TMX Group Limited (NYSE: X) Q4 2022 earnings call dated Feb. 07, 2023
Corporate Participants:
Paul Malcolmson — Vice President, Enterprise Sustainability and Investor Relations
John McKenzie — Chief Executive Officer
David Arnold — Chief Financial Officer
Analysts:
Nikolaus Priebe — CIBC Capital Markets — Analyst
Geoffrey Kwan — RBC Capital Markets — Analyst
Etienne Ricard — BMO Capital Markets — Analyst
Graham Ryding — TD Securities — Analyst
Jaeme Gloyn — National Bank Financial — Analyst
Presentation:
Operator
Good morning, ladies and gentlemen, and welcome to the TMX Group Limited Q4 2022 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Tuesday, February 7, 2023.
I would now like to turn the conference over to Paul Malcolmson, Vice President, Enterprise Sustainability and Investor Relations at TMX Group. Please go ahead, sir.
Paul Malcolmson — Vice President, Enterprise Sustainability and Investor Relations
Well, thank you, Michelle, and good morning, everyone. I hope that you and all of your families are staying well and safe. Thank you for joining us this morning for the full year and fourth quarter 2022 conference call for TMX Group. As you know, we announced our results late yesterday and a copy of our press release is available on tmx.com under Investor Relations. This morning, we have with us John McKenzie.
Operator
[Technical Issues]
Paul Malcolmson — Vice President, Enterprise Sustainability and Investor Relations
Good morning, everyone. We understand that there was perhaps a technical issue. So we’re just going to repeat, apologize if there’s a little bit of repetition, but we do appreciate you joining us this morning. As usual, we have with us John McKenzie, our Chief Executive Officer; and David Arnold, our Chief Financial Officer. We will have a question-and-answer session following their opening remarks and just a reminder that certain statements that we make today might be considered forward-looking, and we refer you to the risk factors that are in our press release and also reports that we filed with the regulatory authorities.
And with that, I will once again turn it over to John.
John McKenzie — Chief Executive Officer
Thank you, Paul, and again, our apologies for the technical challenge to start off the day. I’m going to wish everyone a Happy New Year for a second time. So if it wasn’t a good one to start already this morning, we hope it’s better now and wishing you the best to you and your families in 2023. So my comments this morning, we’re going to focus on TMX Group’s performance in 2022 and some of the key strides we made during the year to accelerate our strategy and advance the evolution of our company to meet the needs of stakeholders throughout the Capital Markets ecosystem here in Canada and around the world.
And then David will join us to discuss our fourth quarter performance in detail in just a few moments. So there’s no secret, 2022 was a tumultuous and difficult year for a broad spectrum of our client base and stakeholders across the markets that we serve. Geopolitical events and macroeconomic conditions, including soaring interest rates, escalating inflationary pressures negatively impacted a wide range of industries and people across our communities. And these factors also had an adverse effect on Capital Markets activity and stifled economic growth.
And while some of these challenges persist into the early weeks of 2023, we do have good reason to be optimistic. Over time, our ecosystem has proven resilient through all conditions in terms of the market cycle and world events and the fact that Canada’s markets are the best in the world, deep and diverse, fair and transparent and innovative and responsive. And I want to take a moment to extend my sincere gratitude to all of our clients and stakeholders across the globe for your crucial contributions to this track record of success. Your partnership is the key enabler, pushing the growth and continued evolution of TMX’s exchanges and venues and the broad ranges of services we provide.
Now turning to our performance; TMX delivered positive results in 2022. Overall, revenue grew year-over-year despite decreased Capital Markets activity compared to a record setting in 2021. TMX reported revenue of over CAD1.1 billion, a 14% increase from 2021 due to higher revenue from Derivatives Trading and Clearing, Global Solutions and Insights, including Trayport and TMX Datalinx and Capital Formation.
The increased revenue included CAD118.5 million in revenue from BOX consolidated in January 2022, of which 52.1% relates to a non-controlling interest and reflected contributions from recent acquisitions, including CAD33.6 million in revenue from AST Canada inquired in August 2021, CAD3.4 million from Trade Signal acquired in June 2022, and CAD1 million from Wall Street Horizon acquired in November of 2022.
Increased revenue was also partially offset by lower Equities and Fixed Income Trading and Clearing revenue due to lower trading volumes on Toronto Stock Exchange, TSX Venture Exchange and Alpha. And excluding revenues from the consolidation of BOX and recent acquisitions, revenue was down slightly, 2% from 2021. On an adjusted basis, 2022 diluted earnings per share was CAD7.13 in 2022, a slight increase from 2021. And total operating expenses increased 21% compared to 2021 or a 4% increase excluding expenses related to BOX, AST Canada, Trade Signal and Wall Street Horizon.
Now, in addition to environmental factors and economic conditions, historical context is important discussing TMX’s 2022 results. 2021 was a record setter in some of our key performance measures including capital raising activity among our listed issuer client base on Toronto Stock Exchange and TSX Venture Exchange. In 2022, under extremely difficult circumstances, TMX’s deep and diverse business model performed extremely well. And we made significant progress in executing our long-term strategy to achieve sustainable growth and build stronger for the future.
Now moving to the individual business areas; revenue from Capital Formation in 2022 was CAD261.2 million, a 1% increase from last year, reflecting the inclusion of revenue from AST Canada and higher revenue from sustaining fees. The year-over-year increase was largely offset by lower revenue from additional listing fees due into a lower number of financing transactions and decrease in dollars raised on TSX and TSX Venture. Higher interest rates and inflationary pressures and increased volatility weakened those capital raising conditions in 2022.
