TMX Group Limited (X) Earnings Call Transcript & Summary

Good morning, everyone. I'm very pleased to welcome John McKenzie, TMX' Chief Executive Officer, to our conference. Thanks for being here, John. We really appreciate it.

It's our pleasure. Thank you.

Now John, you were named CEO or at least the permanent CEO just before this conference last year. Can you share with us how your tenure has been like so far? And what are some of the challenges and wins that you've had over the past year?

Well, I appreciate starting there, and I will correct you as I'll call myself the full-time CEO because I think permanent needs some big room for someone else to do it next. So in terms of what I set up for the next successor. It's been an extraordinary time to take on this role to be candid. With everything that's going on in the environment, very much when I came on in the interim role even beforehand, we had to quickly pivot to remote working, working through COVID and the last 12 months particularly has been almost a renaissance in capital markets for our markets in terms of trading activity, retail engagement and the strongest listing activity pipeline I've seen in the last 15 years. So it's been an extraordinary time to work in the organization. And I think the real win goes to the people that have showed so much resiliency and the ability to step up in different circumstances and continue to serve clients in both a remote working model that we didn't test in the past, but also in the heaviest backdrop of activity that we've seen in the last 2 decades. So I'd say that's the biggest both surprise in terms of the engagement and resiliency, but the silver lining on everything we've been through.

No, John, you -- prior to taking on the full-time CEO role, you were Chief Financial Officer, and TMX has gone through a very large evolution through your tenure, both CEO and CFO, where you transitioned from what was essentially a regional exchange to basically a very large global competitor. What was the thinking of the management team and the Board in terms of making this transformation? And what did you see that made the switch so attractive?

When it comes down to it, it's really about how you broaden out the business and ensure that it's resilient in all different types of markets. And while the Canadian economy is so important to the globe, being overly tied to it is just -- it's a single point focus. And you would historically have the investor or participant view that being Canada means you're also just about resources and things like that. So it's a real deliberate effort to grow globally and recognize that while Canada is our home address, the globe is the addressable market, and that's what we're going to drive long-term growth. So we're about 1/3 of the revenue today that comes from outside Canada. We've also been deliberately driving into more run rate recurring revenue sources as well. So as we bring in new business, it is more in that subscription-based business model and building out that geographic footprint. And as we talk later in terms of our priorities going forward, they will build on that in a more international participation, make access to the Canadian markets easier, so we can bring capital into Canada and bring those great Canadian companies to investor eyes around the world.

Well, and John, I'd like to touch on that because growth for your organization has been a focus. Can you reiterate the growth targets that you've set out on your Investor Day? And what are the key areas of focus for the company? And I guess what are the areas that you see as the strongest runway for growth?

Yes, it's a great question. So we called out those growth targets. And I always reminded these are our targets, not guidance.

Not guarantees?

Well, we look to grow the overall firm at about mid-single digits on the top line and really capitalize on the operating leverage we've got to deliver double-digit return on EPS to the investor. And where we see those biggest opportunities for top line growth are in the areas of the business where we see room for white space expansion, either because we can expand the client base, both domestically or geographically or really expand the service offering and provide a deeper relationship with clients. So in terms of the businesses themselves that, that translates into, our Derivatives franchise, which historically has grown about 10% a year, we still got a lot of room to grow in terms of products and services and global reach, and that's when we should be able to continue to grow at that high single double-digit growth rate. Our data and analytics business, particularly Trayport, with its European presence, we've got the room to expand that globally as well. Again, more geographic coverage, more products and services. We've grown that since we acquired it at double digits, we should be able to continue to maintain that kind of growth rate, high single, low double digits. And then the other interesting one for continued growth is our Capital Formation business. So the Toronto Stock Exchange, the TSX Venture Exchange, which you know from history, is a really unique model in the world that we can take companies at a junior level and grow them with the franchise. That's an area we look to grow that piece at about mid-singles over the long term as both we expand the number of companies we serve and the market values. But we've also got the services side that's becoming much more important there. These are things like TSX Trust, the acquisition we're doing of AST, that's being more meaningful. And we expect to grow that services side at double digits. So those are kind of the highlights of the big growth areas. You can't really take your eye off the ball on some of the more mature really cornerstone parts of the franchise, like trading and clearing because if we don't do those well, we can't drive growth in other parts of the franchise. So they are all equally important, but that's where we're going to get the top line from.

