TMX Group Plans an Institutional Digital Asset Layer Inside CDS, Passes on Tokenized Equities as Q3 Adjusted EPS Rises 21%
Q3 2026 earnings call, October 30, 2026: record revenue of $491.1 million, but BOX costs and a market share slip complicate the quarter
TMX Group used its third quarter call to lay out its most concrete thinking yet on digital market infrastructure, and the message was notably restrained. CEO John McKenzie said the company aspires to build an "institutional-grade digital asset infrastructure, integrated into a hybrid central securities depository," aimed at bridging traditional and decentralized finance. The target is not the tokenization of individual equities, which he argued would fragment liquidity in a market one-thirteenth the size of the U.S., but the movement of collateral and cash. The financial results were strong, with revenue up 17% to a record $491.1 million and adjusted diluted EPS up 21%. Reported diluted EPS fell 12% on non-cash fair value adjustments on FX hedges and acquisition-related FX movements.
Digital Assets: Collateral Mobility Before Tokenized Equities
McKenzie said TMX convened key industry stakeholders last month and has since built a road map around client pain points, which he described as "capital flows, payment flows, timing of payment, collateral mobility." The plan is to build digital capabilities in the clearing house alongside the existing CDS depository, so that TMX can clear and settle digital assets and also connect to networks such as the Canton Network. That would allow digitized collateral to be received into the system. CDS holds more than $8 trillion in custody, and McKenzie's logic is that the more of it that is digitized, the more mobile and efficient it becomes for clients.
The company is deliberately avoiding the more fashionable end of the market. Asked how TMX compares with the DTCC in the U.S., McKenzie said the technology partners and digital rails are very similar, but "the biggest difference is we are not at this stage prioritizing the tokenization of individual equities." His reasoning was blunt: tokenizing an existing equity "is essentially fragmenting liquidity into separate pools that don't integrate with each other," and TMX is mostly pursuing initiatives that improve liquidity and price discovery. He also said that multiple potential issuers over the years have considered a token offering instead of an IPO, and "every single time the choice has been to go to a traditional IPO instead," given the breadth of investor participation.
On cost, management characterized this as an evolution rather than a revolution. McKenzie said the spend is "investment, not material investment" and will sit within the existing run rate. He said the early part of the year was more research and the company has now moved toward development and scale-up as stakeholder readiness improved. The commercial payoff is not quantified and the timeline is vague, so investors should treat this as defensive positioning for a systemically important utility rather than a near-term earnings driver.
Prediction Markets and Extended Hours
TMX is not chasing prediction markets. McKenzie said there is "not a lot of room to move in things that are really experimental" under Canadian regulation, that binary products are not currently permitted, and that demand has been thin. He drew a firm line: "Our business is in the investing business, it is not in the gambling business." Any future product would be tied to economic or company indicators subject to transparent disclosure, and it ranks below digital innovation and extended hours in priority.
On extended hours, TMX submitted a plan to regulators to launch in spring 2027 on TSX Alpha, with trading from 7:00 a.m. to 8:00 p.m. Eastern and a 6:00 a.m. pre-open. McKenzie tempered the enthusiasm, saying extended hours are "not necessarily for everyone, and it is not without risk," citing lower liquidity, higher volatility and wider bid-ask spreads.
Global Insights: VettaFi Leads, Datalinx Benefits From Volatility
Global Insights revenue rose 26% in the quarter. TMX VettaFi grew 46% in Canadian dollars, or 44% in U.S. dollars, and 22% excluding $10 million from the nuclear sector indices and RAFI Indices. Assets under indexing ended the quarter at USD 309 billion, of which USD 211 billion is linked to RAFI. Management attributed the roughly 20% organic growth over the past two quarters to new indices, scaling of previously acquired indices across TMX's distribution network, and net new clients and products. McKenzie said some acquired index groups "have been 2xed" in a year or two. After quarter-end, VettaFi agreed to acquire the SPADE Defense Indices.
