TMX Group Limited — Management Reports 2021

Feb 9, 2021

TMX Group Limited

MANAGEMENT'S DISCUSSION AND ANALYSIS

February 8, 2021

This Management’s Discussion and Analysis (MD&A) of TMX Group Limited’s (TMX Group) financial condition and financial performance is provided to enable a reader to assess our financial condition, material changes in our financial condition and our financial performance, including our liquidity and capital resources, for the year ended December 31, 2020, compared with the year ended December 31, 2019 and as at December 31, 2020 and December 31, 2019. This MD&A should be read together with our audited annual consolidated financial statements for the year ended December 31, 2020 (financial statements).

Our financial statements and this MD&A for 2020 are filed with Canadian securities regulators and can be accessed at www.tmx.com and www.sedar.com. The financial measures included in this MD&A are based on financial statements prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB), unless otherwise specified. All amounts are in Canadian dollars unless otherwise indicated.

Certain comparative figures have been reclassified in order to conform with the financial presentation adopted in the current year.

Additional information about TMX Group, including the Annual Information Form, is available at www.tmx.com and www.sedar.com. We are not incorporating information contained on our website in this MD&A.

MD&A Structure

Our MD&A is organized into the following key sections:

• Mission, Client First Vision, Sustainable Growth and Financial Objectives;

• Our Response to COVID-19 Pandemic;

• Initiatives and Accomplishments - 2020 initiatives and accomplishments;

• Organizational Changes - an update on senior management changes;

• Regulatory Changes - an update on the regulatory environment;

• Market Conditions - a discussion of our current business environment;

• Our Business - a detailed description of our operations and our products and services;

• Results of Operations - a year-over-year comparison of results;

• Liquidity and Capital Resources - a discussion of changes in our cash flow, our outstanding debt and the resources available to finance existing and future commitments;

• Managing Capital - an outline of objectives for managing our cash and cash equivalents, marketable securities, share capital, Commercial Paper, Debentures, and credit and liquidity facilities;

• Financial Instruments;

• Critical Accounting Estimates - a review of our goodwill and intangible assets - valuation and impairment;

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• Select Annual and Quarterly Financial Information - a discussion of select annual information from 2018-2020, the fourth quarter of 2020 compared with the corresponding period in 2019 and the results over the previous eight quarters;

• Enterprise Risk Management - a discussion of the risks to our business as identified through our risk management process as well as Financial Risk Management;

• Accounting and Control Matters - a discussion of changes in accounting policies adopted in 2020 and future changes in accounting policies, an evaluation of our disclosure controls and procedures and internal control over financial reporting and changes to internal control over financial reporting; and

• Caution Regarding Forward-Looking Information.

MISSION, CLIENT FIRST VISION, SUSTAINABLE GROWTH AND FINANCIAL OBJECTIVES

Mission

Powering capital and commodity markets, investment, and economic growth for clients in Canada, across North America, and around the world.

Client First Vision

To be an indispensable solution for companies around the world to raise capital and the preferred destination for traders and investors to prosper.

Sustainable Growth[1]

We prioritize four areas in our efforts to drive sustainable growth and in order to thrive in both today and tomorrow’s environmental context:

• Growth Acceleration: Accelerate strategies to position TMX Group competitively in areas of high growth potential such as Capital Formation, Derivatives Trading & Clearing, and Trayport

• Talent and Culture: Invest in our people to both fulfil our employee purpose and to foster long-term sustainable growth

• Advocate for Better: Collaborate with clients, regulators, and government stakeholders to make the Canadian capital markets more competitive globally

• Environmental, Social and Governance (ESG): Drive long-term sustainable growth through an integration of ESG objectives and initiatives into divisional and corporate objectives

Financial Objectives[2]

In November 2018, we set long term financial objectives of achieving a mid single digit cumulative average annual growth rate (CAGR) for revenue and a double digit CAGR for adjusted EPS* based on certain assumptions and expected performance over time. While we continue to believe that these aspirational goals are reasonable, we may

1 The "Sustainable Growth" section contains certain forward-looking statements. Please refer to "Caution Regarding ForwardLooking Information" for a discussion of risks and uncertainties related to such statements.

2 The "Financial Objectives" section contains certain forward-looking statements. Please refer to "Caution Regarding ForwardLooking Information" for a discussion of risks and uncertainties related to such statements.

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not be able to achieve these financial objectives, as our assumptions may prove to be inaccurate and therefore our actual results could differ materially from our long term objectives. For example, the COVID-19 pandemic is having an unprecedented impact on the global economy and markets. At this point, it is difficult to predict the impact that this will have in the short term on our business, and the longer term impact on our aspirational goals.

Our long term objectives do not constitute guidance. Our current profitability and our ability to attain these goals in a given period must be weighed against our need to invest in our business in order to execute on our strategy. Some examples of these assumptions include successful execution of our strategic growth initiatives and business objectives; continued investment in growth businesses; and continued re-prioritization of investment towards enterprise solutions.

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Our business is organized into the following areas:

Capital formation: Our exchanges are integral to the efficient operation of the capital markets. We continually support the capital markets community by providing companies of all types and at all stages of development with access to equity capital, while also providing market oversight to ensure market integrity.

Lines of business include Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) listing and issuer services, and TSX Trust (TMX Group's transfer agency and corporate trust services business).

Equities and fixed income trading and clearing : Operate fair and transparent markets, with innovative, efficient and reliable platforms for equities and fixed income trading and clearing.

Lines of business include TSX, TSXV and TSX Alpha Exchange (Alpha) equities trading, Shorcan Brokers Limited (Shorcan) fixed income trading and Canadian Depository for Securities Limited and its subsidiaries including CDS Clearing and Depository Services Inc (CDS Clearing) and CDS Innovations (collectively, CDS).

Derivatives trading and clearing : Accelerating new product creation and leveraging our unique market position to meet the increasing demand for derivative products both in Canada and globally.

Lines of business include Montréal Exchange (MX) and Canadian Derivatives Clearing Corporation (CDCC).

Global solutions, insights and analytics : Deliver equities data, index data as well as integrated data sets to fuel highvalue proprietary and third party analytics which help clients make better trading and investment decisions. We also provide solutions to European and global wholesale energy markets for price discovery, trade execution, post-trade transparency and straight through processing.

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Lines of business include TMX Datalinx (information services), Co-location, and Trayport (acquired December 14, 2017) which includes Vienna-based VisoTech (acquired May 15, 2019).

Sustainability and Environmental, Social and Governance (ESG)

Integrating sustainability and ESG factors with our overall enterprise strategy goes hand in hand with our mission and Client First Vision.

In May 2020, we issued our inaugural ESG report. The goal of the report is to inform all of our stakeholders, including current shareholders and potential investors, of our progress in incorporating ESG matters into our corporate strategy, process and operations. We recognize that this initial report is very much a first step on an important journey for TMX Group.

