TMX Group Limited

Paul Malcolmson - Director of Investor Relations Lou Eccleston - Chief Executive Officer John McKenzie - Chief Financial Officer

Jaeme Gloyn - National Bank Financial Graham Ryding - TD Securities Paul Holden - CIBC World Markets Inc.

Thank you, Melissa, and good morning everyone. Thank you, for joining us today for the fourth quarter 2016 conference call for TMX Group.

As you know, we announced our fourth quarter results last evening along with full year results. A copy of the press release is available on our website, tmx.com, under Investor Relations.

Today, 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 the question-and-answer session.

Before we begin, I want 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 outlined in today’s press release and reports filed by TMX Group with regulatory authorities.

Now I’d like to turn the call over to Lou.

Thanks, Paul. Good morning, everyone, and now offer my thanks as well for joining us for our fourth quarter and full year 2016 results.

2016 was indeed an eventful and probably even a landmark year for TMX. We achieved record annual revenue of $742 million, record diluted earnings per share of $3.58 and record adjusted diluted earnings per share of $4.47.

John is going to take you through the detailed results in a moment, before he does I want to spend a few minutes highlighting some of the year's accomplishment, but as importantly the advances we made in 2016 that set us up and provides a foundation for TMX's future success. Back in January of 2015, as many of you will recall, we outline a path forward, a very specific plan.

That plan had a significant amount of detail that the timeframe we clearly identified was as follows: Six months to complete a strategic review, another six months to complete business plans with the stated goal of entering 2016 in execution mode. Two primary objectives of that plan were, one, to return TMX to profitable growth in 2016 reversing multiple years of declining organic revenue and profitability; and second, to deliver on our commitment to drive increased shareholder returns and the results are in.

In 2016 the value of TMX group share is double, we had almost $2 billion in market capitalization, we were able to record high stock prices multiple times, deliver record revenue profits and we announced the first TMX dividend increase post in April and all of this while continuing to paydown significant amounts of debt. TMX was the top performer among our global exchange peer group last year and that was a big change from the previous two years where we were near the bottom rack and we were the number one performer in financial sector stock in Canada.

Even more importantly than those things and I believe ultimately more impactful, as planned 2016 proved to be a year of execution and are building for the long term. Particularly in 2016 we significantly streamlined our organizational structure reducing redundant layers of management to accelerate decision making.

Overall since the end of 2014 we have reduced our employment level by approximately 250 people. We also made several strategic changes in our leadership team including promotions from within, hiring new talent from outside and realigned our businesses and functions.

On the cost side we introduced surgical discipline which has reflected in a year-over-year decline of 6% or $27 million in operating costs before strategic realignment expenses. We also developed a plan to integrate our depository and clearing technology platforms and advanced our rationalization efforts by selling and removing non-core businesses that were a drain on capital and cash.

TMX will continue to focus on streamlining operations and planning the trading platform rationalizations while focusing on growth opportunities. I want to take a moment here to point out some of the positive trends that we see emerging from the key business indicators across our core landscape that bode particularly well for the future.

There are exciting things going on from coast to coast that Canada pushes to the front of the pack in the global innovation economy. Businesses from incubators and startups the large corporations are coming together with academics, governments, to advance this country's innovation agenda and I assure you TMX is an active participant.

As a result of this nationwide upper mobility 2016 stands as the best year on record for technology and innovation IPOs and new listings with 41 new companies coming to TSX and TSXV led by 36 new companies in this sector, in the innovations sector, choosing the Venture exchange their go public destination and the path for business growth. Staying with technology and innovation, we also had a record year for international IPOs and new listings with 12 new companies.

Once again this illustrates the point I have made repeatedly which is we are a Canadian business with a significant global presence and client base and this forward momentum continues. Our capital formation team is in close contact with IPO candidates and venture capital backers and overall across the conversations with early stage companies in the technology sector seems to have shifted now from if to when they should go public.

