[Music] I'm Charlotte McLoud with investing news.com and here today with me is Richard Carlton CEO of the csse thank you so much for joining me great to have you here well my pleasure Charlotte really good to be speaking with you and what we're going to do today is take a little bit of a look back at 2023 and a look ahead into 2024 I know this has been a little bit of a difficult year for many of the early stage companies that we work with at investing news.com so where I thought we could begin is just by getting your


take on the health of Canadian markets trends that you've been seeing there well it's been an interesting Jud position if I can use that big long word uh through the course of the year in 2023 because we've actually seen a uh large number of companies join the Canadian Securities Exchange over the course of the year uh by the end of the year we will probably have listed in the neighborhood of a 100 companies which is down from last year's 122 but still uh looking back over the history of the exchange is uh pretty


darn good in terms of the number of new companies so what that tells me is that uh good projects good management teams are attracting Capital it's not easy we we know that but uh there are funds available and companies are able to raise that pre-public Finance now if you want to talk about the specific challenges though is that once they do list we haven't seen a lot of love from the investment Community yet uh for that cohort of companies that have joined the exchange say since 2021 um certainly the valuations have


been challenging um and of course as you know many of the companies are from the natural resources exploration sector in particular the battery or energy metals and uh many of these companies are actually working projects that were maybe first drilled 50 60 70 years ago and U in fact are generating some really encouraging results from their phase one and phase two drill programs the challenge for the companies is that they've not received much um uh asset appreciation from the markets so as they


continue to raise money to advance those projects they have to do so at levels that are quite dilutive to the original shareholders um so that is a really kind of a frustrating uh kind of environment for the management teams because yes they did win the lottery as it were they managed to get that pre-public Finance but once public as I say it's been very challenging for them to to build an audience and to uh see the value of the work that they're doing measured by an appreciating share price I I'm glad you brought that up


because that's the theme that I've definitely been hearing about and it really sounds like companies are kind of between a rock and a hard place where of course they want to raise that money and move forward but when they do they don't get the recognition so hopefully that's something that we see change in the near future I want to ask a little bit more about sentiment among CFC listed issuers and maybe if you could talk a little bit more about some of the conversations that you've been having with these these


companies well again what I just said is the uh is really the theme uh particularly from the uh companies involved in mining exploration um similar feeling in many respects from the Cannabis world too which is still an important part of the issuer community at the Canadian Securities Exchange um again a number of companies both in Canada the United States and in fact internationally are making real progress in developing their businesses and uh especially in the United States where we have some of the largest multi-state


operators which are listed on the exchange um they are taking advantage of more and more States uh legalizing adult recreational use of cannabis which opens up new markets for them and as time goes on of course they're learning how to work more and more efficiently uh in an environment where they can't consolidate their supply chains across uh state lines so um we we've seen tremendous uh sales growth uh from a number of these companies what we haven't seen is an appreciation in their share price and so


uh it the move M seem to be driven not by the fundamentals of a particular business but by the sentiment that's generated by potential changes to the status of cannabis at the federal level whether that's a rescheduling of cannabis from schedule one to schedule three which would have important tax advantages for the companies involved in the space or whether it's a progress on access to Banking and other Financial Services or obviously outright Federal legalization um any movement on any of


those fronts generates a tremendously positive uh reaction from the investor Community um who seem more focused on that than they do on the actual business fundamentals of the particular uh particular companies and again management is kind of frustrated by that because uh uh they should they are justifiably proud of the progress that they've made developing the business and they're just not seeing that reaction uh from from from the marketplace um it's also true that uh companies in and when


I say the techn ology space that obviously means a lot of different areas whether it's things that uh you know relate to uh blockchain or cryptocurrencies or artificial intelligence or uh data management uh uh applications and so on um again um and this is true not just in the Canadian Securities Exchange but really throughout U the public markets uh frankly in North America um again not a lot of turnover very difficult for man management to develop a following uh particularly in the retail space and uh


again not very attractive share price performance over the course of the last year and a half or so yeah really good points especially on what might make cannabis investors take another look at the market just to follow up there because we have an audience that's very interested in the mining sector what do you think ignites investor interest on that side because we have the gold price just historically high and you'd think that might help us but it doesn't really seem to be my pet theory is that really much of what we've


seen is tied to the rise in interest rates so I uh uh had our research team uh plot uh turnover uh on us and I think on some of the other exchanges in Canada against uh increases in the overnight rate and there's almost a perfect uh correlation or maybe it's a negative correlation I don't know I I didn't take that course in math but but what I'm saying is that as soon as the overnight rate began to go up we began to see lower and lower rates of retail participation in the markets and uh I


think the Catalyst or one of the significant catalysts will be regardless of the fundamentals of a particular business or area of the of the markets but will be uh signals from the central banks Canada the United States uh that interest rate policy is going to solve and I think you've saw that even just in the last couple of weeks in the uh in in the larger cap parts of the markets where the FED basically said okay yeah we probably hit the peak and now they're going to lower them uh Kicking and


