue per user and overall revenue from the business. And that, that's where I would guide folks to.

[Phil Hardie, Director, Diversified Financials and Analyst]

So I'm sorry, is the thinking there you're actually going to provide the -- in terms of giving the ability for investors to track the success where you'll give the revenue per unit in local currency and the way it's translated? Or what's -- how should investors think about that?

[John McKenzie]

Yes. We haven't determined the exact disclosure at this point. But I'm certainly open to feedback from the community in terms of what's going to be the most useful in terms of measuring the progress. Certainly, within our disclosure, we're going to -- and we will break out and give you the guidance around how Trayport's performing as part of our GSIA segment. And if there's additional components that are useful in terms of things like revenue per user, those types of things, again, we're happy to consider them. But we haven't made a determination yet as to what the right measures are and are happy to take the feedback.

[Operator]

Your next question comes from the line of Jaeme Gloyn with National Bank Financial.

[Jaeme Gloyn, Analyst]

Just a couple of quick follow-ups here. And just getting back to, I guess, part of Phil's question there around the pound Sterling and -- it's historically been your, I guess, strategy not to hedge revenues. Is that still going to be the case going forward with Trayport on hedging the pound?

[John McKenzie]

Yes. The way I would look at that is -- I mean, it's certainly one of the risk factors in the business, but it's not the only risk factor in our business. With the sale of NGX and the addition of Trayport, our net exposure to foreign currencies has increased. But we also have other exposures in the business, things like exposures to listing activity, trading activity, things like that. So it isn't necessarily the biggest risk exposure from market activities. So we're going to look at that and continue to look at it from a risk glance. How does it fit within our risk appetite. And if the organization determined, at some point, that it wanted to reduce some of that exposures, we do have ideas and strategies how we'll reduce it. But we haven't looked to take any of those strategies on at this time.

[Jaeme Gloyn, Analyst]

Okay. And then separately, there was some news releases out of TMX last night as well. And it looks like a couple of housekeeping items, but one related to share futures on ETFs and bringing those on board at TMX. What -- this is obviously part of the strategy to offer new products at the -- in the Derivatives channel to enhance growth. What are you expecting out of that particular strategy?

[John McKenzie]

Yes. This is a nice little announcement that we kind of slipped past the net, and we didn't give you a lot of exposure on. When we launched the single-stock future platform just over a year ago, it was built and the rule set was built around straight equities. So the -- that pieces that you saw that got announced is we made some rule changes so that you could actually accommodate ETFs in that platform as well. It was based on client demand and client interest in the products to expand kind of products that were eligible for those single-stock futures. So that's what those changes are. So -- and now that allows eligibility of ETFs in that platform and should help to accelerate the product. Obviously, I can't give you specific guidance in terms of the volumes that will come with it. But based -- it is based on market interest and then the expansion of the platform to accommodate that.

[Operator]

This concludes the Q&A portion of our call. I'd now like to turn the call back over to our presenters for closing remarks.

[Paul Malcolmson, Director, Investor Relations]

Well, thank you, everyone, for listening today. The contact information for media as well as for Investor Relations is in today's press release. And we'd be happy to take further questions through the day. Again, thank you and have a great day.

[Lou Eccleston, Chief Executive Officer and Director]

Thanks, everybody.

[Operator]

This concludes today's conference call. All participants may now disconnect. Thank you for your participation and have a great day.