Madam Speaker, the member from Essex-Kent very aptly leads into my dissertation about the speech from the throne. Basically my speech also deals with the prospect of the evolution of our federation.
We talk a lot in the Chamber about devolution. I think that is an inaccurate word. Basically what we want to do with our federation is evolve it. We have been around for 127 years and it seems reasonable that we should enter into some changes within the federation to make it more economically viable.
Canadians have historically refused to invest in themselves for a variety of reasons. The Canadian economy has been typified by foreign investment. Canadians have been reticent to invest in their own enterprises. As a consequence we have suffered as a country.
Why have we been shy about this investment procedure? I do not really know. The bottom line is the speech from the throne did attempt to address that in some very real and meaningful ways. I refer to a specific aspect which talks about the formation of a national securities exchange. Securities legislation is basically the jurisdiction and purview of the provinces.
Canada is the only industrialized country in the world that does not have a national securities exchange. What has this done? It has fractionalized our capital markets. It has prevented people from properly visualizing and assuming masses of capital for the investment of our own enterprises.
The concept of a national securities commission would not override the jurisdictions of the provinces but would envelope them. Basically the concept is to provide a basic national securities exchange commission which would have a national regulatory environment. Basically what it talks about is harmonizing all the provincial regulatory procedures so that it is one. What is the problem today?
A mutual fund registered in Canada has to register with each individual securities commission throughout the country. It is a very expensive process and basically many people do not do that. A lot of these offerings are not available throughout the country. They are available only in certain jurisdictions.
Another aspect occurring in Toronto, what is called the dealer's network, which is an over the counters market, is the strange evolution that we are having listings on that market which are basically extraterritorial. In other words, they are British Columbia listings, possibly Quebec listings, registering with the Toronto over the counters market.
We have the strange situation in which Ontario's securities legislation is basically being applied to British Columbian companies. One can see this is creating a great deal of confusion and overlap.
We often compare ourselves with the United States. I would like to make a quick comparison with Japan. In 1951 Canada and Japan had the same gross domestic product. That is a very interesting statement, especially because the Japanese economy by the year 2000 will surpass the gross domestic product of the United States.
That country has half the population of the United States and almost none of the natural resources. We must ask ourselves in Canada what we are doing and why we are falling behind the world. It is because of interprovincial bickering that prevents us from properly pooling some of our capital resources.
If Bill Gates were a Canadian he would never get his company started here. Why? We do not have a pooling system and a risk taking orientation within our financial institutions. Because many of our start-up companies are looking for equity capital they are forced to go to the United States.
They end up being taken over by Americans and we are back to where we started. We are on a treadmill of not being able to properly invest in our own companies mainly because of our own institutions.
Because of the great fractionalization of our equity markets, many of our companies go wanting even where they get a listing on the over the counters exchange markets. There is a whole area there that causes a great amount of fees being charged. The legal bureaucracy and regulatory environment almost prevents small and medium size companies from accessing this.
The history of many of these companies is they lost control when they tried to go through this process. The whole idea of a capital based system is to make it easy for small and medium size companies to access these markets.
I was pleased to serve on the industry committee when we talked with some of our biggest banking institutions about access to capital for small and medium size business. Again and again these
bankers told us the problem with small business was not its access to debt capital but its access to equity capital. This was rather strange for a bunch of institutions that only recently took over most of those brokerage firms themselves.
It is an interesting observation that the only bank which now loans to junior securities investment firms is the Toronto-Dominion Bank. Remarkably the Toronto-Dominion Bank is the only bank that does not have a securities arm. We can see there has been consolidation and economic concentration in the whole area of securities.
What I am saying is those banks are also federally regulated. It seems a logical conclusion that our securities industry should also have a federal focus, a national focus. I doubt that many of our provinces are on side on this. The maritimes basically are very interested in pursuing this. Ontario is also very supportive of moving forward with the dealer's network.
To give an idea of the over the counters market, which is part of that market in Toronto, it has zeroed in on small and medium size business. In 1993 it had tradings of over $10 billion. By 1994 it was up to $15 billion. By 1995 it was $17.5 billion worth of trading in small and medium size company stocks. This represents a 70 per cent increase in only three years. We can see there is a tremendous demand for this vehicle.
The over the counters market is still somewhat unsophisticated because of the capital markets we have. We are fractionalized. We are a very small market in the first place in Canada. We made it even smaller by dividing it many times over.
We need a three tier system of access to these over the counters markets, a junior market in which everybody will know the risk involved and then basically tiered into the larger markets like the TSE. It will provide a cheap access to allow start-up companies to find capital in Canada rather than forcing them to go south of the border.
I look forward to the initiatives of the government in this area and look forward to working once again with the provinces in creating a national securities commission in Canada.