John McCoach: Market drivenThe B.C.-based president of the TSX Venture Exchange is eyeing international expansion from the country's west coast
On a clear day, John McCoach has an expansive view overlooking the downtown peninsula and English Bay from his 27th floor office in downtown Vancouver's Scotia Tower.
The air is particularly pristine the day after New Year's, creating a spectacular vista of dark blue water and baby blue sky stretching across the Strait of Georgia to Vancouver Island.
There's a serenity from such a perspective that's not lost on the president of the TSX Venture Exchange (TSX-V) , who marks his fifth year in the role. The markets have been especially volatile in recent years.
The TSX-V index dropped roughly 30% last year and nearly 50% over the past two years as bad global economic and political news continued to rattle market confidence around the world.
The impact has been especially hard on junior companies, particularly miners, which have had difficulty raising additional capital.
But despite the challenging times, McCoach remains confident about the future of the TSX-V, which has gained increasing international recognition as one of the world's best junior capital markets.
It's taken nearly two decades for Canada's national venture capital market to attain its position as a viable competitor with international exchanges for new listings.
McCoach noted that despite the challenging market, companies have continued to raise capital from their venture listing (see "Investment capital continuing to flow to B.C.'s junior companies" – BIV issue 1211, January 8-14).
The venture exchange's strong reputation is a polar opposite to what existed in Vancouver 15 years ago. After decades of investment scams and scandals and untold millions of dollars in losses for investors, the Vancouver Stock Exchange (VSE) was weighed down by its reputation as "Las Vegas of the North" and burdened by unscrupulous penny-stock promoters.
By the late 1990s, the VSE's board of governors determined that something had to be done to fix it. McCoach, who at the time was a corporate finance executive at Yorkton Securities, was asked to join the VSE's board and in 1998 was involved in a brainstorming session at the Mandarin Hotel downtown (now the Metropolitan Hotel). Among the ideas tossed around was merging the VSE with Alberta's stock exchange (ASE).
But that idea didn't last long.
At a dinner with ASE board members at the Westin Hotel in Calgary, McCoach recalled that the idea was off the table within half an hour.
"The board of the Alberta Stock Exchange felt it was the VSE coming in and trying to take over the exchange and they were not interested," said McCoach. "The board was very proud of their exchange, even though it was a much smaller market, but they felt Vancouver was the one on the ropes so [they said], 'Why would we want to be taken over by you?'"
Negotiations with the ASE progressed only after the merger was discussed as part of a plan to create a national venture market. McCoach noted that many exchanges were spending millions of dollars upgrading their technology. By 1997, for example, the TSX had closed its physical trading floor to become a purely electronic exchange. McCoach argued that rather than have each regional exchange invest in its own technology, it made more economic sense for them to share the same platform.
"That's what we focused on, and it came together incredibly quickly."
McCoach joined the VSE's merger steering committee, and within a year the Canadian Venture Exchange (CDNX) launched trading junior stocks from the VSE, the ASE, the Winnipeg Stock Exchange and the Canadian Dealing Network and equities from the Montreal Exchange.
The CDNX's success attracted market attention and a couple of years later, the TSX closed the acquisition of the junior exchange and renamed it the TSX Venture Exchange.
McCoach said the combination of improved securities regulation, more robust trading policies and standards and the merger with the TSX all contributed to the venture market's improving reputation.
"Today, we ask a lot more of our customers [listed companies] than other exchanges around the world. Other exchanges don't require their listed companies to file stock option plans annually or file submissions to get approval on what would be relatively small acquisitions for a big company or have the same level of reviews of financing. But we feel that's what gives the market for early-stage companies credibility for investors."
Market credibility, after all, is something that McCoach took for granted when he made his first stock pick back in the late '70s. After graduating from Port Coquitlam secondary school (now Terry Fox secondary), his younger brother suggested he invest in Mitel, an emerging telecommunications company that was growing rapidly at the time. He also decided to buy some silver bullion around the same time after talking about gold with a bank teller one day.
"Just by dumb luck, they worked out very well for me."
That profitable foray into the markets led him to a career in the industry. It started at West Coast Securities, a small family-owned brokerage firm, and was followed by a two-year stint as the VSE's supervisor of market surveillance.
His job was to monitor the markets for trading anomalies and insider trading. While market surveillance today is highly technical and involves high-powered computers and complex algorithms, McCoach's job involved a lot of phone calls and running around.
"You still had computers that produced reports based on certain parameters related to the price of a stock, but you were also monitoring a series of cameras that displayed different sections of the chalkboard on the trading floor. I would be going up and down to the trading floor all the time."
While surveillance officers today might find suspicious patterns on a computer screen, McCoach would be monitoring computer-generated reports and CCTV screens to see where traders were congregating on the trading floor.
"It was a pretty cool place to be," McCoach recalled. "I felt I had learned a lot about trading and what was going on in the market."
Following his stint at the VSE, he spent the next 16 years at Yorkton Securities before joining the TSX-V as vice-president of listings in 2003.
Gordon Keep, executive vice-president at Fiore Financial, who worked with McCoach at the VSE and at Yorkton Securities, noted that McCoach's strong compliance background and his ability to adapt have served him well in his career, especially at the venture exchange.
"I have to give him a lot of credit. He's adaptable, being able to take his compliance mind and address it in a full business model for the exchange. He's done a great job. He treats everyone with respect, and I don't know anybody out there that hates him, and for someone in his role, that's a compliment."
Today's markets might be rough, but McCoach remains focused on improving the venture market's efficiency and appeal. When he first joined the TSX-V a decade ago, he didn't think he'd stay longer than a couple of years. But the market's improved reputation and its subsequent benefits to listed companies have kept his interest and passion.
"As a career highlight, I really do feel this is the best job I've ever had."