We continue to evaluate our role in Canadian capital markets in a transitioning economy and to engage with the industry as well as our stakeholders as we integrate these factors into the way we do business. We look to:

• Lead by example by building a strong foundation of our own sustainable company practices and reporting

• Engage with the market and support our issuer base and clients through a transitioning economy

• Support transition finance with our products and services

OUR RESPONSE TO COVID-19 PANDEMIC

The novel coronavirus (COVID-19) pandemic has altered the world and the way we operate. It has impacted individuals, communities, businesses and governments in significant ways. In these extraordinary times, we believe that our core organizational values, enterprise strategy, risk management practices and staff, are guiding us through this changing and highly complex situation. Powered by the dedicated and collaborative efforts of employees, the vast majority of whom are working remotely, TMX Group has been able to fulfil our core mission of keeping Canada’s markets operational throughout the pandemic.

The health and safety of our people, our clients and the entire capital markets community is our top priority in this time of great uncertainty, and consistently guides the decisions that we make. Effective March 17, 2020, we directed all staff other than those required to be physically present in the office to complete business critical tasks to work from home and transitioned approximately 95% of our workforce to working remotely by the end of the month. Those employees working remotely will continue to do so until Q2/21 at the earliest. TMX Group will continue to reassess our return to work date as new information becomes available. We have deployed various IT and human resources tools to support both our employees working from home as well as our limited recovery staff who are on site performing critical duties. The TMX Building Back Better initiative was launched in 2020 to reimagine our future work environments. In April 2020, we conducted our first successful all-remote disaster recovery (DR) test on most of our critical systems. There were subsequent tests in both September 2020 and October 2020.

Throughout this period, we continue to work closely with our clients, regulators and government representatives to ensure continuity. TMX Group’s markets play a crucial role in the economy, and we strongly believe that it is in the public interest and in the best interest of our stakeholders, including issuers, investors, and market participants, that markets remain open.

We have also undertaken a number of significant initiatives to help support our key stakeholders most acutely affected by this ongoing crisis, such as:

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• Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV) implemented blanket relief measures to lessen the administrative burden on our more than 3,200 listed issuers during the COVID-19 pandemic and provide flexibility in volatile markets.

• TMX Group successfully advocated for amendments to the federal Government's COVID-19 response package to include public companies in the wage subsidy program – this was an important win for Canadian small businesses and, most importantly, for the thousands of Canadians that they employ.

• In TSX trading, we made adjustments to relax Market Maker performance levels, and in TSX and TSXV, we waived fees associated with 're-opening' trades after a market-wide circuit breaker.

• And in CDS, to support our participants, CDS paid $2.0 million of the $4.0 million annual fixed rebate on the May 2020 invoice payable in June 2020. The balance of $2.0 million was paid in November 2020, as planned.

As we look into the future, despite prevailing uncertainty looming in our operating environment as the business world prepares to emerge from the COVID-19 pandemic, TMX Group remains firmly focused on serving our clients with excellence, providing our markets with continuity, and executing against our global growth strategy.

INITIATIVES AND ACCOMPLISHMENTS

Capital Formation[3]

AST Canada transaction

In September 2020, we announced an agreement to acquire AST Investor Services Inc. (Canada), and its subsidiary AST Trust Company (Canada) (collectively, AST Canada), a leading provider of transfer agency, corporate trust and related services to Canadian public and private companies for $165 million in cash consideration, which includes $30 million of cash in their businesses, subject to customary closing conditions and working capital adjustments.

The acquisition will significantly strengthen our ability to serve the needs of companies across the marketplace by bringing to our TSX Trust business a proven team of industry professionals, and a wider range of products and technology capabilities. From a strategic perspective, this transaction will help to accelerate TSX Trust’s growth and enhance its competitive position, deepening relationships with existing clients and broadening the scope and scale of its service offerings.

AST Canada offer a comprehensive portfolio of products and services, including transfer agency services, equity plan solutions, corporate trust, structured finance and proxy related services. AST Canada has approximately 150 employees[4] in offices in Toronto, Montreal, Calgary and Vancouver.

3 The "Capital Formation" section contains certain forward-looking statements. Please refer to "Caution Regarding Forward-Looking Information" for a discussion of risks and uncertainty related to such statements.

4 As of September 25, 2020.

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Transaction details:

• AST Trust Company (Canada)’s last twelve months (LTM) unaudited revenue through June 30, 2020 was $46.5 million (including $8.0 million of margin income) and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA)[5] was $11.6 million, excluding indirect allocations from the parent company.[6]

• Over 50% recurring revenue for the year ended June 30, 2020.[7]

• The transaction is expected to have a positive impact on TMX Group's adjusted earnings per share (EPS)[8] (excluding amortization of acquired intangibles as well as transaction and integration costs) in the first full year of ownership, before expected synergies.[9]

• We expect to realize combined revenue and technology cost synergies of approximately $8.0 million over the first two years, following acquisition.

• The transaction is expected to be financed with a combination of cash and debt capacity.

• The transaction is expected to close within 12 months from the date of signing the agreement (September 25, 2020), subject to receipt of regulatory approval under the Trust and Loan Companies Act (Canada). We have received regulatory approval under the Competition Act (Canada).

Capital Pool Company (CPC) program

In December 2020, TSXV announced changes to its Capital Pool Company (CPC) program, following extensive consultation with stakeholders across the TSXV community. The CPC program is a unique listing vehicle exclusively offered by TSXV and accounted for almost 50% of new TSXV listings in the past 10 years.

New changes to the policy took effect on January 1, 2021 and provide:

• Increased flexibility - new jurisdictions added, residency restrictions eased, spending restrictions simplified

• Reduced regulatory burden - relaxed requirements on shareholder distribution and shareholder approval, fewer restrictions on professional subscriptions

• Improved economics - increased seed investment, finders' fees and shorter escrow

5Adjusted EBITDA of AST Canada provided above is a Non-IFRS measure and does not have a standardized meaning prescribed by IFRS and is, therefore, unlikely to be comparable to similar measures presented by other companies. TMX Group presents this adjusted EBITDA to indicate operating and financial performance exclusive of adjustments including indirect allocations from the parent company. Management uses this measure because it believes doing so results in a more effective analysis of underlying financial performance, including in some cases, our ability to generate cash. Excluding this item also enables comparability across periods. The exclusion of certain items does not imply that they are non-recurring. Adjusted EBITDA as calculated for the purposes of this acquisition excludes indirect corporate overhead.

6 Revenue and adjusted EBITDA are compilations of financial information provided to us by AST Trust Company (Canada). This information is unaudited and may not be prepared in accordance with IFRS for public companies.

7 Recurring revenue is a compilation of financial information provided to us by AST Trust Company (Canada). This information is unaudited and may not be prepared in accordance with IFRS for public companies.

8 Adjusted EPS provided above is a Non-IFRS measures and does not have a standardized meaning prescribed by IFRS and is, therefore, unlikely to be comparable to similar measures presented by other companies. TMX Group presents adjusted EPS to indicate operating and financial performance exclusive of items such as indirect allocations from the parent company and other items as disclosed in this MD&A. Management uses this measure because it believes doing so results in a more effective analysis of underlying financial performance, including in some cases, our ability to generate cash. Excluding these items also enables comparability across periods. The exclusion of certain items does not imply that they are non-recurring.