From pin tech [ph] to clean tech and beyond innovative Canadian entrepreneurship is alive and well. 2016 also marks the record year for Toronto Stock Exchange in terms of growth in the ETF sector.

TSX was the 77 new ETFs in 2016 bringing the total number of ETFs listed to 454 and that's the total market capitalization of almost $114 billion. Despite the slow year for IPOs when considered in a global context our stats ended up exceedingly well.

According to the World Federation of Exchanges our markets ranked number two in the world in a number of new listings and we tied for first in the world in a number of new international listings in 2016, again stressing the international nature of our franchise. And we are hopeful that 2017 will be a bounce back year for IPO activity.

Two weeks ago we were impressing a proudly Canadian company to Toronto Exchange and we believe the pipeline is strong across a very wide variety of sectors. If you look at our derivatives business MX set annual overall volume records for an impressive seventh consecutive year.

We also reached new highs in our benchmark futures product as well as equity and ETF options. MX has new leadership at the top as well as in research and development and they are focused on optimizing service levels for existing clients while also looking at ways to expand the business into new geographies.

We recently launched an innovation center in Montréal to support the work of our derivatives client facing teams with a focus on market access, economic and financial research, and new products development. Today I am also pleased to welcome a new member of our team.

As many of you likely read in our announcement at the end of January, Alison Simpson has joined TMX as our new senior Vice President of Marketing and Branding and today is her day on the job. Alison is highly regarded for her expertise and proven track record in building digital marketing and branding strategies and I look forward to working with her to define TMX as a premier, globally recognized brand and enhance our client and stakeholder engagement efforts.

To summarize, TMX, our 2016 was a year of profound change in record-setting results. Ultimately it is going to be remembered as the year we reengineered our organization, solidified our leadership position in domestic and global marketplace and implemented a structure capable of generating sustainable profitable growth.

We enter 2017 hard at work confronting challenges, exploring creative solutions for our clients, and pursuing growth opportunities in all of our businesses. The purpose of our transformation of 2016 was more than to implement, it was to institutionalize a changed culture at TMX.

The new evolved TMX is adaptive to ever changing needs across the entire spectrum of our expansive client base and also to a multitude of variables that impact the political and economic landscape which lies beyond our control. The key to our future while we already are starting to see strong evidence of success lies in how we can better leverage the considerable power and transit to a diversified portfolio of businesses.

We are continuing to work to unlock the substantial potential of TMX as an asset and capabilities. Our immediate and ongoing priorities within this initiative includes the strategic realignment of the operations and management of our cash and derivatives clearing businesses, CDS and CDCC, expanding our coordinated TMX wide sales function to promote our core business in Canada and around the world and adding power to augment our team.

TMX is also committed to finding ways to innovate across the broader scope of our industry, immersing ourselves in emerging tech communities and investing in research and development projects that are aimed at harnessing new technologies. The first of a number of new innovation initiatives in development was announced last month with CDS joining a group of international central security depositories in the launch of Liquidity Alliance.

This is an initiative utilizing block chain technology to make multiple CSDs, central depositories to facilitate a cross-border echo system to leverage collateral more efficiently. And a couple of weeks ago, TMX jointed the Chamber of Digital Commerce, the world's leading block chain trade association.

The Washington DC based organization features an impressive and diverse roster of companies that are dedicated to innovating risk or investing in the block chain echo system and a keen interest in Canada. So we expect to announce more of these types of partnerships by companies going forward as we work hard to understanding how we can best apply emerging technologies in support of our multifaceted business.

TMX is constantly examining how we do things, looking for effective ways to accelerate the delivery of new solutions to market with the ultimate goal of optimizing our diversification, driving profitable growth and maximizing total share of return while always delivering again our public interest mandate. So thanks for listening in this morning.

I look forward to answering questions and with that I will turn over the call to our CFO, John McKenzie.

Thank you, Lou and good morning everyone. So jumping right in as you will have seen last night, Q4 was again another very strong quarter this year.