And despite these challenges, though, our public market ecosystem has again proven resilient and the entrepreneurial spirit of our issuers and doers [Phonetic]. While the number of new listings was down from near all-time highs in 2021, we continue to add new companies to our ecosystem and the number of listings has grown for a seventh consecutive year. Although IPOs garner all the headlines, they are not the only way to join our markets. In fact, most companies choose a different vehicle to go public in Canada. In 2022, we welcomed 257 new listings to our market via other means, including 71 additions to TSX Venture Exchange’s Signature Capital Pool Company program.
This past year still ranks among the strongest on record since the program’s inception in 1986, and it stands as powerful evidence of the appeal of the program in all market conditions. Overall, CPCs accounted for 32% of new TSX Venture listings in the past 10 years. And while these constitute smaller-sized, entry-level transactions, small companies grow into big companies. And this is what sets Canada’s markets apart. We do better than anyone, anywhere else in the world. TSX Venture Exchange is the foundation of our powerful two-tiered marketplace and a proven growth accelerator.
In fact, 22% of the S&P TSX Composite Index are TSX Venture graduates. And we have embarked on a collaborative stakeholder-driven initiative to ensure the public venture market remains a key differentiator and a competitive advantage. Venture Forward kicked off in the summer of 2022, canvassing the interconnected community of entrepreneurs, investors, financiers, lawyers and advisers to identify priority near and longer term marketplace challenges. And we plan to announce next steps in the first half of this year, including identifying priority areas where we can work together with our stakeholders to affect a positive change and potential tactics.
Now in all conditions, we continue our efforts to expand our global listing franchise with business development campaigns targeting growth companies that fit the profile of our markets and regions throughout the world, including the U.S., Europe and South America. Canada’s markets are the 10th largest in the world by market capitalization. But TSX and TSX Venture combined rank number 2 in new listings and number 2 in new international listings amongst global exchanges through September 30, according to data from the World Federation of Exchanges.
In addition to this solid performance relative to our peers in a tough year, our TSX and TSX Venture teams remain closely engaged with the deal-making community. And we have a number of go public prospects, companies across a range of sectors in our near-term pipeline poised to join our markets when conditions normalize. And with that, our long-term pipeline for new issuers remains extremely robust.
Now I’d like to turn to derivatives. Excluding BOX, revenue from Derivatives Trading and Clearing was CAD142.8 million in 2022, up slightly from 2021, driven by a 10% increase in revenue from CDCC due to higher REPO dealer activity and fee changes. The increase was partially offset by a 4% decrease in revenues from Montreal Exchange, reflecting termination fees related to a market-making program and retroactive client billing credit as well as a slightly unfavorable product and client mix. Total volume of contracts traded on MX was up slightly compared with 2021 and overall open interest grew substantially in 2022, up 18% at December 31 compared to the end of 2021.
Investors continue to seek out derivative instruments to manage exposure in their portfolio through the turbulence of 2022. While sustained volatility across equities and fixed income markets had a negative impact on volumes traded in some of MX’s core products, including the BAX contracts, we saw strong year-over-year growth in equity futures and options. Some of those key highlights included 18% growth in volumes traded in equity options, reflecting increased activity from institutional and retail investors in the energy and financial sectors; 43% growth in volumes traded on ETF Options highlighted by record activity from institutional investors across broader index, financials and energy sectors, and 14% growth in volumes traded in Index Futures.
We also saw a significant growth momentum in MX’s Government of Canada bond future contracts during 2022 as they continue to gain in profile among global investors. Volume increased 126% in the CGZ or the Two-Year contract and 28% in the CGF or Five-Year bond contract when compared to 2021. Now moving to Global Solutions, Insights and Analytics, or GSIA, revenue was CAD360.1 million, a 4% increase from 2021, reflecting higher revenues from Trayport and TMX Datalinx. Trayport revenue grew 5% or 12% in common currency, pound sterling when compared to 2021, driven by a 16% increase in trader subscribers and annual price adjustments. Continued efforts to expand the depth of trading tools, insights and solutions across the core Joule Network has enabled Trayport to provide essential support for energy market participants and navigating severe volatility.
Trayport added to its dynamic set of features and functionality in 2022 with the signing of a partnership agreement and acquisition of a minority interest in Ventrix Limited, a cloud data technology company that offers a platform for data acquisition, integration and business intelligence. The Ventrix solution has augmented the trading experience for its growing client base. And Trayport has added more than 30 new clients in 2022 in core and new growth areas as new market entrants seek to connect to execution venues and clearing houses across world power and natural gas markets.
Trayport’s global diversification strategy also made continued progress in 2022, pursuing opportunities to move into new asset classes and geographies. One example, the Voluntary Climate Market, a collaboration with IncubEx, launched last year to facilitate trading in the physical voluntary carbon market. The TVCM platforms offers carbon offset projects from five of the leading offset registries, which are tradable with live bid and offer through Trayport’s Joule platform. And while still in the early stages of building this new market, we added several newbuild clients during the second half of the year, and we are working alongside IncubEx to bring additional liquidity to platform in the future.
And same with GSIA, revenue from TMX Datalinx was CAD202.7 million, an increase of 4% from 2021 due to revenue from data feeds, co-location, analytics and price adjustments. These increases were partially offset by lower revenue from usage-based quotes, benchmarks and indices. As reported, TMX Datalinx revenue included CAD1 million in revenue from Wall Street Horizon, a Boston-based company we acquired in November 2022. This acquisition represents another step forward for the TMX Datalinx team as we expand to enhance the content we provide to clients around the world.
Wall Street Horizon is a leading provider of global corporate event data sets to traders, portfolio managers and academics. The company covers 9,000 publicly traded companies worldwide, offering information on more than 40 event types, including earning dates, dividend dates, option expiration dates and more. TMX continues to pursue new ways to expand our Information Services business and to connect our global client base to the information they need to make a competitive advantage.