9 Based on internal analysis.

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ESG initiatives

At the end of March 2020, we launched ESG 101, a new hub of ESG resources curated for TSX and TSXV issuers by us and by many of Canada’s leading ESG experts. The site includes a collection of guides, articles, events, podcasts and definitions to help issuers understand the fundamentals of ESG reporting. In addition, it provides an Expert Centre which offers contact details to help connect issuers to the right people for answers, including ESG rating agencies. The site is updated regularly with new content from our own library (podcasts, workshops, guides) and from our partners. This tool addresses a growing client need and will complement our in-person mentorship and education initiatives, including the existing governance modules of our Growth Accelerator program, a new ESG-focused Growth Accelerator module launched in September 2020, and our ESG-focused workshops. In August 2020, we released, in partnership with Chartered Professional Accountants of Canada, an updated Primer for Environmental & Social Disclosure with the objective of helping listed issuers get started with, or enhance, their ESG disclosure.

Equities and Fixed Income Trading and Clearing[10]

Market On Close (MOC) Modernization

In October 2020, TSX published and filed for regulatory approval a proposed new Closing Auction model, the first substantive changes to the MOC since its introduction in 2004. The MOC Modernization proposal was developed after two years of extensive consultation from market participants unified in supporting a best-in-class closing auction that effectively meets the liquidity and execution needs of Canadian and global investors. The new TSX MOC facility will provide an improved trading experience for market participants, better serve stakeholder needs for enhanced liquidity at the close, and enhance efficiencies in determining closing prices in Canada. The new MOC model is expected to be launched in the second half of 2021, subject to regulatory approvals. The new MOC model has received regulatory approval from the Ontario Securities Commission (OSC).

TSX DRK

The expansion of TSX’s Dark Trading offering continued throughout 2020 with the successful introduction of new pricing programs and targeted sales campaigns. As a result, TSX DRK made substantial gains in this market segment, increasing its continuous trading market share in TSX listed securities from 18% in 2019 to 26% in 2020. Planned expansion initiatives and investments are expected to increase user adoption, introduce new offerings, and support continued market share growth in 2021.

Sustainable Bonds Posted for Trading on TSX

TMX Group is introducing on-Exchange trading for Sustainable Bonds issued by governments and quasi-governmental entities. This platform will be activated in 1H/21. For trading in these bonds, we will use the same TSX trading engine, dissemination tools and distribution channels as those used for trading equities and ETFs on TSX. Offering Sustainable Bonds on TSX will enable retail investors efficient access to an otherwise opaque OTC bond market, and respond to issuers' needs for wider investor ownership of their Sustainable Bonds.

TSX has also modernized its listing fee schedule to accommodate all reporting issuers (typically corporations) in their listing of bonds. The new fee schedule is scaled to issuance size and maturity.

10 The "Equities and Fixed Income Trading & Clearing" section contains certain forward-looking statements. Please refer to "Caution Regarding Forward-Looking Information" for a discussion of risks and uncertainty related to such statements.

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Derivatives Trading and Clearing[11]

In October 2018, MX launched extended trading hours from the previously 6:00 a.m. ET open to a 2:00 a.m. ET open. Initially, this included MX's interest rate products[12] . Beginning in February 2019, MX offered clients the ability to also trade its equity index futures[13] in these extended hours. For 2020, volumes during extended trading hours represented approximately 6% of total volumes in these products. MX is preparing for the next phase of extended hours to align with trading hours in Asia in Q2/21. As part of its global expansion efforts, MX obtained Recognized Oversees Investments Exchange status with the UK Financial Conduct Authority.

In June 2020, MX launched a new three-month Canadian Overnight Repo Rate Average (CORRA) futures contract. As many jurisdictions around the world transition away from interbank offered rates (IBOR), which are survey-based, to new transaction-based reference rates, Canada followed suit by enhancing the CORRA benchmark, now under the administration of the Bank of Canada. Since the launch on June 12, 2020, 13,077 contracts traded through December 31, 2020. There was open interest of 5,578 contracts at December 31, 2020. Canada is expected to be a dual-rate jurisdiction for the foreseeable future, so this new instrument will coexist with MX's flagship BAX product for years to come.

In December 2020, MX launched the S&P/TSX 60 ESG Index Futures[14] (SEG) and launched a new market making program to support the growth of its Two-Year Government of Canada Bond Futures (CGZ). In 2020, 97,912 CGZ contracts traded with open interest of 25,585 contracts at December 31, 2020.

The S&P/TSX 60 ESG Index[14] measures the performance of constituents in the S&P/TSX 60 Index[14] that meet sustainability criteria, while taking into account the industry group weights of the S&P/TSX 60 Index[14] . The S&P/TSX 60 ESG Index Futures[14] (SEG) is an ESG version of the established S&P/TSX 60 Standard Index Futures[14] (SXF), enabling investors to align with ESG strategies or UN Principles for Responsible Investing (PRI) objectives.

The revitalization of the Two-Year Government of Canada Bond Futures (CGZ) is part of MX's efforts to increase the number of liquid points on the Canadian listed yield curve, as a next step after the successful revitalization of the FiveYear Government of Canada Bond Futures (CGF) started in 2018.

Global Solutions, Insights and Analytics (GSIA)[15]

Trayport

Trayport is the primary connectivity network and data and analytics platform for European wholesale energy markets. Trayport's solutions enable price discovery, trade execution, post-trade transparency and post-trade straight through processing.

11 The "Derivatives Trading and Clearing" section contains certain forward-looking statements. Please refer to "Caution Regarding Forward-Looking Information" for a discussion of risks and uncertainty related to such statements.

12 BAX - Three-Month Canadian Bankers' Acceptance Futures, CRA - Three-month Canadian Overnight Repo Rate Average (CORRA) Futures (launched June 12, 2020), CGZ - Two-Year Government of Canada Bond Futures, CGF - Five-Year Government of Canada Bond Futures and CGB - Ten-Year Government of Canada Bond Futures.

13 SXF - S&P/TSX 60 Index Standard Futures and SXM - S&P/TSX 60 Index Mini Futures.

14 The S&P/TSX 60 ESG Index Futures, S&P/TSX 60 ESG Index, S&P/TSX 60 Index, and S&P/TSX 60 Standard Index Futures are products of the S&P Dow Jones Indices are products of S&P Dow Jones Indices LLC ("SPDJI") and TSX Inc. ("TSX"). Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and TSX® is a registered trademark of TSX. SPDJI, Dow Jones, S&P and TSX do not sponsor, endorse, sell or promote any products based on the S&P/TSX Indices and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions or interruptions of the S&P/TSX Indices or any data related thereto.

15 The "Global Solutions Insights and Analytics" section contains certain forward-looking statements. Please refer to "Caution Regarding Forward-Looking Information" for a discussion of risks and uncertainty related to such statements.