And John, now this may be a bit unfair because you don't have a super long tenure as CEO, but has there been any priorities that have changed during your tenure? And is there any new areas that you might actually want to add to your priority list to, I guess, propel growth going forward?

I mean the biggest piece is -- and as CFO beforehand, I was part of the architecture of the strategy that we built. So I'm very much deeply committed to those growth areas. I'd say the change of the priority since taking the role has been in how we look to grow. So we are looking to lean further forward and see if we can stretch those growth targets. And you'll see in how we're performing these days that we are exceeding that direction. So we are looking back at the full portfolio to see where can we accelerate growth beyond what we've committed to in the past, and that's something we'll communicate more in the future. The other pieces with that is a real step into ensuring that as an organization that's global, but also a real Canadian franchise that we're working hard to advocate for the strength and competitiveness of the Canadian markets. So we are more active now in terms of our engagement with regulators, our proposal for streamlining, our proposal for reform because if we can make Canadian markets more competitive, that again will help us to serve more public companies, bring more investors in and grow the whole franchise. So that is something you'll see us lean farther forward on than we have in the past.

Fantastic. Now I know you mentioned that your growth targets are guidance -- sorry, they're not guidance, they are truly targets. As we sit here today after very extraordinary capital markets that we've seen over the last call for 12 months, are there -- how comfortable are you with your targets of the medium term? And what macro environments may generate either tailwinds or headwinds to your guidance?

So on the initial piece, we are very comfortable because they are long-term targets, and I always guide investors is you get to look through some of the cycles. One of the areas that we have had headwinds in the past year, particularly has been around some of the derivative product because some of the derivative product has been in a short-term interest rate environment, there's not as much liquidity in them, but we need to look longer term out in terms of what does a normal interest rate regime look like, what does it look like when we have a broad suite of interest rate products, we move more global, so that we are comfortable still in that long-term growth aspiration of high singles and double digits. So across the board, we're very confident and the interesting piece of our business has always been that there is diversity in the mix. So when there are market conditions that say are more challenging for capital raising, they can often be very strong for derivative trading. And so there are some natural offsets in the portfolio and some resilience in the business that way.

Now as we -- as the pandemic evolves and we move towards a return to office, where does TMX sit in terms of its own return to office plans? And also, I guess, propelling from that is what lessons have you learned from the pandemic? And what can you actually apply to that going forward if and when we actually do hit a more normal operating environment?

Well, I would say right off of that, that we were either very -- had a very good foresight or we were lucky. And I'll take some of both.

It was planning.

We did have really good systems and capabilities set up pre-pandemic to work remotely. So we had already moved most of our workplace on to cloud-based systems. We had automated a lot of the front-end relationship with issuers to do new issuer filings. So we're in a really good spot to go virtual. And at this point, we've still got 95-plus percent of our staff working remotely. The only full-time folks we have on site are ones where the job really requires it and can't be done remotely. So in the interim phase, we're going to continue to use our physical space on a voluntary basis for people to use. We want to really keep health and safety upfront, so the folks that have to be on site are comfortable, they're safe and they can do those jobs properly. And in offices where we can, we are now kind of testing back a new hybrid workplace. So we've actually already gone live with it with our London office, which has mostly our Trayport folks in a pure hybrid model, more team space, more hoteling, more hybrid in terms of days in the office days out. And that's where I expect that we will go broad-based, but really not until the new year. We don't need to be at the front end of people coming back because we can work so much so effectively remotely. It allows us to follow a bit, learn from others' mistakes or things that went well and reapply it. But that's the model we expect to go to as much more of a hybrid model, and I would see it happening in the new year, all things are on the current trajectory and -- but you never know what happens with the next wave.

Exactly. And John, leaning back into your former role as CFO, what does the spend on technology look like moving forward? And I think it's very interesting for TMX Group considering how much technology is a strategic role for you, not just a way of reducing expenses?