So we kicked off 2023 with a strategic investment in VettaFi Holdings, which includes a new commercial agreement. VettaFi is a U.S.-based privately owned data and analytics, indexing, digital distribution and thought leadership company. And TMX acquired approximately 21% of the common equity of VettaFi for $175 million. Our investment in and partnership with VettaFi enables us to increase the depth and value of data-driven insights we provide to clients, enhance our digital capabilities and enrich our leading support for the ETF issuer community.
These recent initiatives and investments build on TMX’s information assets and expertise, they increase our global footprint, and they accelerate our enterprise growth strategy. And it is no surprise TMX is an innovation story with a proven track record and proud 170-year history at the forefront of industry progress. And the expansion of our Information business is the next step in the evolution of TMX and in executing our long-term and sustainable growth strategy. Now in addition to all that, we have a strong balance sheet.
We have smart, dedicated people working together with a purpose to make markets better and empower bold ideas, and we are committed to executing and seeing it through. And so in closing today, I want to sincerely thank our people for bringing TMX’s corporate purpose to life in a way they do every day. And now one person in particular that I’d like to thank today and take a moment of acknowledgment for the contributions of an important member of our team and a familiar voice on these quarterly calls since TMX became a public company in 2002.
As many of you already know, Paul Malcolmson, TMX’s Vice President, Enterprise Sustainability and Investor Relations, is retiring on March 1. Now, it’s hard to believe that this is Paul’s 81st and final quarter leading our IR function. This is a record only rivaled by the number of times he’s run at Disney World over the same years. Now, at various times during his career at TMX, he’s also had a hand in overseeing other corporate functions, including public relations, government relations and sustainability.
And on behalf of the entire senior team and employees across the organization, I want to thank you, Paul, for your dedication to TMX, your steadfast professionalism and sound judgment over the years and for your friendship. For years, Paul and I sat side-by-side in the organization, plotting the future of where this company can be only to sit here today to see it come to fruition. Paul leaves behind a very impressive 20-year legacy as a trusted and expert source of insight for many of you listening today as well as investors around the world and also leads our team well-positioned with a legacy of the future and a strong IR team in place. Paul, thank you very much.
And with that, I will turn the call over to David.
David Arnold — Chief Financial Officer
Thank you, John, and good morning, everyone. Our results for the fourth quarter reflect our commitment to continue investing for long-term growth and our ability to effectively manage our business in challenging economic conditions. Revenue grew by 9%, driven by the inclusion of revenue from BOX Options Market, or BOX for short, which we consolidated on January 3 of 2022 and Wall Street Horizon, which we acquired on November 9 of 2022. Revenue excluding BOX and Wall Street Horizon was down 3% in the quarter compared with an exceptional fourth quarter last year when we had our highest Q4 revenue on record.
There were revenue increases from Derivatives Trading and Clearing, Global Solutions, Insights and Analytics, or GSIA, offset by decreases in Capital Formation and Equities and Fixed Income Trading and Clearing. Excluding the aggregate amounts of expenses associated with BOX and Wall Street Horizon, our operating expenses increased by 3% compared with Q4 of 2021. We reported an increase of 17% in our diluted earnings per share this past quarter, benefiting from a decrease in income tax expense compared to Q4 of 2021 from the reversal of a prior year tax provision as well as an increase in income from operations of CAD3.1 million compared with Q4 of 2021.
The CAD3.1 million increase includes 100% of income from operations of BOX, of which 52.1% relates to non-controlling interests. After deducting the 52.1% portion of BOX, the non-controlling interest in BOX, our income from operations was down compared to last year, and our adjusted diluted earnings per share decreased slightly by 2%. Turning now to our businesses; I’ll start with those that we experienced revenue increases in the quarter. Revenue in Derivatives Trading and Clearing grew by 67% this quarter compared to Q4 of 2021, driven by the consolidation of BOX’s revenue of CAD27.7 million included in the segment starting in Q1 of this year. Volumes on BOX increased by 17% compared to Q4 of last year, and BOX’s market share and equity options grew to 7%, which is up 1% from Q4 of 2021.
Derivatives Trading and Clearing revenue, excluding BOX, was down 6% in the quarter primarily driven by an 8% decrease in the Montreal Exchange volumes this quarter, partially offset by positive impact on trading fees on the heels of pricing changes for our S&P TSX 60 Index Standard Futures or SXF, which came into effect on January of last year and a 2% increase in revenue from CDCC due to an increased REPO dealer activity and interest rate derivatives clearing fee changes, which also came to effect in January of 2022.
Turning to our Global Solutions, Insights and Analytics segment, or GSA for short, revenue was up 5% this quarter with increases from both Trayport and TMX Datalinx. Revenue from Trayport was up 5% in Canadian dollars or 11% in pound sterling. The increase in pound sterling was primarily driven by 11% increase in trader subscribers and annual price adjustments, partially offset by an unfavorable FX impact of CAD1.9 million. Revenue in our TMX Datalinx business, including co-location, grew 5%, driven by increases in data feeds, co-location and the impact of 2022’s price adjustments and CAD1 million related to Wall Street Horizon.
We also benefited from a favorable FX impact of approximately CAD1.7 million due to a stronger U.S. dollar this quarter compared with Q4 of 2021, partially offset by decreases in revenue from benchmarking indices and usage-based quotes. In Capital Formation, revenue in the quarter declined 8% primarily driven by lower additional listing fees, reflecting a decrease in both the total number of financings and total financing dollars raised on TSX and TSX Venture as well as the decrease in initial listing fees.