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Trayport successfully supported its trader and broker customers as they transitioned to working from home during the COVID-19 pandemic. Volumes have been strong through December 31, 2020 with record volumes in both the European power and gas markets driven by the market volatility. Volumes for these power and gas products were up 10% and 14%, respectively compared with 2019.

Global Gas - Liquid Natural Gas (LNG)

Volumes remained strong for the European and Asian benchmark gas contracts, the Dutch Title Transfer Facility (TTF) and the Japan Korea Marker (JKM). TTF volumes rose 27% in 2020 compared with 2019[16] and we have seen record JKM over the counter (OTC) cleared volumes from Trayport brokered customers. While not directly correlated, the increase in volumes in these markets can result in an expansion in market participants, which can drive growth in the number of subscribers connecting with Trayport to trade these products.

Algorithmic Trading and Data Analytics Products

The trend of algorithmic power trading in European intraday markets continued through to December 31, 2020. In 2020, intraday volumes on EPEX Spot grew 14% compared with 2019. [17]

This algorithmic trading trend is also developing across the rest of the markets Trayport serves in Europe. Trayport has responded to this demand by launching a Data Analytics product to store and analyze customers data sets, which is now live and has been well received by customers. Trayport is also expanding its AutoTrader algorithmic design and execution product to cover these additional forward and futures markets. Together, these products provide an end to end solution for customers to design, backtest, and execute algorithmic strategies.

Geographic Expansion

In October 2019, Trayport and Nodal Exchange, a Washington D.C.-based derivatives exchange serving North American commodities markets, announced an agreement to offer Trayport’s core trading screen, Joule, to trading participants of Nodal Exchange. Nodal has started rolling out screens to trader clients.

TMX Datalinx

On July 27, 2020, we launched the following S&P/TSX ESG[18] indices to enable our clients to gain exposure to ESG investments and manage risks associated with ESG:

S&P/TSX 60 ESG Index 18

The Index is designed to track the performance of the constituent companies of the S&P/TSX 60 Index[18] , while taking into account each company's S&P DJI ESG Scores. The index construction methodology is based on the S&P/TSX 60 Index[18] ; companies are then re-weighted according to their sustainability score and relative to industry-specific standards.

16 Source: Trayport's Euro Commodities Report. 17 Sourced from collection of monthly EPEX volume reports.

18 The S&P/TSX 60 Index, S&P/TSX Composite Index, S&P/TSX 60 ESG Index, S&P/TSX Composite ESG Index, S&P/TSX 60 Carbon Price Risk Index and S&P/TSX Composite Carbon Price Risk Index are products of the S&P Dow Jones Indices are products of S&P Dow Jones Indices LLC ("SPDJI") and TSX Inc. ("TSX"). Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and TSX® is a registered trademark of TSX. SPDJI, Dow Jones, S&P and TSX do not sponsor, endorse, sell or promote any products based on the S&P/TSX Indices and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions or interruptions of the S&P/TSX Indices or any data related thereto.

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S&P/TSX Composite ESG Index 18

The Index is designed to target 75% of the float capitalization of each GICS® industry group within the S&P/TSX Composite Index[18] , using S&P DJI ESG Scores for constituent selection.

S&P/TSX 60 Carbon Price Risk Index and S&P/TSX Composite Carbon Price Risk Index 18

S&P Carbon Price Risk Indices are designed to measure the performance of the constituent companies of the S&P/TSX 60 Index[18] and S&P/TSX Composite Index[18] , respectively, reweighed to account for the potential impact of 2030 carbon prices on constituents’ stock prices. The S&P Carbon Price Risk 2030 Adjusted Index[18] Series aims to re-balance index constituents in a way that adjusts for their differing levels of future carbon price risk, based on pricing risks arising from industry and geographic distribution of emissions, as well as levels of emissions.

Co-location Services

In July 2020, we received regulatory approval to increase pricing by 5% for co-location services, which became effective on September 1, 2020. To meet client demand, we plan to increase capacity at our co-location facility by approximately 25% in Q3/21.

TMX Market Centre

Construction of TMX Market Centre, a state-of-the-art modern digital facility located at the base of our Toronto headquarters, was completed in Q4/20. The 8,500 square foot venue will be utilized for daily market open and close ceremonies, and has the capacity to accommodate up to 320 people for corporate and shareholder events. The official opening will be postponed until COVID-19 restrictions are removed, and external guests can be accommodated safely.

TMX Money

In Q2/20 we introduced a new TMX Money website, which integrates the prior TMX Money and TMX Matrix digital platforms. This new website has been designed to help increase exposure for our issuers (particularly those on the TSX Venture Exchange) with retail investors. As of Q3/20, all user traffic is now going to this new site, ensuring that our retail investors and trader users can now benefit from the new improved user experience.

Update on Modernization of Clearing Platforms[19]

In 2017, we commenced work on an initiative to modernize the technology platforms for our CDS and CDCC clearing and settlement businesses as well as for our entitlement systems. We have separated the modernization of our clearing houses into two phases. In phase one, we focused on the CDCC risk management element of the project that went live in Q2/19.

Phase two of this project involves the replacement of other legacy systems at CDS including those related to clearing and settlement, as well as an expanded scope to address entitlement payment systems. In March 2017, we

18 The S&P/TSX 60 Index, S&P/TSX Composite Index, S&P/TSX 60 ESG Index, S&P/TSX Composite ESG Index, S&P/TSX 60 Carbon Price Risk Index and S&P/TSX Composite Carbon Price Risk Index are products of the S&P Dow Jones Indices are products of S&P Dow Jones Indices LLC ("SPDJI") and TSX Inc. ("TSX"). Standard & Poor's® and S&P® are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and TSX® is a registered trademark of TSX. SPDJI, Dow Jones, S&P and TSX do not sponsor, endorse, sell or promote any products based on the S&P/TSX Indices and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions or interruptions of the S&P/TSX Indices or any data related thereto.

19 The "Update on Modernization of Clearing Platforms" section contains certain forward-looking statements. Please refer to "Caution Regarding Forward-Looking Information" for a discussion of risks and uncertainties related to such statements.

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implemented an Issuer Services Program that included a number of fee changes in anticipation of the investment that would be required to modernize the entitlement payments system. We spent $43.8 million up to the end of 2019 on capital expenditures related to phase two and $27.8 million in 2020. Overall, we expect to incur between approximately $100 and $110 million in capital expenditures during Phase two of this project. We expect to complete this project in Q1/22. We will continue to provide updates on estimates for capital expenditures and timing as this complex project progresses.

ORGANIZATIONAL CHANGES

On August 17, 2020, we announced that John McKenzie would lead the organization as its Chief Executive Officer (CEO). Mr. McKenzie, who assumed the role on that date, also became a member of the TMX Group Limited Board of Directors. Mr. McKenzie had served as TMX Group interim CEO, as well as Chief Financial Officer (CFO).

