What TMX Group (X) Said on Its Q3 Earnings Call

Key Points

• TMX Group delivered record Q3 results: Revenue rose 17% year over year to C$491.1 million, while adjusted diluted EPS increased 21%. Growth was led by Global Insights, derivatives, capital formation and trading, with nine-month organic revenue up 13%.
• Derivatives and capital markets activity remained strong: Derivatives trading and clearing revenue increased 24%, while capital raised on the TSX and TSX Venture Exchange nearly doubled in the first nine months, driven largely by mining financings.
• TMX is investing in expansion while managing costs and leverage: The company is developing digital post-trade infrastructure, has proposed extending TSX Alpha hours in 2027, and expects leverage to peak at 3.1–3.2 times after pending transactions. Acquisition and integration expenses drove much of the 35% increase in operating costs.

TMX Group TSE: X reported record third-quarter revenue and continued double-digit organic growth, supported by gains across its Global Insights, derivatives, capital formation and trading businesses. Management also outlined plans to expand its digital-market infrastructure and pursue extended trading hours on TSX Alpha, while continuing to integrate recently acquired businesses.

Chief Financial Officer David Arnold said total revenue reached a quarterly record of C$491.1 million, up 17% from the third quarter of 2025. Adjusted diluted earnings per share increased 21% year over year, although reported diluted earnings per share declined 12% because of non-cash fair-value adjustments on foreign-exchange hedges and acquisition- and intercompany-financing-related foreign-exchange movements.

For the first nine months of 2026, revenue rose 16% from a year earlier, while organic revenue increased 13% after excluding certain recent acquisitions. Adjusted diluted earnings per share for the nine-month period increased 25%.

Global Insights and derivatives lead growth

Global Insights revenue increased 26% in the third quarter. TMX Datalinx revenue rose 31%, including contributions from Verity and TMX Australia Exchange. Excluding C$15.3 million from those acquisitions, Datalinx revenue grew 7%, driven by subscriber growth, usage-based revenue, co-location services and data feeds.

TMX VettaFi revenue climbed 46% in Canadian dollars, or 44% in U.S. dollars. The result included C$10 million from the nuclear sector indices and RAFI Indices acquisitions. Excluding those contributions, revenue increased 22%, which Arnold attributed to growth in assets under indexing. Assets under indexing ended the quarter at $309 billion, including $211 billion linked to RAFI Indices.

TMX Trayport revenue increased 8% in Canadian dollars and 7% in pound sterling, led by an 8% increase in recurring revenue. The business ended the quarter with annual recurring revenue of C$300.7 million, or £159.8 million, as licensee growth, data analytics revenue and annual price adjustments offset lower non-recurring consulting fees.

Derivatives trading and clearing revenue at Montréal Exchange and Canadian Derivatives Clearing Corp. increased 24% from the prior-year quarter. Montréal Exchange revenue rose 25% and CDCC revenue increased 21%, as derivatives trading volumes grew 23%.

Chief Executive Officer John McKenzie said activity in Canadian interest-rate futures remained strong, with the Canadian rate agreement contract posting 39% year-over-year volume growth in the first nine months. He also said Montréal Exchange set records during October, including nearly 28 million contracts in ETF-options open interest and more than 39 million contracts in overall open interest.

Capital formation remains active

Capital formation revenue rose 12% in the quarter. TMX Corporate Solutions revenue increased 17%, supported by dealer services, net interest income at TSX Trust and higher press-release volumes at Newsfile. Sustaining listing fees increased on both the Toronto Stock Exchange and TSX Venture Exchange, while strong listing activity on TSX supported initial listing fees.

McKenzie said capital raised on TSX and TSX Venture Exchange increased 96% in the first nine months from the prior-year period, led by mining-sector corporate financings. TSX Venture issuers raised C$9.2 billion during the period, up 68% year over year. Nineteen issuers graduated from TSX Venture to TSX, compared with seven in the first nine months of 2025.

Equities and fixed-income trading and clearing revenue increased 8% in the third quarter. While overall equity volumes fell 9%, equities trading revenue rose 9%, aided by a C$1 million contribution from TMX Australia Exchange and a more favorable mix of volume toward TSX from TSX Venture. Fixed-income trading revenue was unchanged as higher Government of Canada bond activity was offset by lower credit and swap trading volumes.

Expenses reflect acquisition and integration activity

Operating expenses increased 35% in the quarter. Arnold said the figure included C$34.1 million of higher costs associated with BOX Exchange LLC, including about C$25.9 million of acquisition, integration and restructuring costs largely tied to the pending MEMX Group transaction. Those costs were adjusted from earnings.

TMX also recorded C$32 million in additional acquisition-related expenses, including C$18 million of integration and related costs for recent acquisitions and the pending MEMX transaction, C$11.8 million of operating expenses associated with acquired businesses, and C$2.2 million of additional acquired-intangible amortization.

Excluding acquisition-related items and higher BOX Exchange pass-through costs, operating expenses rose about 9%, primarily reflecting staffing and merit increases, higher performance incentive costs and increased information-technology spending.

Digital infrastructure and market expansion priorities

McKenzie said TMX is working with dealers, custodians and other industry participants on digital infrastructure intended to address capital flows, payment timing and collateral mobility. The company’s early focus is on integrating digital capabilities into its existing post-trade framework, which includes more than C$8 trillion in custody.

He said TMX’s priority is not currently the tokenization of individual equities, citing concerns that doing so could fragment liquidity in Canada’s comparatively smaller market. Instead, the company is focused on collateral mobility, fixed-income assets, payments and other capital-efficiency uses. McKenzie said the investment required is expected to fit within TMX’s existing spending envelope and represent an evolution of its capabilities rather than a major standalone investment.

TMX has also submitted a proposal to Canadian securities regulators to extend TSX Alpha trading hours beginning in spring 2027. The plan would run the trading session from 7 a.m. to 8 p.m. Eastern time, with a 6 a.m. pre-open. McKenzie cautioned that extended-hours trading can involve lower liquidity, greater volatility and wider bid-ask spreads.

On capital allocation, Arnold said TMX expects leverage to peak at roughly 3.1 to 3.2 times following pending transactions, below the previously discussed 3.4-times level. The company aims to return to its long-term leverage range of 1.5 to 2.5 times. TMX held more than C$495 million in cash and marketable securities as of Sept. 30, including about C$259 million above its regulatory cash target.

The board approved a quarterly dividend of C$0.26 per common share, payable Nov. 26 to shareholders of record on Nov. 13. The payout ratio was 41% for the quarter, within TMX’s stated target range of 40% to 50%.

About TMX Group (TSE:X)

TMX Group operates global markets, and builds digital communities and analytic solutions that facilitate the funding, growth and success of businesses, traders and investors. TMX Group's key operations include Toronto Stock Exchange, TSX Venture Exchange, TSX Alpha Exchange, The Canadian Depository for Securities, Montréal Exchange, Canadian Derivatives Clearing Corporation, TSX Trust, TMX Trayport, TMX Datalinx, TMX VettaFi and TMX Newsfile, which provide listing markets, trading markets, clearing facilities, depository services, technology solutions, data products and other services to the global financial community.

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