The decrease in additional listing fees were driven by a decrease of 21% in the number of transactions billed below the maximum fee and a decrease of 58% in the number of transactions billed at the maximum listing fee of CAD250,000 this quarter versus Q4 of 2021. This decrease was partially offset by higher sustaining fees of 4%, reflecting an increase in the market capitalization of issuers at December 31, 2021, over the prior year, along with a 40% increase in TSX Trust revenue in the fourth quarter, driven by higher net interest income and partially offset by lower transfer agent fees and corporate trust revenue.
Revenue from our Equities and Fixed Income Trading and Clearing segment decreased 2% in the quarter compared with Q4 of 2021. This decrease was driven by a 16% decline in the overall volume of securities traded on our equities marketplaces. Trading volumes of TSX decreased by 5%, TSX Venture exchange by 34% and Alpha by 31%. However, we saw gains in our combined market share this quarter, which was up 1% for TSX and TSX Venture-listed issues and up 4% in all listed issues in Canada compared to last year. The decrease in revenue was somewhat offset by a favorable mix amongst our trading venues and a favorable product mix within TSX.
The impact of April’s price change on continuous trading for securities with a price per share below CAD1 and higher Fixed Income Trading revenue reflecting higher activity in swaps and REPOs in the quarter. Revenue from our CDS business was up 1%, reflecting higher interest income on clearing funds and pass-through liquidity fees, partially offset by lower special handling fees, international revenue, clearing fees on exchange traded volumes and lower depository revenue. Turning to our expenses; operating expenses in the fourth quarter increased by 14% compared to Q4 of last year.
Included in this increase is approximately CAD13.9 million associated with BOX, which we now consolidate as well as Wall Street Horizon, which we acquired in November of 2022. These costs include the amortization of acquired intangibles, acquisition-related costs and integration costs. So excluding the aggregate amount of expenses associated with BOX and Wall Street Horizon, year-over-year operating expenses increased 3% compared with Q4 of last year. The higher expenses reflected higher headcount and payroll costs, increased long-term employee incentive plan costs, increased IT operating costs and higher travel and entertainment expenses.
These increases in costs were partially offset by lower short-term employee incentive plan costs of CAD6.4 million and lower legal and severance costs. Our 16 months integration of AST Canada was completed in December last year. Total integration costs were CAD17 million, down CAD1 million from last quarter’s estimate of CAD18 million, which was down from our original estimate of CAD20 million. We realized synergies of approximately CAD3.9 million in 2022, which were up from our estimate of CAD3.5 million last quarter and our original estimate of CAD2 million.
We continue to expect total synergies of approximately CAD10 million to be substantially achieved by the end of 2024 and expect approximately CAD6 million to be achieved by the end of 2023. The transaction had a positive impact on TMX Group’s adjusted earnings per share. Looking at our results sequentially; revenue decreased CAD4.8 million from the third quarter to fourth quarter of this year. This was driven by higher revenue in GSIA, CDS, Derivatives Trading and Clearing, partially offset by lower revenue and Capital Formation.
Operating expenses increased CAD10.6 million or 7% from Q3, including an increase related to the acquisition of Wall Street Horizon on November 9 of 2022. There were also increases in technology operating expenses, commodity taxes, severance, long-term incentive performance plan costs and consulting and travel costs. These were partially offset by lower short-term incentive performance plan costs of CAD2.1 million and lower legal and charitable donations. Turning to our balance sheet; in the full year of 2022, we spent CAD74.3 million repurchasing CAD560,000 of our common shares under our normal course issuer bid program.
Our debt to adjusted EBITDA ratio was 1.6 times at the end of the quarter, and we also held over CAD493 million in cash and marketable securities at the end of the quarter, which was about CAD318 million in excess of CAD175 million we target to retain for regulatory and credit facility purposes. Our Board approved a quarterly dividend of CAD0.87 per common share, payable on March 10 to shareholders of record as of February 24. This is a 5% increase from Q3. As John mentioned, this marks Paul’s 81st quarter with the company.
As many of you know, Paul will be retiring at the end of the month. And while I’ve only had 20 months to get to know and work with Paul, I echo John’s sentiments. I wish Paul nothing but the best in his retirement and look forward to hosting Paul and his family as well as our TMX colleagues as they close the market later this afternoon, which is a fitting way to celebrate both his career and contribution to TMX.
So that concludes my formal remarks. And now for the last time, I’d like to hand the call back to Paul for Q&A.
Paul Malcolmson — Vice President, Enterprise Sustainability and Investor Relations
Well, thank you, David, and thank you both, John and David, for your very kind words. Michelle, we’ll turn it over to you just to outline the process for the question-and-answer session.
Questions and Answers:
Operator
Thank you, sir. [Operator Instructions] Your first question will come from Nik Priebe of CIBC Capital Markets. Please go ahead.
Nikolaus Priebe — CIBC Capital Markets — Analyst
Great, thanks. Good morning, everyone. Okay. Just now that you’ve presumably completed the year-end budgeting process, just wondering if you can update us on how you’re thinking about managing expense growth in the year ahead. Like is flat to low single-digit growth still kind of a reasonable expectation enterprise-wide?
David Arnold — Chief Financial Officer
Nik, it’s David. That will be correct. We normally target flat to below the rate of inflation. So that’s the wild card is the rate of inflation.
Nikolaus Priebe — CIBC Capital Markets — Analyst
Okay. Very good. And then is there anything incremental that you might be able to share on the VettaFi investment just with respect to the expected earnings impact when you fold it in or how the valuation may have compared to, say, the previous fundraising round?