Revenue in the quarter grew 7% with increases across all our major businesses. Our continued focus on efficiency and cost control was evident in the 10% or $12 million reduction in year-over-year expenses before strategic realignment costs.

We delivered diluted earnings per share of $0.95 in Q4 2016 compared with a diluted loss per share of $2.92 in Q4 2015 and our adjusted diluted EPS in Q4 2016 was $1.18 an increase of 36% over Q4 2015, again demonstrating the leverage in our business model. I'll comment more on the organizational transformation initiative later in the results, but before we begin I want to comment on a slight change in reporting format for revenue in segments.

In Q4 2016 we further revised our operations in our reporting for our Efficient Markets operating segment. This segment has been separated into two segments, Equity and Fixed-Income Trading and Clearing and Energy Trading and Clearing to better reflect our organizational structure and to provide additional transparency.

Results for Q4 2015 have been restated to conform to this new structure. So let's begin by talking about our fourth quarter results on a year-over-year basis.

As you may recall, in Q4 2015 we reported a net loss driven by non-cash impairment charges related to capital formation, equities trading, BOX and other assets of $194 million after-tax. This past quarter there were impairment charges of 8.9 million after-tax related to TMX Atrium and AgriClear.

This decrease in impairment charges and the significantly improved operating performance drove the favorable growth results for this past quarter. Looking at revenue there were increases in capital formation equities and fixed income trading and clearing as well as a derivatives trading and clearing revenue.

The increases were partially offset by a decline in market insights revenue reflecting a $6.2 million decrease in revenue from Razor Risk quarter over quarter. Capital formation revenue increased by 20% compared with last year largely due to increases in additional and initial listing fee revenue.

Additional listing fee revenues increased by 32% in Q4 2016 compared with last year reflecting an 8% increase in the number of transactions billed by TSX and the favorable impact from an increase in the maximum additional listing fee on TSX effective February 1, 2016. The increase in additional listing fees on TSX Venture reflects the significant increase in total number of financings and the total amount of financing dollars raised compared with Q4 of last year.

Initial fees of the TSX and TSX Venture tripled from $1.1 million in Q4 2015 to $3.3 million in Q4 2016 reflecting an increase in the number of new issuers listed on TSX. In addition, there was an increase in the IPO financing dollars raised on TSX Venture which contributed to this increase.

So there were also increases in the Equities and Fixed-Income Trading revenue this past quarter with overall volume of securities trading on equities marketplace increasing by 24%. The increase in revenue was also due to the impact of higher average fees on each of our equity exchanges and higher fixed income trading revenue reflected increased activity in Provincial and Government of Canada bonds.

The increase in Derivatives Trading and Clearing revenue primarily reflected higher revenue from MX where volumes increased by 23%. The increase in revenues was somewhat offset by a decrease related to the exclusion of revenue from BOX effective July 1, 2016 when we ceased to consolidate BOX's results from operations as discussed in our previous call.

Now partially offsetting this decrease also effective July 1 Derivatives Trading and Clearing revenue includes revenue from licensing SOLA technology and providing other services to BOX. This revenue was previously eliminated when BOX's operating results were consolidated in our financials.

The net reduction in Derivatives Trading and Clearing revenue related to these BOX changes from Q4 2015 to Q4 2016 was $1.7 million. Energy Trading and Clearing revenue was essentially flat over the fourth quarter of last year reflecting higher revenue from NGX attributable to higher natural gas volumes offset by lower revenue from Shorcan Energy Brokers.

Total energy volumes were 15% higher compared to last year on NGX and partially offsetting this positive impact from the increased total energy volumes for NGX there was an increase in deferred revenue from Q4 2015 to Q4 2016. The decrease in Market Insights revenue in Q4 2016 compared with Q4 2015 reflected a year-over-year decline of $6.2 million in revenue from the Razor Risk business.