Yes. And it's very much run rate for us. So the -- it is baked into our current run rate. We continue to reinvest in all of those systems. We've got some big tech spends that we're working our way through right now, which is a replatforming of the clearing systems, which we hope to have complete next year. We've been modernizing our equity trading systems at the same time, really taking the learnings from the early part of the pandemic in terms of the levels of volumes that we're now seeing in the market, the amount of liquidity and volatility, so ensuring the resilience there. But it really is within the run rate of what you should expect to spend. It's where we prioritize going forward. And even in terms of supporting remote work, we are spending more in terms of remote solutions for staff, but we're spending less on sending people on business travel and conferencing. So it is essentially a bit of a wash from a spend standpoint. And for us, not material as it would be for some other organizations. The bigger question long term around the spend is going to be as we run off some of these big tech reinvestments like the post-trade piece, opportunity to generate new savings that we have in the past. And then when we do get to a new state of normal, what does it do to real estate footprint and were able to create some new efficiency there that we didn't have in the past. And those are to be determined still.

Okay. John, I think -- and taking a step back and ask a bigger picture question, if I may, let's assume that your current role is permanent CEO and 10 years from now, you're presenting at our conference again, how would you like TMX Group to look at that stage -- that station again?

I mean, that's where I want to be seen as a true global player. We are doing, as I said earlier on, we are growing into that today, about 1/3 of the business outside of Canada. But I'd like to see TMX being a majority business outside of Canada with a really strong important role to play with inside. We're continuing to drive growth in data and recurring revenue businesses as well. That's about just over half of our revenue today. Again, that's another one we want to push forward. So I'd like to see that a bigger part of the franchise. And I think those 2 things are the natural organic transitions of the company as we continue to grow. And when you project out a number of years, you can see what it looks like. So more than half the business from outside of Canada, continuing to grow in terms of more recurring revenue sources, really transitioning away from that legacy trading business to much more of a subscription and a solution business to the clients.

And then John, in terms of the globalization of TMX Group, can you remind investors what percentage of your revenues are actually coming globally? And what have you done and what are you going to do to attract more global revenues?

So it's about 1/3 today from outside of Canada, very much driven by -- the biggest piece of that is our GSIA, our Global Solutions, Insights and Analytics space, which is both Trayport, which is European based, and also our more traditional market data business which has about more than half of it coming from outside of Canada with international clients. On that, and then even within the trading businesses like derivatives, like equity trading, as much as 40% to 50% of that flow in those businesses actually comes from international clients. So a number of things we're trying to do to grow that through the organic means is we are looking to build out Trayport globally. We have some beachheads that we've got in the U.S. market to continue to build that out in that market, and we're always looking at other geographies to add to the platform. We are expanding out our derivatives offering to an Asian time zone trading, I think actually, with just in a number of days now. So we've already moved live on U.K. trade time zone, and we're looking to launch on Asia. So that will again bring more international players, more international customers into the platform. And on Capital Formation, Capital Formation, we are one of the #1 exchanges in the world for listing international companies, and that is a continued and purposeful sales effort we're going to continue to do to keep adding new international companies to that mix. So those are 3 of the vehicles we've got. But in all parts of our franchise, it's looking about how do you bring more global customers in as opposed to relying only on what we can do domestically?

John, and you touched on a couple of things. It's interesting. How do you try to diversify yourself -- and sorry, not diversify, but compete with other exchanges and other entities that are trying to go through because from -- you've done an absolutely fantastic job of transforming the business. But when -- unfortunately, when investors are still thinking with TMX Group, it's more -- it is still looking at the traditional business, the Canada focused. And I don't believe investors give you enough credit. So how do you compete against some of your global peers?