John McKenzie — Chief Executive Officer
Yeah, happy to. And you’ll understand Nik, that I’m going to have to be a bit circumspect into my comments because this is a private company. We’re a 21% shareholder. But in order to kind of give you a bit more sense of some of the guidance around it. The size of the company is not dissimilar to the size of Trayport when we acquired it in terms of kind of both revenue size, growth rates, profitability. So it kind of gives you a sense of the size of the business. Very strong performer in terms of index, analytics, ETF solutions.
It’s one of the things that we were attracted to it, and we’ve been in discussions with them for a while actually to find that right path forward. And the importance in our program that we’re doing with VettaFi, it’s a combination of the capital that we’re putting in that’s going to help accelerate some of the things that VettaFi is doing to accelerate its growth. But also we noted the commercial partnership, the long-term agreement we put together to really create net new index and benchmarking products for our broad client base.
And so the exciting piece here is it’s both driving the growth of that investment, but also driving the growth of new products and revenues that we will share between us. So we do expect this to be accretive even in the minority investment phase. And with the ability to build revenue both in VettaFi and in within our joint revenue offering, which will impact our Datalinx business going forward. So I hope that gives you a bit more guidance in terms of how we think about it. But I hope you get from my tone, it’s something that we’re extremely excited about.
Nikolaus Priebe — CIBC Capital Markets — Analyst
Understood. Okay. No, that helps clarify. And then one just final question for me. In the long-term objectives that you outlined, I noticed that the target leverage ratio has just been taken down maybe half a turn. I think that’s a bit lower than the range you’ve talked about previously. Is the upper bound of that range? I think it was 2.5 times how you would define capacity to relever the balance sheet to pursue further M&A, if anything kind of transformational presented itself or would there be appetite to exceed the high end of that range if necessary?
David Arnold — Chief Financial Officer
Nik, it’s David. Yes. So the 1.5 times to 2.5 times is something that we have spoken about over the last several quarters, and we put it into our investor brochure where we’ve updated it in the Annual Disclosures, right? So it appears new, but it’s not that new. But on your question about if the right acquisition were to present itself and there are many things that we look at all the time. Our comfort level would absolutely be to exceed the upper end of that range. That range is really about through the normal course, right? But if there’s a transformational opportunity, we’re very comfortable like we did with Trayport going well north of 3 times, and we have a proven track record of deleveraging very well over time. So hopefully, that gives you what you’re looking for.
Nikolaus Priebe — CIBC Capital Markets — Analyst
Yeah. No, that’s helpful. Thanks very much. I’ll pass the line.
Operator
Your next question will come from Geoff Kwan of RBC Capital Markets. Please go ahead.
Geoffrey Kwan — RBC Capital Markets — Analyst
Hi, good morning. Just following up on the VettaFi. Just was wondering, your comments around accretion, are you able to give any more insight in terms of is it low, mid, high single-digit, even double-digit accretion that you’re kind of maybe expecting over the next year?
John McKenzie — Chief Executive Officer
Yes. I mean, I can’t give you much more guidance. I’m really talking about EPS accretion because, again, this is a 21% investment. So we won’t be bringing the EBITDA into the organization into our statements. And as we go forward with VettaFi and we do more with them, we’ll look to see what we can provide in terms of additional disclosures. But Geoff, that’s a limit I’m going to go to be able to show you today.
Geoffrey Kwan — RBC Capital Markets — Analyst
Okay. Just my other question was we’ve seen a number of other exchanges moving the business to the cloud. Just wondering if this is something TMX is looking into? And if you were to go down that route, any sense of what this could do for margins?
John McKenzie — Chief Executive Officer
Geoff, that’s a — it’s a great question. And one of the things I like about that question is I actually found that I’m going to be a bit [Indecipherable]. I think TMX has done more to move into the cloud than make cloud announcements like some others have done. We’ve actually been very active in terms of putting more core systems into the cloud over the number of years than a lot of our competitors. So for those who don’t know, we are actually fully cloud-enabled in everything we do around productivity, workflow, accounting systems, HR systems, productivity systems.
Actually one of the reasons we were able to move so effectively remote is because we’ve actually done that work in advance. We have a full cloud-enabled solution on the front end for issuers called TMX LINX so all of our issuers actually connect to us through a cloud solution for all their filing activity, application activity and the workflow that surrounds it. It’s made the business substantially more scalable. And particularly when you think about the activity we had in 2021, which was a record activity, we did that with existing resources because we were able to scale the business in a way we weren’t in the past.
In addition, we’ve got a cloud solution for historical market data delivery and deep data analytics, both within TMX Datalinx and also recently what we’re deploying in Trayport. So what we’ve been doing is actually just going about our cloud strategy is as we actually modernize and bring new initiatives online, we do it with a philosophy we call Cloud First. What we haven’t done is gone into a big bang announcement with a single vendor for a long-term commitment because we are still in the stage of looking at kind of who’s the best of breed for each of these things that we’re going to bring to bear.
But to actually — to your point, as we look forward we are looking at how do you think about those bigger systems like trading and clearing and data center management as those technologies evolve, are we able to move those to cloud-based solutions as well? So it’s something we’re going to continue to explore in the future. But that kind of gives you a lens as to where we are thinking. It’s cloud-first in delivery, and we’ve got multiple partners to do that.
Geoffrey Kwan — RBC Capital Markets — Analyst
That’s helpful. And maybe if I can just add one extra question just on — based on your response there is like for what you have kind of moved to the cloud, have you done analysis in terms of how much that helped margins? And if you’re able to move to your point, trading, clearing data center, all that other stuff potential for the financial impact?