Frank Di Liso, Vice President, Corporate Finance and Administration, a member of the Finance department leadership team for over ten years, was named interim Chief Financial Officer until a permanent successor to John McKenzie is appointed.

On November 17, 2020, we announced the appointment of Cindy Bush as Chief Human Resources Officer, effective December 7, 2020. Ms. Bush is responsible for leading all aspects of TMX Group's Human Resources function in support of TMX Group's corporate objectives, including strategy development and execution, workplace culture, performance management,employee communications, talent development and acquisition. Ms. Bush has more than twenty-five years of experience in human resources, talent strategies and culture transformation at companies based in Canada as well as in the United States, the United Kingdom and France.

REGULATORY CHANGES

Equities Trading

On January 23, 2020, the Canadian Securities Administrators (CSA) published a notice confirming that it has approved a Trading Fee Rebate Pilot Study that applies temporary pricing restrictions on marketplace transaction fees, to examine the effects of a prohibition of rebate payments by Canadian marketplaces (Pilot Study). The implementation of the Pilot Study was conditional on the implementation of a similar study by the United States Securities and Exchange Commission (SEC). With a Court ruling against the SEC in June 2020, we understand that the U.S. fee pilot study will not proceed, and that the CSA will not be advancing the Pilot Study in Canada.

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MARKET CONDITIONS AND OUTLOOK[20]

The COVID-19 pandemic has had an unprecedented impact on market and general economic conditions. Heightened volatility has resulted in significantly higher trading and clearing volumes for cash equities markets. At this point it is difficult to project the longer term impact from this volatility, when it may subside, and the implications for capital markets activity. The average CBOE Volatility Index (VIX) was 29.3 in 2020 compared with 15.4 in 2019. Overall, Canadian equities trading volumes were up 39% in 2020 compared with 2019.[21] Across all of our equities markets, overall trading volumes were up 42% in 2020 compared with last year with trading volumes on Toronto Stock Exchange (TSX), TSX Alpha Exchange (Alpha) and TSX Venture Exchange (TSXV) increasing by 37%, 64% and 47%, respectively. In Canadian derivatives trading, the volume of contracts traded on MX was essentially unchanged in 2020 compared to 2019. While MX experienced significant increases in volumes earlier in 2020, volumes on interest rate products, particularly short-term interest rate contracts, declined substantially throughout the year reflecting reduced trading in a very low interest rate environment.

The highly uncertain and volatile economic and market environment has contributed to less favourable conditions for capital raising in 2020. However, in recent months we have seen increased financing activity on both of our exchanges as valuations have improved. On TSX, the total amount of financing dollars raised increased by 4% from 2019 to 2020, and the total number of financings increased by 4% over the same period. On TSXV (including NEX) there was a 57% increase in the total amount of financing dollars raised, and a 25% increase in the total number of financings in 2020 over last year.

On January 20, 2021, the Bank of Canada (the Bank) announced that it was maintaining its target overnight rate at ¼ percent. According to the Bank, economic recovery has been interrupted in many countries as new waves of COVID-19 infections force governments to re-impose containment measures. However, the arrival of effective vaccines combined with further fiscal and monetary policy support have boosted the medium-term outlook for growth. Canada’s economy had strong momentum through to late 2020, but the resurgence of cases and the reintroduction of lockdown measures are a serious setback. Growth in the first quarter of 2021 is now expected to be negative. Assuming restrictions are lifted later in the first quarter, the Bank expects a strong second-quarter rebound. After a decline in real GDP of 5 ½ percent in 2020, the Bank projects the economy will grow by 4 percent in 2021, almost 5 percent in 2022, and around 2 ½ percent in 2023.

The Bank added that CPI inflation has risen to the low end of the Bank’s 1-3 percent target range in recent months, while measures of core inflation are still below 2 percent. CPI inflation is forecast to rise temporarily to around 2 percent in the first half of the year, as the base-year effects of price declines at the pandemic’s outset — mostly gasoline — dissipate. Excess supply is expected to weigh on inflation throughout the projection period. As it is absorbed, inflation is expected to return sustainably to the 2 percent target in 2023.[22]

20 The "Markets Conditions and Outlook" section contains certain forward-looking statements. Please refer to "Caution Regarding Forward-Looking Information" for a discussion of risks and uncertainty related to such statements. 21 Source: IIROC (excluding intentional crosses).

22 Source: Extracted from Bank of Canada press release, January 20, 2021.

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OUR BUSINESS

On the following pages, we provide an overview and description of products and services, strategy and revenue description for each of our segments as outlined below:

1. Capital Formation

2. Equities and Fixed Income Trading and Clearing

3. Derivatives Trading and Clearing

4. Global Solutions, Insights and Analytics

5. i. TMX Datalinx

6. ii. Co-location Services

7. iii. Trayport

For key statistics related to each business above, please see Results of Operations .

TMX 2020 Revenue: $865.1 million

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Equities and Fixed Income
Trading and Clearing: 26%
Derivatives Trading and
Clearing: 15%
Capital Formation: 22%
Global Solutions, Insights
and Analytics: 37%
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Capital Formation

Year Ended December 31, 2020 Capital Formation revenue of $189.0 million

Other Issuer Services: 14% TSX Venture Exchange: 25%

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Toronto Stock Exchange: 61%

Overview and Description of Products and Services

Our goal is to provide solutions for corporate clients in need of growth capital and liquidity, and provide investors with a broad range of investment opportunities.

TMX operates a unique two-tiered ecosystem, comprised of Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV), to help companies access the public markets, raise capital and provide liquidity to shareholders. TSX is a leading listings venue for established domestic and international issuers. TSXV is the pre-eminent global platform for facilitating venture stage capital formation.

In general, established issuers initially list on TSX through an Initial Public Offering (IPO), by graduating from TSXV, or by seeking a secondary listing (to complement an existing listing on another listing venue). Venture stage companies generally list on TSXV either in connection with an IPO, or through alternative methods such as TSXV’s Capital Pool Company program or a reverse takeover. We also operate NEX, a market for issuers that have fallen below the listing standards of TSXV.

Issuers list a number of different types of securities including conventional securities such as common shares, preferred shares, rights and warrants; and a variety of alternative types of structures such as exchangeable shares, debt or convertible debt instruments, limited partnership units, ETFs, and structured products such as investment funds.

We are a global leader in listing small and medium-sized businesses with concentration in resource sector listings and a growing number of innovation companies, including those in the technology, clean technology, renewable energy and life science sectors. In 2020, we welcomed 300 new listings, of which 47 were innovation companies and 20 were international (non-Canadian) companies. Issuers listed on TSX and TSXV raised a combined $42.8 billion in 2020 ($36.2 billion on TSX and $6.6 billion on TSXV).

In addition to our listing facilities, we offer other services to our listed issuers. TSX Company Services is focused on enhancing and expanding our service offering to support the funding, growth, and success of our listed companies. Together with industry leading service providers, we offer solutions and resources designed to help our clients reach their corporate objectives.

