Montreal Exchange shares make strong debut on the TSX

Shares of the Montreal Exchange were inbig demand Tuesday as they began public tradingon the TSX.

The sharestradedas high $49.50, and closed at $46.15 in heavyvolume of 3.9 million.With only 30.9 million shares available, that put the value of the ME at about $1.43 billion.

There was no initial public offering of ME shares, so it wasn't immediately clear what the stock would trade at.

But the market gotsome tentative guidance last month. On Feb. 14, the Montreal Exchange announced a strategic alliance with the New York Mercantile Exchange (NYMEX). As part of that alliance, the NYMEX acquired 10 per cent of the ME for about $90 million.

Based on that early price, the whole ME would be worth $900 million, making each of the shares worth a little less than $30.

But analysts said the demandwould force that up, and Tuesday's trading showed howtrue that was. The shares opened at $45 and went up from there.

The big gainers in the move to go public will bethe banks and brokerage firms that were seatholders on the ME. Going public allows them to turn their seats into stock they can sell on the open market.

Under a 1999 agreement,the ME agreed to transferthe trading of itslarger equity issuesto the Toronto Stock Exchange and its junior stocks went tothe Canadian Venture Exchange. In return, the ME became Canada's sole market for such derivatives as options and futures.

That agreement expires in 2009. The TSXserved notice earlier this month that it plans tolaunch its own derivatives exchange once the non-compete agreement runs out.

Analysts say the demand for derivatives trading continues to grow strongly.