John McKenzie — Chief Executive Officer
Yeah. What I would say to you, in each of those programs, the business case has supported the investments in terms of the run rate. But in addition, the real piece is the scalability that it gave us. So in each of those cases, like the ability to do a deep data lake program without the cloud solution, you really can’t do it in a way that’s scalable for clients. Same thing with the work we’re doing on issuers. It’s made the business more scalable. So it reduces the amount of really variable cost in the organization as we grow so that is the better way to think about it in terms of providing that long-term scale and growth potential.
Geoffrey Kwan — RBC Capital Markets — Analyst
Great. Thank you.
Operator
Your next question comes from Etienne Ricard of BMO Capital Markets. Please go ahead.
Etienne Ricard — BMO Capital Markets — Analyst
Good morning, and congrats, Paul. On the introduction of — on the transformational objectives, how will TMX bridge the gap between the business today and your long-term objectives from organic and acquisition perspectives?
John McKenzie — Chief Executive Officer
Yeah. So one of the — I want to be clear in terms of when we put out these objectives, these are not new objectives. We’ve actually been talking to The Street about the transformational objectives in terms of where we’re trying to grow the business over the long-term, and that’s why they are long-term objectives. So don’t — I wouldn’t look to where are we at any point in time but are we making progress against those components in terms of progressing into more data revenues, more global revenues, more subscription-based services.
So even in 2022, if you normalize and looked at the business in terms of taking out the impacts of kind of BOX in or the acquisitions and what the organic business did, you’ll see that all those numbers expanded and grew in terms of along that glide path, anywhere from 1 percentage point to 3 percentage points. So our organic strategy, as we set with the organization and the Board at the end of last year, builds in the types of investments and growth initiatives to continue to drive more global revenue, more data revenues, more sustaining recurring revenues, very much like the partnership we just talked about with VettaFi, which index and benchmark and is exactly in that sweet spot of delivering both global solutions and subscription and recurring and data revenues.
So we do believe that we’ve got an organic strategy to build there through the long term. But certainly, inorganic moves, even small ones like Wall Street Horizon that we did in Q4 are ways for us to accelerate and get there faster. So that’s what we’re trying to give more guidance in a more consistent way in terms of what that long-term future looks like so that when you see the strategic moves that we make, you can understand them in that context.
Etienne Ricard — BMO Capital Markets — Analyst
Understood. And your long-term objective for Datalinx is now 5% plus annual revenue growth. Now this is an improvement from your prior objective for low single-digit growth. So I guess, what is giving you improved confidence Datalinx can achieve stronger growth potential?
John McKenzie — Chief Executive Officer
Oh, we’ve got a plan to deliver it. So it’s not just confidence. We wouldn’t put out that direction without knowing that we had a plan to deliver it. So under the leadership of Michelle Tran and Jay Rajarathinam we’ve been building a growth plan around Datalinx. You see the results in the last couple of years that we had some — we’ve had track record already in 4% to 7% growth over that period, even in a very tough market in 2022, I might add.
And it’s a combination of factors that help give us the confidence that we can grow this business faster. So we do have some potential for pricing in there that we’ve actually been executing getting approved and bringing to market. We’ve been bringing new products to the table, new bundled solutions, new analytics solutions on top. The pieces that we’re doing around expansion with, again, things like Wall Street Horizon, when I talk to my comments, this is an organization that does corporate action and event data for 9,000 companies.
Most of them are not Canadian. And we actually have all those data sets on 3,000-plus Canadian issuers that we can build on their product and also a substantially larger global sales base to sell that product towards. So in all these pieces, we are looking at how we actually add more product and sell them globally to accelerate that, and we’ve got a plan for that business that gives us confidence that we can give you that direction.
Etienne Ricard — BMO Capital Markets — Analyst
And lastly, on VettaFi, I understand what the benefits of the partnership is to launch new index products. So could you please share the next steps in this regard? And how would that be complementary to your current partnership with S&P?
John McKenzie — Chief Executive Officer
Oh, that’s a really good question. So S&P is a fantastic partner on broad, big name index and benchmark. So we’ve got a long-term relationship with S&P for the TSX S&P 60, those types of products. Where we’re really focusing here is in what I’ll call even more special products, special indices, thematics, if we’re trying to do something special around a sector or creating a custom index for an ETF provider. This is the capabilities that VettaFi brings the table with us. And our teams together are already working on what I’ll call the pipeline of the products that we’re potentially going to bring to market.
That started immediately and we immediately put it into the objectives of our key people in terms of things that they’re looking to deliver with that partnership. And so it’s really that ability to go into the middle market of more custom product sector indices, thematics, those types of things that this allows us to do, and it’s complementary to the relationship we have with S&P. And similar, the partnership we’re putting together is also a long-term relationship with VettaFi similar to our S&P relationship.
Etienne Ricard — BMO Capital Markets — Analyst
Thank you very much.
Operator
Your next question comes from Graham Ryding of TD Securities. Please go ahead. Mr. Ryding, your line is open for questions.
Graham Ryding — TD Securities — Analyst
Sorry, I was on mute. Just to follow-up on the VettaFi theme. Just to be clear, so any — you have a commercial agreement here. So anything incremental around new products or indices? How does that flow through? Does that — will that come through in your GSI data line or will that still come through a sort of equity ownership in another entity?
David Arnold — Chief Financial Officer
Yeah. Graham, it’s David. So primarily the piece related to the commercial agreement that is for our account will flow through our Datalinx business, so the GSIA segment. But because we also own a 21% stake in VettaFi, we’ll also, on the income from associates pick up our 21% share after tax of any of those benefits that they would record.
Graham Ryding — TD Securities — Analyst
Got it. Okay. That helps. Maybe I could start with Trayport then just — could you just sort of give us some context here with the volumes down 25% year-over-year, you’re still seeing good growth in your subscribers. And just where is this trading moving to that’s not going through Trayport right now? Is it going to other markets around U.S. or Asian LNG products that are not on the trading platform? Is that how the market is adjusting here?