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Within Capital Formation is TSX Trust, second by market share, servicing approximately 23% of listed issuers when measured by clients on the TSX, TSXV, and Canadian Securities Exchange (CSE). The business supports approximately 1,200 equity and debt issuers and private companies with corporate trust, transfer agent, registrar and registered plan services.

Strategy

• Leveraging our global presence and channel partners to attract international listings across all sectors

• Accelerating growth in targeted sectors (including the mining, energy, innovation, and ETF sectors) where we are uniquely positioned

• Activating new pools of capital (including sustainable investing capital) in Canada and globally

• Accelerating our policy and regulatory advocacy and thought leadership efforts to stimulate investment in the public markets, ease regulatory burdens, and promote fairness for public companies

• Streamlining and digitizing issuer listing processes to enhance the issuer experience, achieve operational excellence, and facilitate revenue protection and revenue growth

• Driving policy innovation

• Adapting to the evolving needs of public and private companies (across their business lifecycle) and their capital providers by offering new platforms and solutions.

• For TSX Trust, the strategy focuses on three main pillars of growth:

• Growing from the core - accelerating growth through expanding product line-up and selling more to existing clients

• Private markets - expand service offering to meet unique needs of the client base

• Corporate, government and infrastructure debt - leveraging the trust license to expand into adjacent markets with recurring revenue and cash balances

Revenue Description

We generate Capital Formation revenue from several fees and services, including:

Initial Listing Fees

TSX and TSXV issuers pay initial listing fees based on the value of the securities to be listed or reserved, subject to minimum and maximum fees. Initial listing fees fluctuate with the value of securities being listed or reserved at the time of listing. Revenues from initial listing fees are deferred over a 12-month period from the date of listing.

Additional Listing Fees

Issuers already listed on one of our equity exchanges pay fees in connection with subsequent capital market transactions, such as the raising of new capital through the sale of additional securities and reserving additional shares to be issued under stock option plans. Additional listing fees are based on the value of the securities to be listed or reserved, subject to minimum and maximum fees and are recognized in the period the transaction occurred.

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23 Sustaining Listing Fee ~~s~~

Issuers listed on one of our equity exchanges pay annual fees to maintain their listing, based on their market capitalization at the end of the prior calendar year, subject to minimum and maximum fees. Sustaining listing fees for existing issuers are billed during the first quarter of the year, recorded as deferred revenue and amortized over the year on a straight-line basis. Sustaining listing fees for new issuers are billed in the quarter after the new listing takes place, based on their market capitalization on the date of listing, and are amortized over the remainder of the year on a straight-line basis.

Fees charged to issuers vary based on the type of issuer (corporate, structured product or ETF).

The aggregate market capitalization of issuers listed on TSX increased from $3.2 trillion at the end of 2019 to $3.4 trillion at the end of 2020. The market capitalization of issuers listed on TSXV including NEX increased from $45.4 billion at the end of 2019 to $78.4 billion at the end of 2020. We estimate that the increase in the total market capitalization on TSX should result in an increase in TSX sustaining fee revenue of approximately $2.0 million in 2021. We estimate that the increase in the total market capitalization on TSXV should result in an increase in TSXV sustaining fee revenue of approximately $3.0 million in 2021.

Other Services

TSX Trust has approximately 1,200 clients, and revenue is primarily derived from recurring monthly fees and net interest income on cash balances. Corporate trust fees relate to services that include acting as trustee for debt instruments, depository for takeover bid offers, warrant agent, subscription receipt agent, and agent for voluntary escrow arrangements. TSX Trust launched a new business line in 2020 with its introduction of a Registered Plans custody service to non-bank broker dealers. TSX Trust benefits from periodic and large cash balances that are held in its trust account, which results in net interest income.

23 The "Sustaining Listing" section above contains certain forward-looking statements. Please refer to "Caution Regarding ForwardLooking Information" for a discussion of risks and uncertainties related to such statements.

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Equities and Fixed Income Trading & Clearing

Year ended December 31, 2020 Equities and Fixed Income Trading and Clearing revenue of $226.2 million

Equities and fixed income clearing, settlement, depository and other Equities and fixed income services (CDS): 44% trading: 56%

Equities and Fixed Income Trading – TSX, TSXV, Alpha and Shorcan

Overview and Description of Products and Services

We operate innovative, efficient, reliable, high performance platforms for trading and clearing.

Equities Trading

TSX, TSXV and Alpha operate fully electronic exchanges that facilitate secondary trading in TSX and TSXV-listed securities on a continuous auction basis throughout the trading day.

Retail, institutional and other proprietary investors and traders place orders to buy or sell securities through Participating Organizations (POs)/Members of the exchanges. In addition to continuous trading throughout the day, TSX and TSXV also operate opening and closing auctions, which are central sources of liquidity for trading in Canada during those times. The closing auctions also establish the industry benchmark closing price for our listed securities. A post-closing trading session on TSX and TSXV allows for further opportunity to trade at the closing price. Additional trading features and functionalities are offered to accommodate a range of trading strategies and provide flexibility and optionality to clients. Each of TSX, TSXV and Alpha also allow POs to report their internally matched orders, by printing them as crosses on the exchanges at no cost.

Fixed Income Trading

Shorcan acts as an inter-dealer bond broker (IDB) that specializes in the Canadian fixed income marketplace, brokering products that include Government of Canada, provincial, corporate, strip, and mortgage bonds, repurchase agreements (repos) and swaps. Shorcan serves financial institutions that are broker-dealers registered with IIROC and that are CDCC members; the buy-side does not participate. Inter-dealer brokers can be accessed via broker screens that run on desktop computers at a trader’s desk or via voice lines.

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Strategy

Equities Trading

• Continue to deploy innovative trading features and functionalities aimed at enhancing market efficiency and trading liquidity

• Continue to maintain leading market share

• Maintain market leading position in Canada Trading

• Continue to grow our Canadian Swaps business

Revenue Description

Equities Trading

Most of the fees on TSX, TSXV and Alpha are volume-based. These fees are applied to traded shares, and in most cases, involve one side of the trade being charged a per share fee and the other side being provided with a per share rebate. The excess of the fee over the rebate represents the exchanges' net fee per share traded. These types of models are intended to incent different types of customers and behaviors. The primary fee structure on TSX and TSXV is a makertaker model that pays a rebate to the liquidity providing side of the trade so that market participants have an incentive to enter passive orders into the central limit order book, while the liquidity taking side of the trade pays a fee. Alpha supports an inverted pricing model which is intended to provide incentives to take liquidity by providing a rebate, with the liquidity providing side of the trade paying the fee. Regardless of the fee structure applied, trading revenue is recognized in the month in which the trade is executed.

Fixed Income Trading

Shorcan charges broker commissions on both sides of the trade upon execution. Shorcan broker commission varies by different types of instruments and by execution method, voice vs. electronic.