Datalinx revenue rose 31%, or 7% excluding $15.3 million from Verity and TMX Australia Exchange. Subscribers rose 5.7% on TSX and professional subscribers on MX rose about 10%. CFO David Arnold tied this partly to volatility around tariff disputes and said that if uncertainty persists, further gains are possible. He reiterated the long-term target of mid-single-digit Datalinx growth, which implies that the current pace is cyclical. On AI, both executives were candid: there is client interest in alternative consumption, but it is "not vastly pervasive yet," and McKenzie said TMX is "not seeing that in a material way yet."
Trayport revenue grew 8% in Canadian dollars, with annual recurring revenue of CAD 300.7 million, or GBP 159.8 million. Total license fees rose 5%, though a question about declining subscribers drew a shrug. McKenzie said the long-term trend is growth, that the same quarter last year showed similar trimming, and that renewals typically bring step-ups. Arnold added that it has been a while since TMX added premium products to the Trayport ecosystem and that this is a leadership focus.
BOX Costs and Share Loss Draw Scrutiny
The weakest part of the quarter was BOX. Revenue fell 3% on an 11% volume decline, and market share dropped for the first time in a while. McKenzie said a small team working on the pending MEMX Group transaction created "a substantial distraction impact," limiting client engagement, though he said share and volumes are already ticking up.
Operating expenses rose 35%, including $34.1 million of pass-through costs from BOX Exchange LLC, the self-regulatory organization in which TMX holds a minority interest and which operates on a cost-recovery basis. Of that, $25.9 million relates to acquisition and integration costs tied to MEMX and is adjusted out of earnings. The other $8.2 million reflects higher net pass-through costs for SRO services and is not adjusted, meaning it hits adjusted earnings. Arnold did not say whether the $8.2 million will recur. Excluding all special items and the BOX pass-through, operating expenses grew about 9%, driven by merit and headcount (4%), incentive compensation (3%) and IT costs (2%). TMX still reported 6% operating leverage for the first nine months.
Leverage Peak Lowered; Capital Return Stays Secondary to M&A
Arnold said that with BOX and MEMX voting and rollover percentages now set, leverage should peak at "somewhere in that 3.1x to 3.2x," below the previously flagged 3.4x. Debt to adjusted EBITDA was about 2.5x at quarter-end, or 2.3x net of $259 million in excess cash. The priority is returning to the top of the 1.5x to 2.5x range. The dividend was held at $0.26 per share, a 41% payout, near the low end of the 40% to 50% target range because capital is being deployed into acquisitions. The 2% normal course issuer bid is expected to continue, but execution depends on option exercise dilution and competing uses of capital. Arnold noted that the strong share price also makes equity a more usable acquisition currency.
Capital Formation and Trading
Capital Formation revenue rose 12%, with TMX Corporate Solutions up 17% on TSX Trust net interest income, dealer services and Newsfile volumes. Additional listing fees fell 2%. Year to date, capital raised on TSX and TSX Venture is up 96%, led by mining, with $9.2 billion raised on TSX Venture, up 68%. Nineteen issuers graduated from TSXV to TSX in nine months versus 7 last year.
Derivatives trading and clearing revenue rose 24%, with MX up 25% and CDCC up 21%. MX open interest hit a record of more than 39 million contracts, and ETF options open interest reached nearly 28 million. Equities and fixed income trading and clearing revenue rose 8% despite a 9% drop in overall equity volumes, helped by $1 million from TMX Australia Exchange and a favorable mix shift to TSX from TSXV. Combined TSX and TSXV market share was about 60%, down 1% year over year. Fixed income trading revenue was flat. Sequentially, revenue rose only 1% on softer volumes and seasonal TSX Trust AGM effects.
Australia and RAFI Integration
TMX Australia Exchange, acquired July 31, is skewed toward data rather than trading revenue, which Arnold said was the investment thesis because of recurring, sticky revenue. The first job is to exit the transition services agreement with Cboe, complete industry testing and cut over to TMX technology, and management does not want to distract teams with new products until that is done. Longer term, McKenzie pointed to ETF listings, corporate issuers, corporate solutions and VettaFi distribution as options. He said the "surprise" has been the breadth of opportunities, and the vision for 2027 centers on execution. McKenzie also said the TM2X program is on course to be delivered "well ahead of schedule," with the original "moonshot" now "the outcome, not the objective."