Theralase Technologies Inc. V.TLT

Is TSXv just an options exchange or just a joke

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An interesting story has been unfolding quietly, yet in plain view of all Canadians, with regard to the Vancouver Stock Exchange, after having operated for over 90 years, as reported by Vancouver History, in 1999, with the introduction of the home internet service provider, 10 years earlier, in 1989, as reported by Indra, seems noteworthy. The "scam capital" exchange lasted about 10 years once all investors had equal access to information.

The Canadian Venture Exchange, now called the TSX Venture, exists, 17 years after its creation, with many companies on "artificial life support" and described as the "walking dead" that "should not continue to be listed," by Business Vancouver. The TSX Venture Composite Index (JX) is down more than 40 percent since its inception in 2003 and more than 80 percent from its peak. By comparison, the NASDAQ Composite Index (differences between options and penny stocks are discussed by Reddit users.

Given that there are hundreds, if not thousands, of companies on the TSX Venture exchange with charts that resemble charts of options, the question begs to be asked: If the TSX Venture Exchange was renamed an Are many of the no-sales, no-earnings penny stocks trading on the TSX Venture Exchange actually options in disguise?

First, unfortunately, renaming the TSX Venture Exchange to an options exchange would not create a marketplace free of pitfalls for investors. However, it would shore-up many. An elderly couple could no longer be pitched an investment in shares in a fraudulent company with a Peruvian claim; and unless the elderly couple specifically asked for access, they would not have access to options issued by such a firm.

 

"Circa 1955: An exchange official hard at work at a trading post on the floor of the Toronto Stock Exchange." [Photo by Evans/Three Lions/Getty Image]

 

By insisting that companies with no revenues, no earnings, or other flaws sell only options, and not stocks, stock market regulators would be putting up a clear warning flag for the average Canadian that says, "Hey, this investment is probably going to zero," while still allowing what seemingly few legitimate junior companies there are to have access to capital.

An examination of the Toronto Stock Exchange and TSX Venture indicates a number of smaller companies with revenues and profits trading on the junior exchange, while, perhaps puzzlingly, a number with no revenues and no profits trading on the senior exchange.

A seeming common-sense idea might be to only allow shares of companies with trailing 12 month revenues of some amount (perhaps $500,000) to trade on the Toronto Stock Exchange, and those with less to be classified as options, and listed on the TSX Venture Exchange. Currently, companies must have net assets of $7.5 million and pre-tax earnings of $200,000 to be eligible to list on the Toronto Stock Exchange. Alternatively, other variations of this formula worth consideration might include earnings minimums.

In addition to removing a seemingly huge creator of motive for nefarious acts from Canadian society, conceivably, creating this new perpetual options playing field, with a higher level of disclosure for investors, could allow a greater number of small companies to raise capital by participating in securities offerings, and an increase in trading activity.

[Photo by Evans/Three Lions/Getty Images]