Excluding this Razor Risk impact, Market Insights revenue increased by 3% year-over-year due to higher revenue recovery of some $1.2 million related to underreported usage of real-time quotes in prior periods. The average number professional market data subscriptions declined year-over-year but was relatively flat on a sequential basis.

Now, turning to costs and in Q4 2016 operating costs before strategic realignment expenses were down 10% from last year. There were reduced costs related to Razor Risk of approximately $7.7 million and overall lower headcount following our strategic realignment initiatives In addition, there were lower operating expenses related to circuits, infrastructure, projects, occupancy as well as depreciation and amortization.

As discussed, effective July 1, 2016 we excluded the operating expenses related to BOX when we ceased to consolidate BOX's results or operation. The decreases in costs were partially offset this quarter by higher employee performance incentive plan cost which for long-term incentives were driven by the appreciation in our share price over the period.

Income from operations before strategic realignment expenses increased by 40% in Q4 2016 over Q4 2015 reflecting a 7% increase in revenue and a 10% reduction in operating cost before strategic realignment expenses. Now looking at our financial results sequentially, revenue in Q4 2016 increased by 5% over Q3 reflecting increases in Equities and Fixed-Income Trading and Clearing, Derivatives Trading and Clearing and as well as capital formation and Market Insights revenue.

Operating expenses before strategic realignment expenses for Q4 increased by 1% compared to Q3 2016 reflecting an increase in selling and general administration expenses including commodity taxes and external fees mainly relating to our clearinghouse platform consolidation initiative. This was offset by lower occupancy cost as the increases overall are partially offset by a sequential decline in the Information and Trading Systems expenses as we wrote off $2.8 million in costs related to discontinued products in Q3 2016.

Compensation and benefits costs declined slightly as lower costs and reduced headcount were partially offset by other compensation benefits expenses including those related to higher long-term employee performance incentive plan costs I had mentioned recently. As a result, income from operations before strategic realignment expenses increased by 11% from Q3 to Q4 and income from operations increased by 45% when you include the significant decrease in strategic realignment expenses including severance costs related to the initiative we announced in September 2016.

We incurred $16.5 million in severance and related strategic realignment costs in Q3 2016 in line with our original estimate of $15 million to $17 million and there were no further strategic realignment expenses recorded in Q4 2016. As an update of our initiative to transform the organization we realized approximately $13 million in net cost savings on a run rate basis at the end of 2016.

This exceeded our initial target of $8 million to $10 million per year and this largely reflects the acceleration of the process of streamlining the organization. So while there will be additional savings that we will see in 2017 as we complete the program, we expect most of these savings will largely be off by the costs associated with new employees that continue to be hired as we invest in our strategy.

So we continue to expect to achieve the overall target of $11 million to $15 million in net cost savings per year on a run rate basis as we exit 2017. Overall our headcounts has dropped by over 110 employees from 1187 at the end of 2015 to 1075 at the end of 2016.

In addition, as part of the organizational transformation and focus that we're taking on we completed the sale of the Razor Risk business to Parabellum Limited on December 31, 2016. Now just a comment on the balance sheet, we reduced our debt by about $115 million during 2016 and returned additional capital to shareholders last year through an increased dividend.

Our leverage as defined by our debt-to-adjusted EBITDA ratio declined from 3.2 at the end of 2015 to 2.5 times at the end of 2016. Yesterday, our board declared a quarterly dividend of $0.45 per common share to be paid on March 17, 2017 to shareholders of record on March 3, 2017.

As discussed in the last call our intention over the long-term is to target a dividend payout ratio that is consistent with our peer groups both domestically and internationally. At this point I will wish you all a happy Valentine's Day and turn back the call to Paul for the question and answer period.

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

Yes, good morning.

Good morning.

The first question is just hoping obviously the cost reduction measures that have been taken have been very successful to date. The next step is clearly a focus on the CDS and CDCC.

I was wondering if you just could provide us a little bit more color on where we stand there in terms of personnel, systems, redundancies, things of that nature and just give us a little bit of an outlook for 2017 on that front?