Screaming um but I think there's a lot of smart money betting that interest rates will begin to come off as early as the first quarter of next year and I think there's a lot of reasons uh some of them economic some of them political that that is likely to be an accurate assessment um and I think that will be an important Catalyst uh for retail investors to begin to um uh pay attention uh to the uh to the space again um again it is a mystery to everybody in the mining space that uh we know that there is going to be a


tremendous increase in demand for copper or nickel zinc Cobalt lithium graphite and the various Rare Earth uh Metals um yet the underlying commodity price really hasn't begun to price in that anticipated demand and so yes uh I think as you see that you know again as as the commodity prices begin to appreciate that too uh will be I think a an important Catalyst and that may also be very well um uh correlated to the interest rates as well okay a lot of a lot of good points there and I think a mystery is a very


good way to describe it I want to touch a little bit more on some concerns that we see among the companies that we talk to and one of those is short selling I think companies see that impacting their share prices their ability to progress and I wondered if there are any comments you would share on that note well I think there's we we have a lot of thoughts uh We've obviously been working very closely with The Regulators uh over the last several years because uh you're absolutely right every one of


our uh issuers is concerned uh and probably believes that at one time or another they've been the target of of an organized to Short Selling campaign um and and and we've worked with The Regulators to try to identify to to shend some light on on the practices that may or may not in fact indicate that there is um uh inappropriate uh Short Selling because Short Selling is really part of the old liquidity profile like we know for a fact that when short selling is banned uh as it was for certain stocks during


the global financial crisis you saw an immediate collapse in liquidity for those names spreads got wider far fewer players were prepared to trade those names so you know Banning Short Selling is not the answer I mean what you're looking for is is reducing or eliminating predatory Short Selling or people taking advantage of of of of the rules and ways that the spirit doesn't in fact intend for them to to operate so I'd say over the last couple of years uh in in conjunction with The Regulators we


have identified some practices that they have I think quietly behind the scenes began to work with the dealers on and uh there have been a number of Papers written publicly I realize that's cold comfort for uh for our issuers who feel that they're really getting uh beaten up uh in the uh in the markets but I think um again we we we identified I think where the source of the issues are and The Regulators are watching they genuinely are and you will see some proposals brought forward one of the


areas that um it in in potential changes to the way the so-called buyin process is operated now I realize I'm getting into the back office here and uh your viewers are probably not all that interested what goes on uh in there but the way it works is that if you fail to deliver Securities again to to your counterparty who's showing up with cash um there is the ability for the Clearing House to basically ask for a buy it and what they do is they publish um uh a number of shares that are requ ired in


order to satisfy the shortfall that the seller uh had in delivering Securities to the buyer now and they do that they induce that by offering a premium to market for other people to come up with those shares so the problem is that in the United States a buyin is mandatory so on T plus2 you don't show up with the Securities you're going to get bought in and of course that thatth the premium that has has to be paid goes against your account so there is a distinct disincentive for the dealer to not um or


to there's a distinct incentive for the dealer to show up with with the stock on the day that's set for settlement uh in Canada it's optional and you know we do have concerns that in fact that optionality is being used to potentially facilitate the creation of Mer maybe significant short positions in certain companies and U you know facilitating the kind of activity that issuers are worried about the other concern that people have is the Canadian markets are not as transparent as they should be and so you


know here the Canadian Securities Exchange we're a startup exchange and one of the things that we knew right out of the gate that we had to begin working on was ensuring that our data was available on Reuters and Bloomberg and all of the different services that provide uh information on trading and Company fundamental data to all investors whether it's the professional trading desks the institutional investors portfolio managers and Retail investors that know basically are looking maybe through their online


broker or gaho or Google Finance to see what their favorite stock is up to at a given time um now the problem is in the United States it doesn't matter a stock could trade in a lot of different places the same is true in Canada hey your stock can trade um on on one of the TMX exchanges it can trade on NDA Canada it can trade on the thing called trade logic it can trade in the dark pool it can trade on CBO Canada it could trade on the csse the problem is not very many people have access to all of those data


services in the US they do and so what happens is if I'm running CSC listed company or company that's listed on another exchange and I can't see the trading activity that's happening in my stock I assume that somebody's up to something and I think better transparency A system that would in fact provide a Consolidated view of trading in the given name and show where it happened and at what price and in what volume uh would be an enormous step forward in rebuilding confidence in the