Well, I agree with you on that point. So let's build off that. You got to compete from where your competitive advantages are. And that's why I actually raised earlier, what a lot of investors don't recognize in our -- even in our exchange model, the fact that we have TSX Venture and TSX that Canada being a smaller country, we still have 3,000 issuers, which makes us one of the largest issuer markets in the world. And we are able to take an issuer at almost a micro cap level where in the U.S. market, by example, NYSE or Nasdaq, they don't have the regulatory or the market framework to do that in a public market. And this was a market that was built out of junior resources, but we've reapplied that to things like junior technology. And now the big area of growth there is in small-scale tech businesses. And then once they come on exchange, they can do multiple rounds of capital raising, they can graduate to the senior market, graduate to be an index company and be with us throughout their whole life cycle, and we can build that relationship with other products and services around it. So that is a unique competitive advantage for TMX, and that's one that we'd lead with to compete with globally. The other piece that on the trade side of the business is we do have unique and proprietary products. So when we are out selling globally, yes, there are other fixed income index products that other global futures markets have. But if someone is looking to get exposure to the broad-based Canadian index or the Canadian fixed income complex for either their hedging strategies or their speculation, we've got the only products that do that global. So again, leading from the competitive advantages of what we have got, that's unique and then do that on a global basis.

That's great. Wanted to dive in a couple of your businesses specifically. And honestly, one of the ones that you mentioned a couple of times that's very exciting is Trayport, the European Energy and analytics platform. This is acquired, I believe, in 2017. Can you give investors a quick overview of the business? And why is it so important to energy traders?

One of the fine ways I find it easiest to get investors to understand it is to think about it almost as the Bloomberg for energy commodities. What Trayport does is it brings together disaggregated pools of liquidity onto a single screen. So when a German power distribution point is trading on a number of brokers and a number of exchanges, Trayport is the only place where you can see the entire market for that product on a single screen and execute it either with a broker that you're tied to or with exchange and to clearing house. With the markets that we serve today, which are primarily and mostly European, 88% to 85% of all the flow in those markets goes through a Trayport screen. And so if you are coming new to market and you want to see pricing on any of these products, you really need Trayport to get that. So that's the product itself. And then what we do with it in terms of continuing to drive growth has been focusing on where is the growing demand in the energy market for product. And so in the last couple of years, it's really been around the globalization of natural gas. So as liquid natural gas is a more transported commodity, you need pricing indications in Europe from U.S. and vice-versa. And so there are a number of products that have been great growth products in there like gas in Europe, the Japan Korea Marker that marks gas on the Asian coast, those have been great growth products, and they bring new traders into the platform. Similarly, with the shift in the power mix to more renewable sources. So Europe, I'd say, is fairly ahead of North America in terms of the shift to renewable power. But when you are shifting to more renewables, it changes the way people trade. So now they need to trade in the spot market more than the forward market they would have in the past. And that means different demand for tools, and we've been adding products and services to support that. So we have an automated trading product that we acquired through acquisition, integrated into the platform to really support the needs of those spot power traders. So that's really the drivers of the growth that we've enjoyed with Trayport so far and really focusing on what the market needed. And as we continue to go forward, we are looking at that twofold approach to growth. So where are the markets and geographies we can continue to expand the product into but also what additional services can we provide on top of it that are a premium and benefit the client base. So we have an analytics product now that we sell as a premium on top that we developed in-house. And we've recently acquired a business called Trade Signal, which is an advanced charting tool that we integrate into Trayport, and we will provide that to the clients, both across the Trayport network. But candidly, we'll also see what we can do with more traditional TMX market data as well.

Well, it's interesting because last year, energy markets were a little bit chaotic. And I know that Trayport, as you said, is a model to be more of a subscription based. But how much do the macro markets impact the business? And I'm just curious if healthy energy markets have positive implications for clients and will ultimately add to greater revenue solutions?