Sure, in the last we talked about this probably, it's going to be difficult to give you a lot of guided for this stage. Where we are in that initiative is well along the way of determining the technology solution for bringing the platforms together and we expect to have that well underway in 2017.

As we get that done, we’ll have a better sense of what the - both the investments going to be to make those changes happened and what their related target and savings are going to be. But as we indicated at the last quarter this is a project that will be longer term.

This will take us a couple of years to get to full execution on.

Okay and in terms of expanding beyond the resource sector or diversifying away from the resource sectors somewhat looking at technology and international companies, you mentioned in past calls that you didn’t saw the sales person in silicon valley, I was just wondering if you could give us an update on how that individual is progressing with sales and if you’ve taken similar measures in other parts of the globe and how that process is proceeding?

Yes Jaeme, I will. I mean we are going to build a business development team around the world in all the markets that have great potential for us and it's already starting to pay dividend.

As I mentioned in my remarks, the fact that we were tied for first in the world in 2016 for new international listings wasn’t an accident. We are actively out there.

We’re running events in China, in London, in Israel in Silicon Valley, so it will be a combination of a global business development, marketing, branding, digital marketing effort. And I had mentioned Alison just joined us just to drive that and feet on the ground where we need to.

So this is a big part of our growth for the future and I try to keep stressing the fact that yes we are a Canadian business, but we have a very strong international franchise. So it's already starting to pay dividends.

As you can imagine it takes a little bit of time to build the pipeline, but literally wherever we've got people around the world are already uncovering prospects. There is a big demand for capital and the way to think about us is not just do you go public in capital, but in Canada, we are a source of literally public venture money to people all over the world and that is something the way to think about is, it's a different kind of business for us, not just the Canadian exchange, but we're not picking people always capital.

So we’ll continue to build that out. It's early days, but we expect to continued to build a business development team all over the world.

Right, and just in terms of the pipeline that you mentioned is that diversified, is it broadly focused, or sorry is it more focused in the technology in innovations sectors that you are looking to target, how does that look right and how?

I think you’ve got a big chunk that are in the, in what we call the innovation sector, because remember that is that’s the broader term and it's not just syntax where the technology of course clean tech, its biotech, but then also looking at some of the larger companies you've got [indiscernible] and you got Freshie [ph] and so, I think when we look at the innovation sector as companies that are looking for growth capital, so we're more focused on companies that are looking to grow and reason that’s important is that’s the gap number one in Canada and you've seen us probably talk about from the advancing innovation round table and those recommendations will be coming soon too. But the real issue here is helping companies grow.

That’s what creates jobs and that’s what creates foreign investment and that’s how companies get much bigger. So, it's not just an incubation issue, we’re focused on those companies $10 million and above that are really looking to grow.

And so it’s pretty broad based, it's probably comprised 35%, 40% or somewhere in the technology sector, but it’s broad based.

Okay, great and then just last one to wrap up my part. In terms of the new products that have come on for Derivatives Trading with respect to single stock futures and expectation to broaden that out to six years, I was wondering if we could just sort of just give us a little more color on the reception those products have had what kind of growth are you thinking you might see from new products outside of the traditional futures trading?

Well, I think I don’t – I'll start in channel there, but you've seen the reception is very good so far for the new product. We’ve got I mentioned a new leadership team both at the top of that and in R&D.

So they are really just getting going, but I think there is, I mean you’ve got a business that as I mentioned has for seven straight years grown very strongly and it's got a great franchise and they are now going to accelerate the new product growth. So they are going to keep looking for products but also you can look for us, and we talk about analytics, analytics also talks, it means benchmarks.

And as you know, we've got a pretty, we've got a lot of data across lots of different business and one of the things we're also focused on for the future is, how do we start thinking about benchmarks with partners like S&P and 15 others that we have relationships with that drive trading in derivatives because you need an underlying benchmark for that. So we’re looking at new products across the board and also how can we help with the other parts of our business to create benchmarks to drive new products.