Equities and Fixed Income Clearing, Settlement, Depository and Other Services - CDS

Overview and Description of Products and Services

CDS is Canada's national securities depository, clearing and settlement hub for domestic and cross-border depositoryeligible securities. CDS supports Canada's equities, fixed income and money markets and is accountable for the safe custody and movement of securities, the processing of post-trade transactions, and the collection and distribution of entitlements relating to securities deposited by participants.

CDS’s domestic clearing and settlement services enable participants to report, confirm or match, reconcile, net and settle exchange and OTC traded equity, debt and money market transactions, as well as derivative transactions in depository-eligible securities (e.g., the processing of rights and warrants and the settlement of exercised options). CDS also offers related services such as buy-ins, risk controls and reporting, and facilitates trading in CDSX (CDS’s multilateral clearing and settlement system) eligible securities before they are publicly distributed (trades in these securities settle after public distribution). CDSX is designated by the Bank of Canada as being systemically important, under the Payment Clearing and Settlement Act (Canada).

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CDS Depository is accountable for the safe custody and movement of depository-eligible domestic and international securities, accurate record-keeping, processing post-trade transactions, and collecting and distributing entitlements arising from securities deposited by participants.

Other CDS services include, the issuance of International Security Identification Numbers (ISINs), depository eligibility, securities registration as well as entitlement and corporate action (E&CA) event management.

Strategy

TMX Group is implementing a post-trade services strategy to replace the existing clearing, settlement and custody system at CDS. During 2020, the development and internal testing of the system was substantially completed. Testing with participants will commence in Q2/21. Under this strategy, TMX Group will continue to invest in modernizing core technology and developing growth opportunities for each of the two businesses under these main focuses:

• Clearing and Depository: Develop and migrate to an advanced clearing, settlement, and risk management solution, to deliver enhanced client experiences at higher efficiency (see INITIATIVES AND ACCOMPLISHMENTS - Update on Modernization of Clearing Platforms ).

• Global Liquidity Solutions: Provide streamlined access to funding and margining, and continue growth in Repo central-counterparties offering.

• Global Connectivity Solutions: Create access gateways that connect global clients within an increasingly global marketplace such as the CDS-DTCC (The Depository Trust & Clearing Corporation) link and collateral optimization opportunities through one of 2 European providers.

Revenue Description

For reported trades, both exchange traded and OTC trades, CDS charges clearing fees to participants on a per trade basis. Clearing fees are recognized as follows:

• Reporting fees are recognized when the trades are delivered to CDS.

• Netting/novation fees are recognized when the trades are netted and novated.

Other clearing-related fees are recognized when services are performed.

For those trades that are netted in Continuous Net Settlement (CNS), settlement fees are charged on the basis of the number of netted trades settled. Settlement fees for those trades that are not netted (i.e., trades that are settled individually on a trade-for-trade (TFT) basis) are charged on a per transaction basis. Settlement-related fees are recognized when the trades are settled.

Depository fees are charged per transaction and custody fees are charged based on a daily average of volume (i.e., number of shares held for equity securities and nominal value held for fixed income securities) and positions held. Depository fees are charged for custody of securities, depository related activities, and processing of entitlement and corporate actions, and are recognized when the services are performed.

International revenue consists of revenue generated through offering links as channels to participants to affect crossborder transactions and custodial relationships with other international organizations. The related fees are recognized as follows:

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• Fees are charged to participants based on participant usage of National Securities Clearing Corporation (NSCC) and Depository Trust Company (DTC) services. Participants are sponsored into NSCC and DTC services via the New York Link service and the DTC Direct Link service respectively.

• Custodial fees and other international services related revenues are recognized when the services are performed.

Issuer services fees are fees levied to issuers and/or their agents for ISIN, and entitlements and corporate actions management services for which they benefit. The transition period for the discount on entitlement and corporate action event management fees ended on December 31, 2018.

50:50 Rebates on Core CDS Services

For the period starting November 1, 2012 and subsequent fiscal years starting on January 1, 2013, CDS shares with participants, on a 50:50 basis, any annual increases in revenue on clearing and other core CDS Clearing services, as compared with revenues in fiscal year 2012 (the 12-month period ending October 31, 2012). Beginning January 1, 2015 and subsequent years, CDS also shares with Participants, on a 50:50 basis, any annual increases in revenue applicable to the New York Link/Depository Trust Company Direct Link Liquidity Premium. Rebates are paid on a pro rata basis to participants in accordance with the fees paid by such participants for these services.

Additional Rebates

In addition, CDS must rebate an additional $4.0 million annually to participants in respect of exchange clearing services for trades conducted on an exchange or alternative trading systems (ATS).

In December 2019, CDS filed a proposal to make two changes to the existing fee model. The first and most significant change was the proposal to modify its fee model by eliminating the rebates that are paid annually to participants based on their respective use of CDS services. The second change was the elimination of network connectivity fees currently paid by participants.

CDS expects to publish an amended proposal In Q1/21, which includes two changes to the original application:

• CDS is proposing to cease charging for reports that it transmits to participants. These report fees generated $1.2 million of revenue in 2020. The elimination of the report fees are in addition to the originally proposed elimination of network connectivity fees which were $3.1 million in 2020

• CDS is proposing to modify the effective date of the proposed rebate elimination to coincide with the Modernization of Clearing Platforms launch which is expected to be in Q1/22 (See Initiatives and Accomplishments - Update on Modernization of Clearing Platforms ).

The elimination of the rebates is being proposed to ensure that the significant investment required to modernize CDS technology now can be made, and to ensure adequate funding of ongoing future technology upgrades, while enabling us to earn an appropriate rate of return on our capital investments. The elimination of network connectivity fees and report fees is intended to enable participants to obtain a further netting benefit as against the impact of the rebate elimination.

For the five-year period from 2016 to 2020 inclusive, CDS rebated an average of approximately $10.0 million annually. In 2020, CDS rebated $14.3 million reflecting increased volumes.

The above proposals are all subject to further public comment and regulatory approval.

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Derivatives Trading and Clearing

Derivatives Trading and Clearing – MX, CDCC and BOX

Overview and Description of Products and Services

Our domestic financial derivatives trading is conducted through MX, Canada’s standardized financial derivatives exchange. Headquartered in Montréal, MX offers trading in interest rate, index, equity and currency derivatives. BOX is an equity options market located in the U.S. for which MX provided transitional technology services in 2019, and the first half of 2020. As at December 31, 2020, MX held approximately 43% ownership interest in BOX.

Derivatives - Trading

MX

MX offers interest rate, index, equity and currency derivatives to Canadian and international market participants. MX connects participants to its derivatives markets, builds business relationships with them and works with them to ensure that the derivatives offerings meet investor needs. In 2020, approximately 59% of MX’s volume was represented by four futures contracts – the Three-Month Canadian Bankers’ Acceptance Futures contract (BAX), the 5-Year Government of Canada Bond Futures contract (CGF), the 10-Year Government of Canada Bond Futures contract (CGB) and the S&P/TSX 60 Standard Futures contract (SXF) – with the balance largely represented by our equity and ETF options market.