Yes. When we were early in the pandemic, our biggest concern around the, as you call it, the chaos and the energy markets was, what would it do to client health because as you said, it's -- for us, it's a subscription model, it's based on how many traders a client has, it's not a regulated business, so everything is on a client-by-client enterprise agreement. So it was really about client health and we saw really strong usage of Trayport through that. So when markets are disrupted and they are more volatile and more fractured, a Trayport solution becomes more important. And as markets go forward and the energy mix keeps changing and becoming more complicated, a Trayport solution becomes even more important. And so that's the approach to continue to take. We actually all through the pandemic, had new client sign-ons, where we actually had new clients coming on to drive. We had material renewals where clients would resign with us for multiple years and commit to the product. So the importance of Trayport and their solution was only highlighted during the pandemic. It wasn't lessened. And the interesting piece with that as we go forward is we're actually continuing to expand on the usage of Trayport on kind of what I'll call kind of other either ends of the energy mix. So we've got new deals with brokers to bring refined oil on the platform because refined oil, I mean, other than the big contracts at WTI, they tend to be brokered product and Trayport can provide some aggregation in that space as well. On the same side, flip side, in the more renewable side, we're looking at where we can do renewable credits, voluntary credits, things like that to augment what we're doing in both power and renewable power. And so the solution is agnostic, and we can put product across it, depending on what the client needs are and we continue to stay relevant to what the clients need to trade.

And John, I think earlier this year, you announced the acquisition of Tradesignal. Now my understanding is the financial impact is not particularly material, but what was the strategic rationale for this acquisition?

Yes. And it was very much about client needs. So clients needing to have advanced analytic and charting capability. And that's why actually, I often use Bloomberg as that reference point. Bloomberg has that capability for fixed income for clients. We needed that capability for energy for our clients. So we knew Tradesignal for a number of years. We actually co-sale a product in some -- with some clients already. So we knew it worked well with our system. And so this was about rather than build something ourselves, let's take the best on the market, integrate it into the JUUL platform. That's our Trayport screen, and then get broad-based distribution on it. So as you said, it wasn't -- it's not a huge business as it comes in. It's probably contributing about $1 million quarter top line to us, but we've got the ability to expand it across the entire network. So really, it's kind of like almost an organic -- inorganic piece where you buy something small and then scale it up for the franchise. And as I mentioned earlier, it has some really great capabilities that we also don't have in other parts of TMX. So we're going to be looking at what can we do with that Tradesignal product for advanced charting around equities, derivatives, fixed income, other parts of our franchise. So it's a unique asset. They've got a very smart team based in Germany, and we're really happy to have them part of the organization.

If we can move on to the Derivatives platform, Montréal Exchange, which is the only Derivatives platform in Canada. The low interest rate environment though, has been a bit of a headwind to the operations. Can you give us a sense as to what the near-term outlook is for the platform?

Yes. The interesting thing is that low rate environment because it's had a negative effect on really the products like the BAX, that's a short-term future product. It's actually overshadowed some really strong growth in other products at the same time. So well, that's a big product. So when you see downturn year-over-year, it can mask where we're seeing really strong growth in equity options, single name futures, both single stock futures and ETF futures and some additional products that we've been adding that have created growth across the curve. So one of the things we've been very consciously doing, particularly around fixed income is building out a yield curve. And so historically, we only really had 2 material products. We have that short-term back future and a 10-year Government of Canada bond future. We relaunched a 5-year couple of years ago. That's now a meaningful product in the mix. Earlier this year, we launched a 2-year product, which has about 8,000 contracts a day now trading in it. We're going to be bringing out a 30-year product as well. And what that does is it helps to make the business less reliant on just a short-term product for a single product. And it allows clients to trade across the yield curve in all kinds of different rate environments. So that's what we're trying to make the business do, work better across different rate environments, and it sets us up for growth going forward. So when you go forward, not only do we have a broader product suite to bring to the client base, but when rates return, we can trade all across that curve. So again, it will support that strong growth potential. And I always like to remind people in the rate regime that both the positive and negative of COVID is we've got a lot more government debt coming to market in the near term in terms of how everything that's going to be funded from COVID spending gets done. There's going to be a lot more new cash market debt products that we'll be able to create derivatives on and that's going to support the market for the next years to come.

And you mentioned earlier about extending the trading hours for Europe is online now, and Asia knock on wood in a couple of days. How much do you think that's going to drive incremental trading? And what do you envision the ultimate mix for Canada versus international trading on the platform?