So these guys are in their seat only a few months for now. So it is going to take some time, but I think you are going to see a pretty robust pipeline of ideas for new products and then we will prioritize and pick our launches accordingly.

We’re not going to throw out 50 new things and hope something works. I mean, we’re going to pick our spots where there is real need in the marketplace.

Yes, then the last piece I'll build on that is what we really found positive, what you mentioned in terms of the launch of the single stock product is that we really proved out the hypothesis of when you've got a unique product and clients that have already expressed interest that there is a need in the marketplace for them and they are willing to partner upfront on the launch of that client of that product, you can build open interest in those volumes very quickly. And so that's proven out that hypothesis and that’s a formula we can reuse for other benchmark and other initiatives as we go forward.

Okay, great. Thank you, I’ll turn it over.

Hi, good morning.

Good morning, Graham.

So it sounds to me like you are pretty constructive on listings and you feel that listings in 2017 has good potential to grow versus 2016? That would be my first question.

And secondly, do you have any expectation on what sustaining fees could be up next year just given the market cap expansion that we saw this year for your listed names?

Yes, so on the pipeline we are optimistic. I mean obviously you can’t predict exactly who is going to come through, but as you've seen already at the start of the year we’ve had a couple of IPOs where they were in the pipeline for a bit of time.

They actually have come to market and done well and that’s a good sign and I think that sets the tone for lots of others. We do know there is a robust pipeline and assuming markets are cooperative with these entrepreneurs and then they will bring those business to market.

So, so far it looks like a good start to the year and then we’ll have to see how things progress through the year.

Yes, so in terms of the synergy we’re not providing guidance in terms of specific revenue guidance like that, but the pieces I would point you to from an indication standpoint, as we look at the overall market capitalization of the companies that compromise particularly the TSX, we ended the year at about $2.7 trillion compared to $2.3 trillion last year. So 19% increase year-over-year and while that won't necessarily translate into a direct increase across the board in the sustaining fees because a number of those companies cap out and you can use those as indicators as look at a lot of previous users as well to get some good guidance and then by Q3 you will know it from us, sorry now we have a Q1.

Yes, okay we will see you next quarter then, that’s fine. And I just wanted the Razor Risk sale just could you quantify what is the expected impact there both on the revenue and expense side of selling this platform?

Yes, so the – so Razor Risk because we've sold it December 31, there is a full year impact of it in the 2016 numbers. I am going to give you both the full year impact and the quarter impact in terms of you can use that as you want from a modelling standpoint.

In Q4 the impact of Razor Risk included in our results was fairly minor. It was about $1.4 million of the revenue in Q4 was Razor Risk and $2.4 million of the cost, so a loss in the quarter of about a $1 million.

On a full year basis we had revenue just under $6 million and expenses were about $12 million. So that’s in terms of what you would extract out of the business to model out those would be what you'd use.

Okay, that’s interesting. The AgriClear and Atrium, the impairments just $8.9 million is it safe to assume that Atrium was the bulk of that write-down?

Atrium was around just sort of $5 million of it. The rest of it was AgriClear and let me give you a context on both of them because there are different considerations there.

Atrium as we’ve talked about some of the businesses that we've determined aren’t the ones that we're focused on from a strategic growth standpoint, so we have revalued that business to basically reflect where it is from a strategic priority standpoint and that’ s how it was reflected it the valuation. But we do actually continued to have carrying value for that business.

So we soon expect to see revenue for it going forward. The difference on AgriClear is a little different that we did a restructuring of the organization in terms of where we manage AgriClear.

It was actually very down underneath our NGX structure and what we're doing with it is moving it out, bringing it into the organization at more of a center level. So we can get more synergy on our R&D efforts for new products like AgriClear and see if we can get some more lift in terms of the types of things we’re doing there and also our ability to reply it to others sectors.

