The TSX Group saw consolidated net income of $30.2 million on revenue of $180 million as 2001 marked the second strongest year on record. There were declines in trading activity in 2001 from the previous year's market peak, and with it, trading revenues. The five-year results between 1997 and 2001 reflect a strong upward trend in virtually every significant category of financial performance. Operating revenues in 2001 were more than 50 per cent above our comparable revenues in 1997.
TSX Group CEO Barbara Stymiest's remarks to shareholders are below.
"Mr. Chairman, Members of the Board, Shareholders.
We meet this year at a time of immense uncertainty.
There are significant disconnects between stock market indices and the economy.
The Canadian economy in particular has shown all the signs of an economy now in the midst of a robust recovery.
Indeed, it has been sufficiently robust to invite a pre-emptive strike against inflation from the Bank of Canada. We are soaring, as one bank economist recently put it.
The American economy, though the signs are more mixed, has nonetheless displayed considerable strength as well in specific areas such as consumer spending and housing.
American productivity is also growing at a phenomenal rate - something you should expect at a time of accelerating economic growth.
In such circumstances, past experience would normally give us every reason to expect that stock market indices would reflect investors' expectations of a strengthening economy.
But that is not what has happened.
While the economy is growing, markets have been declining.
A contagion of distrust has fed upon itself, undermining confidence and driving many retail investors to the sidelines.
The securities industry is having an especially difficult time, with layoffs following declining revenues and profits.
The TSX Group has not been unscathed by the decline in markets from their peaks in the year 2000.
But there is something of a disconnect between the performance of the markets and the performance of the Toronto Stock Exchange, as well as between the markets and the economy.
Michael Ptasznik, our Chief Financial Officer, will take you through our 2001 over 2000 numbers in a few minutes.
As you will see, our year-over-year results reflect the market decline during that period and the collapse of the so-called tech bubble.
But while trading declined in 2001 from the previous year's market peak, and with it trading revenues, we ended the year with an increase in shareholders' equity.
More to the point, our five-year results between 1997 and 2001 reflected a strong uptrend in virtually every significant category of performance.
Our operating revenues in 2001, for example, were more than 50 per cent above our comparable revenues in 1997.
That happened in 2001 notwithstanding the collapse of the tech bubble, the horrendous events of last September 11 and the corrosive effect, first of Enron's implosion, then its spread to other major corporations, and especially to the accounting profession.
In recent weeks, the collapse of confidence triggered by Enron took on yet greater force with the revelations concerning WorldCom.
Our problem in dealing with this is two fold.
First, national borders are not barriers to the spread of distrust.
As distrust of American public companies has become pervasive among American investors, it has also affected the confidence of Canadians in their own companies.
This is unwarranted, but it is fact.
Some recent research indicates that between the year 2000 and this year, the percentage of adult Canadians owning shares actually declined, from roughly 49 per cent to 46 per cent.
The second is that, deserved or not, each revelation puts a whole new circle of corporations in doubt as to their integrity, and puts off the beginning of what may be a long and arduous process of restoring confidence in the market and bringing back those lost shareholders. At what point will the psychology turn? My crystal ball is as cloudy as yours on this point.
But at some point, investors must take notice of the reality that our economy is performing a lot better than they are feeling about it and it is time to get down to business again, especially the business of investing.
But they're not at that point yet.
In the circumstances, however, the overall performance of the TSX Group in 2001 was remarkably solid.
Given the market environment, however, it is clear we must maintain tight control of expenses. We are intent on continuing to do so.
In the meantime, we have to reshape our business for what's ahead, whenever it arrives.
Indeed, the real story of the last year involves our having reshaped our business in virtually every dimension.
We installed a new trading system, ending what had become the single most damaging element in our performance, our inability to handle the huge volumes that came at the peak of the tech bubble and thereafter.
After more than a year with the new system, we have not lost a second of trading time on the Toronto Stock Exchange.
Indeed, on June 11, we were able to deal easily with trading volumes 42 per cent greater than our previous high - 464 million shares versus 326 million shares on February 17, 2000.
We purchased the Canadian Venture Exchange and integrated it into our operations.
We spun off our regulatory services into the new RS Inc. to remove any chance that we might be regulating our competitors and thus be in a conflicted situation.
We were the first exchange in the world to do this.
We restructured the company and rebranded ourselves as the TSX Group.
This provides the components that make up the Group - Toronto Stock Exchange, TSX Venture Exchange, TSX Markets, TSX Datalinx, - with both a sharper focus on business objectives, and a sharper image for investors and issuing companies in Canada and abroad.
We launched a series of new products designed to increase liquidity and make us more competitive in the struggle for listings and liquidity that increasingly is taking place on a global scale.
That is a substantial list of achievements.
And today, as you have read, we have added yet another achievement with our purchase of a 40 per cent stake in CanDeal, this country's dealer-to-client electronic trading system for institutional traders in debt market securities.
This investment represents diversification of the business of the TSX Group, this time making us a part of the electronic fixed income market in Canada.
The bond market, I need hardly tell this group, is six times larger than the securities market in traded value. But electronic trading in the bond and money markets is not nearly as developed as in equity markets. So we have much to offer as well as to gain.
This investment demonstrates, as well, our ability to lever our superior technical capacity and technological expertise by working with other major players to increase the efficiency and liquidity of Canadian securities markets.
I'm delighted that we can contribute in this way. By adding our experience in running the country's largest electronic trading platform for equities to the task of further developing the country's electronic trading system for institutional debt, we are helping to make our capital markets more competitive.
I might add that we have tackled some critical public issues that also bear directly on the efficiency of Canadian capital markets and on our capacity to compete on a global basis.
Most notable among these, we have taken a lead role in identifying the costs of Canada's fragmented regulatory system to investors, to issuing companies and to Canadian markets.
I cannot say how this will turn out. At the end of July, the premiers may take up the issue when they meet in Halifax for their annual meeting.
At minimum, however, I believe we have already spurred provincial and territorial regulators toward a simpler system in which differences among jurisdictions are minimized.
Harmonization may not take us as far as we need to go, but it is certainly an improvement over what has existed.
Most recently, the Canadian Securities Administrators have set out new rules that will apply nation-wide and provide for disclosure of a whole range of financial information on a much more timely basis than now.
This, too, will simplify matters and add transparency to the financial operations of listed companies, transparency that is one of the critical ingredients of improved investor confidence.
I hope that we can trigger similar improvements in the whole area of venture capital and innovation so that Canadian capital markets can provide stronger support for new and emerging companies and a higher survival rate for companies that go public.
All of these actions and activities comprise an ambitious agenda for change.
Taking what we've done as a whole, indeed, we have already seen in the last two years a degree of change that is unprecedented in our 150-year history. What has made all of this work is the people of the TSX.
Existing staff and new recruits have responded to the demands for change with extraordinary energy and dedication.
The success of the TSX Group so far is their success.
And as we grapple with the new pressures from global markets and the disconnects that lie ahead, we will count on them even more for our future success.
We all owe them a debt of gratitude, for what they've achieved and for what they'll help us to achieve in the future."
TSX are the initials attached to the core businesses of the TSX Group: Toronto Stock Exchange, TSX Venture Exchange, TSX Markets and TSX Datalinx. TSX Group collectively manages all aspects of Canada's senior and junior capital markets. TSX Group is headquartered in Toronto and maintains division offices in Montreal, Winnipeg, Calgary and Vancouver.