Yes. So we take our benchmark and our target from what we've seen in other international exchanges do and what their success has been. So folks that have gone before us who have done this have seen 15% to 30% of their flow come from those aftermarket hours. So once we launch Asia, we'll be trading essentially 21.5 hours a day. We're doing about 6% of our flow through just the European time zone trade right now. With that similar objective to our peers, which we'd like to see 15% to 30% coming from the broad aftermarket trade. And the Asian piece is really important to build this out because right now, there are clients or potential future clients in Asia who are looking for international exposure, but you've got to make it easier for them to come to Canada. And we always need to recognize that we can't just build it and people will come, that Canada is a smaller market, only 2% to 3% of the global GDP. If we don't make it easy for a global trader to trade us, they will simply trade the U.S. by proxy. And so moving to their timezone trade, making clearing streamlined, ensuring we've got market makers in the after-hour recession so that the market is liquid when they come to market are all key to launch, and that's why it's taken us some time to do it because we want to launch the market, we want it to be a full service market that can meet those needs, and they can trade Canada quite easily. When we go live, John, we'll go live with those biggest Canadian products that give the best exposure to Canada. So the S&P equity future that backs short-term money market future, the 10-year government bond, those will be the primary products that we launched with and that was a strategy that we did in Europe as well that was very successful.

Yes. You mentioned, I mean, the interest rate products your focus, but you did mention you have some S&P/TSX futures. Are there other noninterest rate derivatives that you'd like to highlight that have maybe not necessarily got the attention but are still good products for the exchange?

Yes. So early stage, we've done -- we've actually got 1 very strong single-name futures business, which has been tried in other marketplaces with less success, and we've actually had some really good uptake on it. One of the reasons it's really interesting is because when you can put a future on an ETF, you can react very quickly to a market demand for an exposure. So when -- and we are the only markets in the world to have ETFs on things like Bitcoin. Well, we now can provide a future exposure on that without creating a unique futures contract around Bitcoin because we got the underlying to work with. So single-name futures has been a good growth area. We've also recently launched ESG futures on the S&P Composite in 60 to give that different type of ESG-based exposure for investors that are looking for that. We've got a dividend future product as well that we are building out. So there's all kinds of unique ways that we're providing new futures exposure on the equity complex to meet different client demand. So it has been an area that's been strong for growth for us.

Well, that's really interesting. When you approach product development, what actually drives the decision-making? Is this top down? Is this bottom-up clients demanding this? Or do you look to see what is there and which you can build off of? I mean, how does the product evolve on your platform?

Everything that we bring to market is based on client engagement. So it is based on those direct dialogues with clients in terms of what problems they like to solve, what would they like to be able to trade for different exposure. There's 2 different ways to look at it as well. So in cases like the large fixed income futures products, we are looking at what's got deep liquidity in the OTC space. So we know on the 5-year, the 2-year, the 30-year, that there's a market there and people will trade it there and trading it over the counter. And if we can standardize those products and build liquidity in it with good market makers, we can transition that to an on-exchange product. And the way we've done it is by partnering with brokers to build a liquidity in it because there's -- they need to be partners in the success because they are moving business they would have otherwise done OTC on exchange. So that's been a really important business building strategy that's successful in the 5, we're doing it on the 2 is having big bank brokers that are partnered in it. They actually share in the upside, and that helps build that sustaining liquidity early on in our product. What we don't want to do with the product is what I call the spaghetti against the wall approach, where we just throw things up and see who uses them because that's not a way to drive success. And if a product is out there and it doesn't get used, it's not going to get traction later on either. So it's always driven by client on that.

Fantastic. If we can switch to the Capital Formation. The business has seen great momentum over the last year, but it's also been -- that follows a couple of years but slower growth. What's been driving this momentum over the last 12 months? Is this a catch-up of activity? Is it the SPAC boom? What are you seeing from your seat?