So, we’re still very positive on AgriClear and what we can do with the model, but as we moved throughout the organization we did write-down some goodwill that frankly was attracted to it as we restructured our organization the year before. So this was goodwill that wasn’t generally didn’t buy the AgriClear business, but was allocated to it when we restructured at the end of 2015.

The positive impact in the change is that move actually allowed us to realize some tax losses that were created in that business over 2016 and by moving that business out from underneath where it was we were able to get those all in 2016 as opposed to differing them over what would have been I think three to four year periods. So there was some corporate reasons for us to make that changes and that's what you've seen reflected.

Okay and did that fall through at all in the tax return in the quarter or that was a separate issue?

In through the cash taxes in the quarter, yes.

Yes, okay and then I guess just lastly on the or actually on that Atrium is that still potential candidate for you to sell that platform.

You are offering to buy? Yes it is.

Yes, okay I just wanted to confirm it's still considered potentially non-core. Market Insights just the data analytics, I know there are initiatives there that you are growing, but you're also seeing some decline year-over-year in your subscriber base just a little bit of color there, how much of an offset do you think the subscriber decline year-over-year could be on growth in those data analytics initiatives?

I think Graham, the way to think about Market Insights now is thinking about all things together. So in market data what we are continually doing is adding more and more of the data we have across TMX into the data products.

And so, that’s you continually have more so in that. The second thing is, if you think about benchmarks, again I had mentioned that.

Previously both in equities and in derivatives and in fixed income and then there's the analytics piece. So, I think the way to think about that is despite what's happening with our client base around the world which is a reduced number of seats to sell through which impacts your market data, because of all new things we've done in that it still experienced the 5% growth year-over-year.

And so it’s not so much this new thing and that will generate something, but it's really what are we doing with the insights business and that data actually that's excluding Razor Risk by the way just for clarity. That data drives the use of analytics.

So we’re very focused on how to use our data for us to create analytics and for our clients to create analytics. So it’s very much thinking about the data that is evolving into more of a data mining, benchmark, and an analytics business and that’s the way we are were thinking about how we keep growing that despite what happens with subscriptions.

Okay, that’s helpful and should I still be thinking sort of end of 2017 is when you are sort of targeting to actually see some revenue impact or revenue growth impact?

Well, I think you are saying it. I mean I think that’s the point.

I think but yes, I think until we get, right now you've got a pretty good client base. It is about 60 paying clients already around the world for the new analytics product and there's a strong pipeline.

So, I think yes, that's still fair estimate on how that keeps growing through the year and by the end of 2017 we hope that continues, but so far you've got a very good start for that.

Okay, thank you.

Yes.

Thank you. Good morning.

Good morning, Paul.

So, we were just kind of continuing that conversation and I have to commend you on all the progress you've made over the last two plus years since you joined the organization, but just trying to get may be a better summation of what specific items you think will drive sustainable growth for TMX in 2017, 2018 and the years beyond?

Well, first of all, thank you Paul. I always appreciate a kind word.

I think as you look across the business and you've got to go piece by piece, when if you think about in the equity capital markets business and particularly in capital formation for example, the idea of us really growing and building an innovation franchise that will eventually rival what we've built in the resource world is a very important factor. But also as you expand internationally, you expand your resource base too because those are, there are a lot of companies around the world.

I know one big one gets a lot of attention, but there's a lot of companies around the world in Latin America as well as the Middle East that are looking to grow and we're a great market for that. So I think there is a potential of expansion as we treat capital formation as an aggressive growth market for us when we put people on the ground, when we build brand, we digitally market around the world, that’s not simply hoping someone comes and lists in Canada, that’s a growth engine for us.

I think in trading, in equities for example, you’ve heard some ideas we've put out there. We’re going to keep thinking about how do we trade more products, how do we trade more securities from around the world and we’ve got a proposed well for comment right now.

In derivatives we’re going to keep adding new products. We've got three products that drive an enormous amount of volume and a proprietary basis that only trade on MX, we're going to have more of those and that’s not unlike what you're seeing in other exchanges around the world like [indiscernible].