John McKenzie — Chief Executive Officer
No. I mean if you look at our kind of our market share of the trade flows going through is it’s not materially changed. So this is more of a pullback in the overall market activity in those products. Remember that the prior year was substantially more volatile and had higher levels of trade activity. So that’s what you’re seeing as a reflector of overall market activity. But what you’re seeing with Trayport in terms of the subscriber growth and the new clients is that the solution is just becoming even more valuable to the users throughout that network.
Graham Ryding — TD Securities — Analyst
So is there any concern on your part here that if this volume decline persists that subscribers growth may start to wane somewhat if energy trading is shifting to non-European markets?
John McKenzie — Chief Executive Officer
No, it’s not a market shift. It’s just like markets move in cycles in terms of activity, but there’s not a concern there. Our bigger concern was more around health of clients within the Trayport community when you had that level of volatility, pricing impacts, margin and balance sheet impacts. And we did see one client loss through 2022 on that basis, but nothing material. So that would be our bigger concern that we watch around is around client health, but our clients continue to be in good shape.
Graham Ryding — TD Securities — Analyst
Okay. And I think you’re rolling through a 7% to 8% price increase on Trayport for 2023. How does that compare to your CPI increase that was baked into 2022?
John McKenzie — Chief Executive Officer
So the increase in 2022 would have been in line with what the Bank of England Consumer Price Index movements, which was in the 4-ish range. So that kind of gives you the delta year-over-year.
Graham Ryding — TD Securities — Analyst
Okay. Jumping to BOX, I noticed there was a decline in your revenue yield from BOX. It just seemed to drop down again quarter-over-quarter relative to the volumes. Maybe just some commentary on what that’s reflected?
David Arnold — Chief Financial Officer
Yeah, Graham, it’s David. It’s the mix between electronic trading and/or traded on the floor, as BOX has one of the few trading floors pit [Phonetic] style. So the revenue per contract is subject to fluctuations between the two.
Graham Ryding — TD Securities — Analyst
Got it. And then one last, if I could. Just it looks like the CSA is reviewing some market data costs just both around the methodology you use to gauge pricing for real-time market data, but also just, I think, possibly broadening its regulatory scope to other areas of market data. Can you provide some sort of initial commentary, your position here and the potential implications of how this could impact your business?
John McKenzie — Chief Executive Officer
Yeah. I mean, this is something that the CSA and the commissions within it have been looking at for years and years and years. And if — I’ll remind people that we actually operate the information processor on behalf of the industry that pulls all the different markets together for the use of the clients. One of the things that actually — we’ll be putting our submissions in there and providing substantial information and data with respect to market data structure and pricing in Canada and how it compares to the world. The initial report that we put out really only compared Canada to the U.S., which is not a fair comparison given the size of the U.S. market to Canada.
If you take Canadian data rates and compare them to anywhere else in the world beyond the U.S., we are extremely competitive, and we’re going to be providing that information. The other piece that’s in there is they do actually now show what is the potential total cost to a user of combining all the different Canadian markets. And what you’ll find interesting in that is that the TMX piece is less than half of that total, despite the fact that we are 65% to 67% of all the trade activity in our listed names, plus 94%, 95% top of book in terms of data quality for anything that trades on our markets. So there’s a lot of cost in the industry, and it doesn’t come from us.
It comes from other venues. And when you look to the recommendations that we’ve made in the past around what markets should actually be protected and required to be purchased from that threshold is likely too low. And we’re going to be making some market structure recommendations around that. And also when venues we’re able to price and include the value of crosses in there, that was probably a mistake because it allowed markets to actually pump pricing up beyond the value they were providing to the industry. So we’re going to be providing a very fulsome solution and recommendation of this in terms of how to prove it from a marketplace.
I don’t believe that it’s a challenge for TMX in terms of the market data we provide because it’s high value. We continue to add more content and we are globally competitive. And just the response to that, I would also give you is that we’ve had multiple price changes over the past year approved. So it doesn’t show an indication of a concern around TMX particularly, but there are opportunities to make the market structure and the cost for the industry more competitive. And we would welcome some of those changes. We think it would be very good for our clients.
Graham Ryding — TD Securities — Analyst
Okay. That’s it from me. Thank you.
Operator
[Operator Instructions] Your next question will come from Jaeme Gloyn of National Bank Financial. Please go ahead.
Jaeme Gloyn — National Bank Financial — Analyst
Yes, thanks. I wanted to first just start on the cost side. So looking at the Q4 results on the IT and the SG&A line, specifically, was there anything from like a true-up nature in Q4 or should we look at that quarter as being consistent for a run rate in ’23?
David Arnold — Chief Financial Officer
Hi Jaeme, it’s David. Yeah, so when you look at Q3, you’re right on the IT line. As with many businesses, Q4 for us is the end of the fiscal year. So a lot more project wrap-up activity. So a little bit of that in there. And then obviously, you’ve noted it on SG&A. A material item between Q3 and Q4 is also the impact of the pound and the U.S. dollar strengthening. That was about CAD1.5 million because, as you know, we bring in BOX’s operating expenses, which are primarily U.S. dollar and obviously, Trayport’s, which are primarily pound sterling.
Jaeme Gloyn — National Bank Financial — Analyst
Okay. So a little bit of a step down into Q1 should be expected, but maybe not that material back to, let’s say, like the mid-20s range.
David Arnold — Chief Financial Officer
That’s fair, Jaeme. I would say because in Q1, you’re going to have base salary increases and things like that, compensation and benefit resets in terms of payroll source reduction. So yes, net-net, you’re probably going to see consistency between the two quarters, maybe a slight step-up.
