US Tariff Spat Fuels Trading Boom on Canada’s Top Exchange

(Bloomberg) -- The early salvos in a North American trade war have been a boon to the operator of Canada’s largest derivatives exchange.

Investors are navigating the geopolitical jitters by flocking to financial products that feed off the uncertainty, with exchanges like Toronto-based TMX Group Inc. riding the wave.

Trading volumes are “off the charts” in rates futures and options on exchange-traded funds, Luc Fortin, global head of trading at TMX Group, said on March 10 at the Futures Industry Association conference in Boca Raton, Florida.

Stocks across the world have swung wildly as trade-war anxiety has mounted, but in Canada, where the brunt of many of US President Donald Trump’s most caustic barbs and threats have been, the gyrations are particularly pronounced. A gauge of 20-day volatility in the nation’s benchmark index spiked to the highest level since 2022 on Friday, creating a spillover effect into the options markets. By comparison, recent price flunctuations in major developed markets’ indexes have been in line with their long-term trend, data compiled by Bloomberg show.

Like its bigger US rivals CME Group Inc. and Intercontinental Exchange Inc., TMX Group gives traders a myriad of ways to hedge or speculate on price movements across different asset classes.

Rising volatility has played in favor of shares of TMX Group. The stock is up 13% so far this year, bucking a 0.7% decline in the broader S&P/TSX Composite Index. 

“TMX is well positioned for the evolving environment,” said Scotiabank analyst Phil Hardie in a note, referring to its recurring and transactional revenue mix. “What makes it unique among other Canadian Financial Services companies is its ability to outperform through periods of market volatility.” 

In February, transaction volumes on TMX’s Montreal Exchange were up by 35% from the same time last year, hitting a record high of over 20.3 million. Overall, TMX Group’s derivatives trading and clearing revenue increased 32% in 2024 to C$94 million, a figure that includes the Boston-based Box Options Exchange in the US.

ETF options trading volume on the Montreal Exchange surged 116% in February, compared with the same month last year. On the US options markets, by comparison, volume for such trades was up 10% in the same period, data from the Options Clearing Corporation shows.

“We are seeing a significant jump in demand for protection,” James Neals, national director of the structured products team at Desjardins Securities, said. 

Nevertheless, while market volatility is currently a tailwind for TMX Group, how long the swings will last is anyone’s guess. 

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