So lots of new products of growth and capital information around trading and then in the analytics world, I think you’re going to see us not just build analytics for trading which we've done, transaction cost analysis and understanding, trade flows, but also analytics that help people invest. So if you want to drive capital formation for example, one of the things that we want to help clients with is understanding these companies and there are thousands and thousands of small companies that aren’t covered by research, you guys don't cover them and clients have to try and make decisions.

And the only way do that is with having data, being able to mine data and being able to run analysis and create their own valuation metrics against that. So unlike, for example where you are looking at a company like [indiscernible] has gone out and spent billions of dollars buying information companies like IDC.

Well our focus is very much around building the analytics and the framework and the foundation to help people make investment decisions around data and do data mining at the same time that we have very ambitious goals to build business development capabilities in Canada and around the world for both existing the resource franchise and the new innovations sector. So right across our business we're very focused on how we grow all those pieces.

Okay, that’s good. That’s very helpful.

And then just in terms of progress with AgriClear, so I understand the nature of the restructuring, maybe you can just provide us a little bit more of an update in terms of how the revenue is progressing there?

Yes, well I mean to just build on what John said, it’s there's some, it’s not what we want it to be. And I think the way to think about both AgriClear and the moves we made is a way to think about us in the future too.

AgriClear was a start, is a startup still and in any kind of startup you need to make adjustments. So what we saw with AgriClear was very good uptake in some of the things that we thought would be more predictive metrics, like how many people have registered, how many visits for the site, how much inventory is on the site and that’s all there.

And as John mentioned, the model we still think is there. What we haven’t done when it was in a corporate structure was treated enough like a startup which means evolve, change, move quickly.

And so where it sits now is within the innovation lab called explore which you guys have heard us talk about before and we're tapping into things like going really sophisticated to customer journey mapping. We're talking very much with the client and the prospects.

We're engaging our student population through the academic network that we have. There are people that think about start-ups and no start-ups.

So we took it out of the corporate structure and put it into a supportive more of an incubation evolutionary plate and like our lab which is what we want to do a lot more. So, we want to be an innovation company not just a traditional trading company and that’s the way to think about it.

So there are some revenues, there are not what we wanted to be, they didn't match up to predictive metrics, but we still believe in it and we’re going to evolve it and I think now it’s really where it should be as a start-up and where it can get the kind of nurturing it needs and the kind of change that it needs.

Got it and then one final last question for me in terms of asset rationalization, so this made some progress this year with Razor Risk and then he has also highlighted Atrium. And really my question is, do you think in 2017 you’re going to push a little bit harder towards asset rationalization or is there anything that may be, made it less of a priority or just there wasn’t a market for the assets in 2016 or like what the pace of dispositions pick up?

I think the way to think about it is the non-core assets we've talked about, we mentioned Atrium and then Razor, it is now sold, but I think our focus is not so much on asset rationalization now as it is on asset utilization. And I think that that's the thing, when I talked about one of the strengths that we're just starting to tap into now.

I mentioned last quarter before we focused on for the first few years, we really had to get ready to be able to build and leverage all these assets and it’s important to understand that we didn't just cut costs last year. We really realigned our organization and got rid of redundancies, started to put assets together that can complement each other and that’s the only reason we could achieve the cost savings we did, otherwise we couldn’t have done those kinds of reductions.

So, now it’s now about how does the analytics team help trading in Montréal, right? How does that the business development team help listing around the world and so now it’s the leveraging of a diversified portfolio that we’ve always had, but we had to get it ready to leverage.

And I think that's a big win coming out of 2016 is that we’re ready to leverage that. So I think its utilization now, keeping with our discipline obviously of our cost management, but if we can leverage those assets across the portfolio that's something that’s unique to TMX and can be a driver of growth.

Okay, thank you.

Well, thank you everyone for joining us today. The contact information for media as well as investor relations is in our press release and we’d be happy to take questions through the day.

Once again thanks and have a great day.