Jaeme Gloyn — National Bank Financial — Analyst
Okay, great. Shifting to Capital Formation and sustaining listing fees. Forgive me if this is guidance you’ve already provided. But as we think about the market cap of issuers at the end of the year and some of the changes on pricing, where do you see that shaking out in terms of the growth rate for sustaining listing fees in ’23 versus ’22?
John McKenzie — Chief Executive Officer
Sorry. I think, Jaeme, we’ve indicated in the documents there that impact, I think, is around CAD600,000 when you take into account the change in the market cap of our listed issuers plus the increased pricing for the sustaining fee, the maximum fee.
Jaeme Gloyn — National Bank Financial — Analyst
Sorry, that was up CAD600,000?
John McKenzie — Chief Executive Officer
Down CAD600,000.
Jaeme Gloyn — National Bank Financial — Analyst
Okay, great. And then shifting to the Derivatives business, this has been a business that’s targeting double-digit revenue growth, I guess, since back in 2018 for the targets. It’s a bit of a — challenging to achieve that, I guess, both from a contracts traded point of view and then also from a capture rate point of view, driving the revenues higher. I guess what’s going to give — what are the catalysts here that we should be thinking about that’s going to get that business back up into the double-digit growth range? Is it simply like this is a muted environment for derivatives trading generally from a contract perspective and that will normalize or are there some other factors here?
John McKenzie — Chief Executive Officer
There’s a number of factors there. And I will — I’ll take the liberty of correcting in one piece, Jaeme. That was — 2021 was soft in terms of that derivative expectivity, but the number of years before that was sustained at that growth rate that we’ve been talking to. And the biggest challenge in 2021 was the impact of market interest rates and Central Bank rate changes that were [Technical Issues]. Hi, Michelle.
Jaeme Gloyn — National Bank Financial — Analyst
Hello.
Operator
Gentlemen, this line is now open.
John McKenzie — Chief Executive Officer
Sorry, can you hear us through there?
Operator
Yes, sir, this line is open now.
John McKenzie — Chief Executive Officer
And Jaeme, are you there? Can you still hear me?
Jaeme Gloyn — National Bank Financial — Analyst
I can hear you. Thank you.
John McKenzie — Chief Executive Officer
All right. I’m going to first indicate that no way are these teleconferences is connected to trading systems. So let’s just put that right on the table right now. So I don’t know how far I got into the derivative piece, but let me talk about the pros going forward into 2023. So number one, stable interest rate environment, that means much more strength in the short-term rate products like the BAX, which were down kind of 30%, 40% last year. So you’ve got market impacts there that are very good. We’ve got growth in the new products we’ve added, which are not mature yet, so more growth in the Two-Year and the Five-Year and the long government bond, and that’s a deliberate piece in terms of the pieces we’ve talked in the past about rounding up the yield curve.
And also, when you get stability in the Central Bank Market, it’s going to be easier for us to build in the international markets as we’ve been doing over the last couple of years. So the long-term expectation of building our international trade and our core products, 5%, 6% this year, but looking at more long-term objectives of being more than 15%, those are pieces that are going to continue to build out. Now when you take all those components, they give us a lot of confidence that we’re going to be able to grow the contract volume double-digit plus and allow the support for high single, low double-digit growth rate in the revenue.
The other pieces in there that you’re starting to see more of is things like strength in the CDCC REPO product, which we do provide some statistics for that sustainable growth in that product, which actually rolls through the revenue. And there are more things that we’re going to be doing in the future in terms of adding net new product to both the trading and clearing to continue to provide products that support the client needs. So those are all the pieces that give us confidence in terms of that continued strong growth rate.
Jaeme Gloyn — National Bank Financial — Analyst
Okay. Thank you.
John McKenzie — Chief Executive Officer
No problem.
Operator
At this time, there are no other questions. So I will turn the conference back to Paul Malcolmson for any closing remarks.
Paul Malcolmson — Vice President, Enterprise Sustainability and Investor Relations
Great. Thank you, Michelle. Back in January, I told many of you that I would be retiring from TMX at the end of this month, and the details on succession plans would be shared on today’s calls. So today, I’m very pleased to announce that Amin Mousavian will be succeeding me as Head of Investor Relations. Amin has been with TMX for 12 years, having worked both in parts of our business as well as on our finance team. Last year, he joined the Investor Relations team and is well positioned to succeed me.
As you know, Amanda Tang has been on a maternity leave and will be returning to TMX towards the end of this coming summer. Julie Park will now be dedicating a 100% of her time to ESG and sustainability initiatives and reporting. And finally, I want to welcome Nina Bai to the IR team. Nina joined IR in December and previously supported both CDS and CDCC on the finance side. In closing, I do want to thank the countless investors and analysts that I’ve met and for making the last 20 years such a real pleasure for me.
To TMX employees that might be listening in, thank you so much for always being there to get us the timely information that we needed for The Street. To John, now as CEO, and before that, as CFO, you could not have been more supportive of me as a colleague and a friend and certainly to our IR program. And now David is following exactly that same vein as CFO. So thank you both for that. Finally, I want to thank the IR team, past and present. Many on this call have been around a while like me.
So I want to mention the names that most of you will recognize. Joanne, Shane, Christine, Amanda, Julie, Amin, Nina as well as some great interns over the years and our securities lawyer, Katherine, who’s always been there, giving us wise counsel for the entire run. So thank you, Katherine. These amazing and talented people have made our IR program what it is today. And now I know you will all really truly enjoy working with the IR team that Amin will be leading. With that, I wish you every success and all the very, very best. Let’s stay in touch, and have a great day, everyone.
Operator
[Operator Closing Remarks]