So early in the pandemic, I would have said it was more around balance sheet financing and catch-up because the -- in 2019, the early part of 2020, we were very long into the curve of companies doing a lot of debt financing growth on low-cost debt, and we hit the pandemic with companies already being highly levered. And so it was an expectation as we would see some catch-up on balance sheet refinancing equity capital back into the organization, things like that. The really positive surprise and it comes off in years of developing the pipeline is the number of companies that are doing new public offerings. And that's been the piece that's been the real story in this is that over the past 12 months, we've seen more IPO activity, highest level in 15 years and broad-based. So not particularly 1 sector or another, it's been strength in innovation companies, it's been strength in mining, it's been in industrials, so across the board. And I think it's a combination of a number of things, is when some large companies can get successful deals done, it is the blueprint then for other companies to follow and test the market. And the market conditions that have continued through COVID in terms of strong valuations and strong liquidity have made it possible for companies to continue to come and launch new public offerings. With that, when you back test what kind of aftermarket support they're getting in the secondary, most companies are outperforming their IPOs. So they've got a real strong investor base then in terms of future financing that goes with it. So our team right now that works on new public issues continues to be flat out. We've got a full pipeline and a full calendar still. So at this point, I don't see when this will abate.

That's very good news. John, ESG has become very topical and it only seems to be ramping up even further. You mentioned that you offer an ESG futures product, but is there anything else that TMX is doing in terms of the ESG sphere that might be of interest to investors?

Yes, 2 things I'll raise really quickly. So first of all, I'll encourage anyone to look at our own sustainability report that's on our website. We are working to be an ESG leader ourselves. And so we think that the right example that we set for public companies is actually how we conduct ourselves as a public company. So look to some of the commitments we've made there as well. But the other piece is that given our relationship with so many issuers, we do see the rules in terms of helping our issuers navigate their ESG journey. Top 200 companies know how to do this already. But as I said earlier, we've got a lot of small cap companies as well that may not have the same resources. So we've got an ESG 101 program that helps train and mentor companies in terms of how to navigate ESG disclosure. And we've recently launched in partnership with IHS Markit an ESG reporting portal really designed to make it easier for issuers to report against the number of different frameworks that ESG investors are looking for, be it a SASB, TCFD, or other ratings frameworks that are out there in the marketplace. So the idea being is if you create with a portal, if you report a piece of data, once you can use it across multiple framework points. And so that's what the big piece that we're trying to do is simplify disclosure for issuers so they can navigate and get their data in the hands of the investors that need it. Because the biggest challenge in the ESG world is no standards on information, a lot of screen scrape data, not as timely. So those are the things that we are trying to solve with that type of solution.

Fantastic. John, we are bumping up against time. So I'm going to close with a discussion on capital, if I may. TMX historically has done a fair amount of M&A, has paid a dividend but recently announced a repurchase plan. What are the expectations for cash flow usage going forward? What are the priorities? And can we anticipate that your M&A machine will continue?

Yes. So it is a twofold priority, which is we are absolutely committed to continuing to grow the business. And from my commentary right at the front in terms of accelerating our growth expectations, we do have that balance sheet and cash flow capacity to do that. So I think our debt today is about 1.8x, which is actually below our target range of 2 to 3. So we've got a lot of flexibility to do smart transactions to accelerate growth. The challenge in the marketplace is finding those opportunities that actually create value for shareholders and are not so overpriced in sellers' expectations that we destroy value. So people should expect us to remain disciplined in terms of how we execute. We have actually just closed our AST transaction. That's going to be a really good one for the organization to drive growth in the capital formation space. And at the same time, we do want to continue to grow and value that return to shareholders. So our target dividend of kind of 40% to 50%, given that we are targeting long-term growth in the double-digit range, it's a good indicator of where we see the dividend growing. We are kind of at the low end of our range right now, so we've got room to do more despite the fact that we increased 10% in the first quarter. And our buyback program is -- I think of it as a piece on top of that. So it actually helps bring our total return to share -- or payout to shareholders from kind of 40-ish to 60-ish percent. It's only a 1% buyback program. So it is not the #1 piece of our capital structure. And it is more designed to offset equity option dilution as to be a meaningful return of capital, but it does have that vehicle as well. So it's a dual strategy, continue to grow the return to shareholders and reserve capability within our balance sheet so that we can continue to act on things that can accelerate growth like AST, like Trayport before that.

John, that's fantastic. It was a fascinating discussion, and thank you very much for joining us today. We really appreciate it.

My pleasure. Thank you so much, John.

Okay. We'll talk soon.