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TMX Group increases Q1 net income by 23 per cent on higher trading volumes

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TORONTO - TMX Group Ltd. (TSX:X), the operator of the country's largest stock market, is reporting a 23 per cent bump in profits as trading and clearing volumes picked up during its latest quarter.

The owner of the Toronto Stock Exchange, the TSX Venture exchange, Montreal derivatives market and other securities bourses earned net income of $46.4 million, or 86 cents per share, in its first quarter ended March 31. This compared with net income of $37.8 million, or 70 cents per share, in the same quarter a year earlier.

"We are extremely pleased with the company's operating performance this past quarter across all of our businesses," CEO Thomas Kloet said in a statement on Friday.

"In particular, there was evidence of some turnaround in market activity, which translated into increased additional financings on Toronto Stock Exchange as well as higher cash, Canadian derivatives and energy markets trading and clearing volumes."

The earnings came in slightly below analysts estimates, which was $47.7 million, or 88 cents per diluted share, according to data compiled by Thomson Reuters.

The Toronto-based company said the restructuring of its long-term debt, which started last year, along other cost savings, helped it boost first-quarter profits.

Its adjusted earnings per diluted share was $1.05, excluding acquisitions and other costs. That's up 35 per cent from 78 cents in the same quarter last year.

Revenue for the quarter came in at $182.1 million, up six per cent, from $172.2 million in the same period of 2013.

Even though the first quarter showed higher trading volumes, the TMX Group has long been dealing with either flat or declining number of new companies listing on the Toronto Stock Exchange.

The company has also focused its attention on a number of new ventures, including improving its global footprint, as it readies for more competition with the arrival of a new exchange, Aequitas Innovations Inc., later this year.

Aequitas, which is backed by Royal Bank (TSX:RY), BCE Inc. (TSX:BCE), Canadian pension fund PSP Investments, and a number of Canadian and international brokerages, is awaiting regulatory approvals and is aimed at tackling abusive behaviours related to high-frequency trading (HFTs).

TMX Group is also in the midst of some executive changes, as it prepares for the departure of Kloet at the end of August.

Kloet took the reins at the stock exchange in 2008, shortly after the completion of its merger with the Montreal Exchange and as the industry headed into a period of widespread consolidation.

Earlier in his career, Kloet was the CEO of Singapore Exchange Ltd. where he oversaw the integration of the country's stock and monetary markets, as well as the initial public offering of Singapore Exchange shares. TMX Group announced it planned to open an office in Singapore later this year.

Under Kloet's guidance, the company has already expanded with offices London, New York, Sydney and Beijing and more than doubled the number of international companies listed on the TSX.

It is also recently signed an agreement with the Zhengzhou Commodity Exchange in China to better understand its business and explore the possibilities of co-operation.

TMX Group said the deal gives it an opportunity to gain new perspectives and explore collaborating further with the Chinese firm.

In March, TMX Group announced it was expanding into the private sector with a new business aimed at helping Canadian startups raise money, and eventually go public.

It billed TSX Private Markets as a way to give registered dealers access to access to private firms that are looking to secure key capital in the early-to-mid stage of their development. The service will be overseen by TMX subsidiary, Shorcan Brokers Ltd., along with a registered exempt market dealer.

"Well if you think about what we do, we bring a public visible forum for buyers and sellers to meet in a marketplace and I think bringing that to private market companies would be very beneficial. We're hearing that from them," Kloet said in a call with analysts following the company's results.

Follow @LindaNguyenTO on Twitter.

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