public markets so I'll get off my data so FX for a second but but again I think it's a genuine issue because again as we speak with the company management teams they Wonder maybe only 50 or 60% of the trading activity takes place on the CSC where's the other 40 to 50% they can't see it and that's a and that's a problem that we need to address yeah no I appreciate the level of detail I do think these are important issues to go through especially if if they're things that companies are asking


about and facing so thank you foring that every conversation is is along those lines yeah yeah and you know the other one that I think is a little bit connected to this that I wanted to bring up is algorithmic trading I think that we see companies asking about this they're worried about this especially you know with the rise of AI there's there's more conversations around that and I know AI is very exciting in some ways but algorithmic trading if you could if you had any thoughts that you


would add there well algorithmic trading is a term that covers a whole range of sins um so again like anything there's probably good algorithmic trading and then there is algorithmic training that might not be in the interests of the best interests of of the markets uh by and large uh every uh sophisticated uh participant in the marketplace is using Advanced Technologies to operate their trading systems uh think about U folks for example who are working uh the Arbitrage trade between Canada and the


United States uh again they're using a lot of computing power and some very sophisticated Network Technologies to sure that again if there's a different price available in the United States for the same stock in Canada and vice versa that that difference is eliminated almost immediately now we like that sort of trading because again it makes markets fairer and the activity of the Arbitrage uh uh folks uh actually deepens the market increases the liquidity uh improves price Discovery in many ways certainly Narrows the spreads


um so that's a that's a good thing um I think people will think about uh uh strategies which may not in fact U uh be in line with the accepted conduct in the markets um I don't know how often that happens uh understand that The Regulators themselves have extremely sophisticated surveillance technologies that are watching literally every message that's going into the market and uh uh again if you getting away with something trust me you're not getting away with it for very long um and uh you


know again again I don't by and large let let let me let me say that the application of technology to support trading on uh on balance is a tremendous positive uh and not something that we need to be uh you know worrying about that the that the house is getting burned down yeah and my apologies I know that was a broad question but I think it's a good way to ask it because you you bring in the Nuance of the good and the bad and see how they kind of Stack up together so again thank you for going


through that and so looking at at the markets you've done a great job of explaining the situation in Canada and among CSC companies what what is the CC doing right now to support companies during these times that might be a little bit a little bit tricky well many of the things that we've done uh from from the Inception uh we're going to be celebrating our 20th anniversary as an exchange uh next spr uh which is a uh tremendous uh uh achievement uh for the folks that uh many of we we have a number of folks


folks that have been here really from the beginning uh and to survive against the competitive onslaught of uh uh some very very large and well-funded competitors not just domestic but you know International and Global um was was really quite a uh uh an achievement for the organization and I think one of the things that uh really did set us apart is the level of customer service and insight that we bring to the table as we work with companies that they come into the markets and then as listed on the


csse so we do a variety of things around issuer education we do what we can to uh alert them to different opportunities to to raise Capital uh we've I've traveled extensively over the course of this year to anticipate where they're going and to try to help plow the road ahead of time um there's a good Canadian analogy for you uh but for example a few weeks back I was in Australia have a lot of companies that are raising capital in Australia and uh investment funds may have had some concerns or didn't really


know much about the csse well you we're certainly there to fill that uh that knowledge Gap and to U eliminate or assuage any concerns that people might have there in in some cases there are some arrangements that we can make with the local Regulators that reduce the friction and cost associated with potentially accessing capital and maybe listing in a in a foreign jurisdiction so those are the sorts of things that uh that we do um we have a uh as I say a number of events largely virtual at this


point uh they used to be in in person more more and more but uh again where we uh look to uh educate uh our issuer companies as much as possible on on a range of topics um and uh as I say we'll certainly continue that uh with Vigor uh into 2024 yeah and I think you've kind of started to go down this road already I was going of ask about initiative from the CSC in 2024 I know I think that this year the big one was launching that senior tier back in March so any any further comments you would add there


well it wasn't just about the senior tier um that was the first major rewrite we had our listings policies uh from inception of the organization so there were a lot of updates that we needed to make um and and working with our partners at the uh The Regulators principally the obar Securities Commission and the BC Securities Commission to uh you know address some concerns that they had had um you know we obviously brought a lot of learning to the table too so it wasn't just the creation of the senior tier you know


again looking to be able to handle companies throughout the full life cycle from startup to maturity essentially um but um again uh we we raised our initial uh listing standards we provided a lot more clarity and on the requirements for a variety of companies especially in the mining space um there are areas where we've increased the required distribution as in the number of shareholders that people need to have before joining The Exchange so really it was about us applying what we've learned


