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2020 in Review and the Road Ahead

Moving ahead of Nasdaq Canada in volume traded and unleashing the corporate listings business

It is not possible to look back at 2020 without first reflecting on how the COVID-19 pandemic has affected so many through loss of human life, economic upheaval, and social disruption.

While our organization and most of our team have weathered this unprecedented challenge relatively unscathed, NEO and all those in a similarly fortunate situation should remember how blessed we are. There are hundreds of millions of people in Canada and around the globe who have been impacted by the death of a family member or friend, by losing their livelihood, by experiencing mental health issues, or by being hit by all of it at the same time. Minorities have been particularly affected, reminding us once again of how poorly we do as a society when it comes to diversity and inclusion.

The vaccines are providing us with a path towards what will be the new normal, but we are not there yet, and the vaccines will not lessen the devastation that many have already experienced.

More than ever, we need to respect safety guidelines and instructions, more than ever we have to support the front lines, and more than ever we must reach out and help those in need – today, but also tomorrow.

As we did in 2020, NEO will continue to demonstrate leadership in the year ahead by showing that, as a company, we are not only accountable to our immediate stakeholders, but to our community and society as a whole. Stay tuned.

Despite all the challenges and changes that came with it, 2020 was actually a very positive year for NEO. We built on our 2019 achievements, strengthened our team from within, and accelerated our growth across all business lines.

Trading

From a trading perspective, we experienced 33% growth in volume traded across all Canadian listed securities, taking our market share from 10.5% in December 2019 to 14% in December 2020. On top of that, and for the first time, in December we overtook Nasdaq Canada in volume traded. January 2021 seems to confirm this new state of affairs, but also shows that we are growing further as we closed in on 15% market share!

Our relentless focus on quality of execution continues to be a key driver behind this growth, but in 2020 our growth also benefited from the entry of new quality liquidity providers on NEO. There is no doubt that our trading model, which protects genuine liquidity providers, has been instrumental in enabling this.

We still see a lot of growth ahead of us on the back of an ever-wider adoption of the only marketplace that truly cares about quality of execution and genuine liquidity.

Listings

While 2019 was our break-through year for SPAC listings, which we helped put back on the map in Canada, 2020 heralded the break-through of our corporate listings business.

The pivotal event was the March 2020 listing of MindMed, the first ever psychedelics-inspired biotech company to go public… on NEO. It allowed us once again to demonstrate that we are the progressive stock exchange that welcomes real innovators and disruptors for the better. It also finally allowed us to demonstrate the benefits that a stock exchange can provide when it views issuers as partners and not mere transactions. The go-public journey of MindMed has been exemplary, driven by the vision and quality of their team, enabled and supported by NEO. Comparing the journey of MindMed on NEO with that of its peers, in particular Compass Pathways on Nasdaq US, speaks volumes.

What is the NEO secret sauce? A senior exchange that maintains high listing standards, a unique approach to liquidity, a comprehensive investor outreach strategy, access to quality market data at a fair cost and, above all, a desire to be a partner and enable mutual success.

At the end of 2020 we were close to 20 corporates listed on NEO, across an ever-growing number of industries (life sciences, technology, entertainment, finance, mining), and including a number of unicorns.

We started 2021 firing on all cylinders with 5 new corporate listings in less than 3 weeks! Including ETFs, Closed End Funds and SPACs, NEO is now home to well over 100 listings.

We are also working on some exciting, new public investment vehicles and services… to be announced soon, as we continue to live up to our mantra of innovation and disruption for the better.

Market Data

With respect to market data, 2020 was a year of further expansion across new user communities and new geographies.

We also continued to fight our battle for a true and affordable Canadian consolidated market data solution. After years of raising the issue and demonstrating how it makes our country look second-rate on an international level, the securities regulators seem to be reengaging. On top of that, the Ontario Capital Markets Modernization Task Force put forward a number of recommendations seeking to address those same shortcomings.

Is our industry – and the various stakeholders around us – finally realizing how detrimental the lack of a true and affordable Canadian consolidated market data solution is to innovation, competition, and investor confidence? I truly hope so, and I also hope that in 2021 we will see more than words.

Let it be clear, though, that regardless of the outcome, NEO will continue to speak up about regulatory shortcomings until there are proper solutions in place to the benefit of investors and capital-raisers. Predatory short-selling is another item that is currently at the top of my agenda.

PTFs / DealSquare 

During the previous year, we achieved a steady increase in the number of asset managers, dealers, and advisors using Platform Traded Funds (PTFs). We surpassed the milestone of $1 billion in assets raised!

The benefits, resulting from the fact that PTFs are mutual funds that can be purchased and redeemed the same way as ETFs, are undisputed: better client and advisor experience, more choice, less risk, operational streamlining, and cost savings.

So why don’t we see even faster growth? The answer is simple: reluctance to change by those operators entrenched in the past. We are working on a number of opportunities, however, that will demonstrate that resisting change and evolution is no longer an option.

On the DealSquare front, a platform designed to support private placements which has been fully operational since the end of Q1 2020, we have also seen a steady increase in the number of asset managers, corporates, dealers, and advisors using the platform.

DealSquare in a nutshell: on-book processing of private securities, complemented with a fully electronic workflow to handle all paperwork, including e-signatures, and a marketing platform towards registrants. The benefits are similar to those of PTFs with an even greater impact considering how manual the processing of private placements still is.

In this area, too, we are working on a number of lighthouse-deals which we anticipate to fully demonstrate the potential of the platform.

 

The progress we have made in 2020 – and indeed, since our inception – is due in large part to you, our partners and our friends, who have believed in our vision and supported us along the way. We thank you for standing by us throughout the journey.

And of course, none of this would have been possible without the NEO team. 2020 cemented, beyond a doubt, that this is the best team I have ever had the honour to work with, over the many years I have been active in the industry. The way that they handled the extreme market volatility in March; transitioned to working from their homes without any impact on service; performed a full upgrade of our entire trading infrastructure and software without any glitches; rallied together as a team to accommodate growth; continued to be innovative and customer focused during a very challenging time; stepped up to make NEO a more diverse and inclusive workplace than ever… all of these factors, and more, make me feel very confident about NEO’s future. More than ever, I am comfortable in asserting that we are not done yet, and you can expect many new initiatives from us to the benefit of better Canadian capital markets!

Yours,

Jos Schmitt
President & CEO, NEO Exchange