A TSX Primer for the U.S. Investor

A Brief History of the TSX

The initial formation of the Toronto Stock Exchange can be traced back to July 26, 1852, when a group of businessmen originally met with the intention of forming an association of brokers.

Although there are no records of any trades being made during that time in 1852, the official creation date of the Toronto Stock Exchange (TSX) is said to be October 25, 1861.

And so, the TSX was born with a resolution passed by 24 men who had gathered at the Masonic Hall in Toronto to establish a framework to facilitate the exchange of financial instruments.

With only 18 securities at the time — primarily banks and real estate — trading was limited to half-hour trading sessions during which only a few transactions could take place.

At its inception, TSX membership cost was only $5. But 10 short years later, the membership jumped to $250 per seat.

The TSX was formally incorporated by an act of the Ontario Legislature in 1878, becoming the second official stock exchange in Canada, following the Montreal Exchange.

Up to Date

Canada is prized for its extensive natural resources, making it an ideal avenue for investors of that particular inclination.

While the country has a number of different stock exchanges with a wide array of potential offerings to investors, none is more lucrative than the Toronto Stock Exchange.

The TSX is not only one of the largest stock exchanges in North America, but it’s one of the largest in the entire world.

Situated on Bay Street in Toronto, the exchange is owned and operated by the TXM group, which is owned by the Maple Group Acquisition Corporation.

As of 2016, it consists of over 1,500 companies that are worth over $2.6 million in market capitalizations.

Some of the largest companies listed on the TSX include:

• Royal Bank of Canada (TSX: RY)
• Toronto-Dominion Bank (TSX: TD)
• Suncor Energy Inc. (TSX: SU)
• Barrick Gold Corp. (TSX: ABX)
• Potash Corp. of Saskatchewan (TSX: POT)

A majority of the companies are based in Ontario, and a substantial number of the natural resource companies are located in Alberta due to the rich supply of oil and gas in the area.

With such easy access to a plethora of natural resources, the TSX houses more mining and energy companies than any other stock exchange in the world, making it the most important exchange for natural resource-focused companies engaged in energy or other related commodity markets.

It’s comprised of not only common stocks but also exchange-traded funds (ETFs), income trusts, split share corporations, and investment funds, providing investors with a number of different options to suit most, if not all, needs.

All Canadian stock markets, including the TSX, are accessible to U.S. markets, especially when compared to other markets around the world.

While direct investments on the TSX are easy, many of the companies dual list on the U.S. stock exchanges, making it easier to invest in the same companies on domestic exchanges.

Trades on the TSX are done exclusively electronically. The floor was eliminated in 1997, analogous to the Nasdaq in the U.S.

The TSX electronic trading floor is open from 9:30 a.m. to 4 p.m. Eastern, with post-market sessions from 4:15 p.m. until 5 p.m. Eastern on all days of the workweek, excluding Saturdays, Sundays, and holidays.

Although the TSX is home to many junior mining companies that are tasked with developing and excavating Canada’s prized natural resources — which can make risky investments — the listing requirements on the Toronto Stock Exchange vary based on the type of company seeking a listing.

For instance, mining companies that seek listing must meet certain property, work program, and working capital requirements before listing, while oil and gas companies have only working capital and financial requirements that must be met.

Investing in TSX-listed companies can be easily accomplished through most online brokerage accounts, especially if investors want to add rich Canadian oil and gas to their portfolio.

On the other hand, commission might be slightly more expensive than typical domestic trades but remain completely reasonable.

Be sure to check with tax professionals or accountants to learn of any tax implications before jumping in.

That’s all for now.

Until next time,

John Peterson
Pro Trader Today