over the course of the last 20 years to try to provide a better public market experience uh for for for the issuers um we don't have anything quite so big or grand uh in the hopper for 2024 um we're certainly going to be implementing many of the uh components of of the new rules that working with issuers and the Auditors the investment bankers and the lawyers who support them to ensure that they best understand uh how to uh work with us in in this new rule framework um the other thing is we


will continue to work with our issuers to help them identify new sources of capital um Canadian issuers have really good access to the United States and U uh for prospectus exempt Capital even though they're not reporting issue in the US um so there are a number of avenues that you know potentially our mining companies and and others can access using their Canadian public uh uh company status and and so we'll be leading some seminars with the partners uh from from different parts of the uh


ecosystem to help teach to you know to provide the knowledge uh of potentially some of these some of these techniques so so those are the sorts of things that we'll be uh looking to continue to do in uh in in 2024 um it's worked so far uh and uh you know we we have an excellent pipeline of companies uh as we go over the year so I can tell you with pretty fair assurance that uh q1 and Q2 next year are going to be pretty solid as well um and if we do get a bit of an interest rate U uh decrease as I say I think be the


pipeline will fill in in F very good and I think connected to that we of course have a strong Canadian audience unsurprisingly but we do have Global Investors who are looking at our website and one question that we get from them times is you know if I am from a different country how do I invest in these companies that are listed in Canada on the CC for example so briefly you know any any thoughts on that for investors yeah that's a question we get a lot or uh as well um there there are two ways um actually three ways now that I


come to think of it if you're a bigger investor uh Canadian brokerage firms will open an account for you and um uh unless you're from the United States in which case they probably won't because of the uh uh know your client and any money laundering forms that have to be filled out uh as well as potential registration with the Securities and Exchange Commission in the United States but for non us uh investors as I say large investors will always be welcome at a Canadian brokerage firmed open the account um it


is uh uh something that we have been working on again from from our Inception 20 years ago or so is on building that range of of International Dealers who who provide access uh we have a list on our website so www.th CSC do.com and uh the Brokers that do in fact cover the uh uh The Exchange uh internationally and U again we hope to be adding to that list the other way which is kind of back door but it is actually for many people very successful is we have about five or six companies which are interlisted with


NASDAQ or on NASDAQ and so just about everybody around the world has access to NASDAQ and so those companies and and again those uh uh companies are identified on our website uh the csc.com um the uh rest of the companies are quoted on the over-the-counter markets in the United States and many of those issuers are actually on the QX and the QB which are for call them the regulated boards if you will and many investors have access to those names internationally now they trade under different stock symbols it'll be a five


character symbol and making the letter F which denotes foreign Security in the United States but again many inv s will have a US dollar account uh which means and and of course the companies are trading in US Dollars on the OTC in the United States um and uh as I say the vast majority of our companies are there uh and because of the crossb Arbitrage opportunities there's usually quite a deep book and a fairly significant amount of daily turnover uh in uh in the NS that uh are listed on the CC so


that's the other place that people should look uh when they're trying to uh trade CSC names and in fact that's probably the most likely way or the easiest way for many people to do so okay very helpful so if if people do want access to these companies there's a very good chance that they'll be able to get it all right as we're finishing up here I want to ask if there's any final thoughts that you would share with investors heading into 2024 and perhaps we can talk about if there's any areas


of strength that you see in in the markets well I think uh again as I said we have pretty good 3 to six month uh look ahead in terms of the applications that uh are under review uh with the issuers or from the issuers at this point and uh I would say that the one thing we know for sure uh is that uh critical minerals are continuing to be funded uh by uh investors and they pre-public round um so again and and again these projects uh wide range of uh of metals uh in a in a wide range of places um but if I had to say that there


was a particular theme uh politically reliable is are the are the two words that keep coming out so you know and and in fact we're probably maybe only at this point talking about Australia United States and Canada um and maybe a couple of other jurisdictions but but that is going to continue to be a theme uh into uh 2024 uh for sure um again I think as you see interest rates begin to come down uh my suspicion is that we will see a broader range of companies from the technology space uh also seek


public funds and uh because again it's been pretty tough and and public capital's been fairly expensive with interest rates where they're at um so again as we start to see better share price performance and some more liquidity um again I would expect many companies which have been on the threshold maybe for a year and a half two years at this Point actually do decide to to take punch so there's potential uh for 2024 to be in fact a very strong year uh for the public Equity markets in particular and for the


CSC specifically okay I think that is a great place to wrap it up so thank you so much for coming on to share 2023 Trends 2024 Outlook really good to speak with you thanks again my pleasure of course and once again I'm Charlotte McLoud with investing news.com and this is Richard Carlton with the CSC thank you for watching if you like this video make sure you subscribe to our Channel we'd also love to hear your thoughts so leave us a comment below we'll see you next [Music] time