BOX

BOX (BOX Holdings Group LLC and BOX Exchange LLC) is an all-electronic equity derivatives market and is one of a number of equity options markets in the U.S. All BOX trade volume is cleared through the Options Clearing Corporation. BOX ran on our SOLA technology. Effective December 31, 2018, the term of such service offerings ended, and we provided transitional services to BOX until Q2/20. In 2020, D erivatives Trading and Clearing revenue included approximately $1.7 million of revenue from providing transitional services to BOX.

Derivatives – Clearing

CDCC acts as the central clearing counterparty for exchange-traded derivative products in Canada and for a growing range of customized financial instruments. CDCC’s role is to ensure the integrity and stability of the markets that it supports. CDCC provides central clearing counterparty (CCP) clearing and settlement services for all MX transactions and certain over-the-counter (OTC) derivatives, including fixed income repurchase and reverse repurchase agreement (REPO) transactions. In addition, CDCC is the issuer of options traded on MX markets.

CDCC is an integrated central clearing counterparty in North America that clears and settles futures, options and options on futures. The Canadian Derivatives Clearing Service (CDCS) operated by CDCC has been designated by the Bank of Canada as being a systemically important financial market infrastructure under the Payment Clearing and Settlement Act (Canada).

CDCC generates revenue from clearing and settlement, as well as from options and futures exercise activities (see Revenue Description section below).

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Derivatives – Regulatory Division

MX is recognized by the Autorité des marchés financiers (AMF) as a Self-Regulatory Organization (SRO) that has responsibility for maintaining the transparency, credibility and integrity of the exchange-traded derivatives market in Canada. MX’s Regulatory Division oversees the regulatory functions. It is responsible for the regulation of its markets and its trading participants.

The Regulatory Division operates as a separate and independent unit of MX. It is subject to the oversight of MX’s Special Committee – Regulatory Division. The Special Committee – Regulatory Division, which is appointed by the Board of Directors of MX, is composed of a majority of independent members, none of whom is a member of the Board of Directors of MX or CDCC. The Regulatory Division operations are self-funded and are carried out on a not-for-profit basis.

The Regulatory Division generates revenue from regulatory fees principally comprised of market surveillance fees collected by MX on behalf of its Regulatory Division. Market regulation fees are recognized in the month in which the services are provided.

Any surplus in the Regulatory Division must be, subject to the approval of the Special Committee – Regulatory Division, redistributed to MX’s approved participants and any shortfall must be made up by a special assessment by MX’s participants or by MX upon recommendation of the Special Committee – Regulatory Division. Regulatory fines are accounted for separately from regulatory fees revenues. The regulatory fines can be used only for specifically approved purposes, such as educational initiatives.

Strategy

MX sales and business development efforts will focus on:

• Continuation of global expansion through trading hours and access expansion

• Introduction of new client-focused products and services with new offerings to unlock the yield curve and further build out the equities derivatives complex

CDCC strengthens and supports Derivatives markets growth with trusted, deep post-trade capabilities. Enhancements of CDCC’s products and services will focus on:

• Supporting a vertically-integrated introduction of new derivatives products and services

• Providing efficient international access to a global pool of traders and asset owners

• Upgrading operational, risk and regulatory compliance capabilities

• Complementing the Derivatives ecosystem with an expanded REPO facility

Revenue Description

Those who trade on MX are charged fees for buying and selling derivatives products on a per transaction basis, determined by factors that include contract type and volume of contracts traded. Since MX trading fee rates are charged on each transaction based on the number of contracts included in each transaction, MX trading revenue is largely correlated to the volume of contracts traded on the derivatives market. Derivatives trading revenue is recognized in the month in which the trade is executed.

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CDCC clearing members (Clearing Members) pay fees for clearing and settlement, including OTC fixed income and REPO transactions, on a per transaction basis. Fees for fixed income transactions are based on the size and term of the original agreement. Clearing Members are also eligible for a revenue sharing arrangement based on annual cleared volumes of REPO transactions. Clearing and settlement revenues other than for REPO transactions are correlated to the trading volume of such products and therefore fluctuate based on the same factors that affect our derivatives trading volume. Revenue is recognized as performance obligations are satisfied; this occurs within a short period of time. Clearing revenue for fixed income REPO agreements is recognized on the novation date of the related transaction.

Global Solutions, Insights, and Analytics (GSIA)

Year ended December 31, 2020 GSIA revenue $323.7 million

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Other: 4%
Index (incl. Benchmarks): 5%
Co-location: 5%
Feeds: 13% Trayport: 42%
Subscribers & Usage: 31%
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Overview and Description of Products and Services

We deliver data to fuel high-value proprietary and third party analytics to help clients make better trading and investment decisions, and provide solutions to European wholesale energy markets for price discovery, trade execution, post-trade transparency, and post-trade straight through processing.

TMX Datalinx

Real-Time Equity Market Data Products – TSX and TSXV Level 1 and Level 2 and Alpha Feeds

Trading activity on TSX, TSXV and Alpha produces a stream of real-time data reflecting orders and executed transactions. This stream of data is supplemented with value-added content (e.g. dividends, earnings) and packaged by TMX Datalinx, our information services division, into real-time market data products and delivered to end users directly

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or via Canadian and global redistributors that sell data as feeds and for desktop product use. Our market data is available globally through a large number of network carriers and extranets.

We offer our subscribers Level 1, and Level 2 real-time services for TSX, TSXV and Alpha. Level 1 provides trades, quotes, corporate actions and index level information. Level 2 provides a more in-depth look at the order book and allows distributors to obtain Market Book for TSX, TSXV and Alpha. Market Book is an end-user display service that includes Market-by-Price, Market-by-Order and Market Depth by Broker for all committed orders and trades.

We also provide market participants with low-latency access to real-time Level 1 and Level 2 market data consolidated to include all domestic equities marketplaces, by way of our TMX Information Processor Consolidated Data Feed (CDF), Canadian Best Bid and Offer (CBBO), Consolidated Last Sale (CLS), and Consolidated Depth of Book (CDB) services. Our Information Processor mandate from securities regulators was approved in June 2018 for an additional four year period.

Real-Time Derivative Market Data Products

We also derive data revenue from MX. Similarly to equities markets, we distribute MX real-time Level 1, and Level 2 trading data to market participants on a global basis directly and through data distributors.

Historical, Online, and Other Market Data Products

Historical market data products include market information such as historical tick data, official market statistics and close prices and corporate information such as dividends and corporate actions used in research, analysis and trade clearing, including via TMX Analytics product suites to enable increased usability for clients.

Equities and Derivatives - Index Products

We have an arrangement with S&P Dow Jones Indices (S&P DJI) under which we share license fees received from organizations that create products, such as mutual funds and ETFs, based on the S&P/TSX indices[24] . In general, these license fees are based on a percentage of funds under management in respect of these proprietary products. The multiyear Index Operation and License Agreement between TSX Inc. and S&P DJI covers the creation and publication of all S&P/TSX indices[24] , while also providing MX with the rights to list futures and options on the S&P/TSX indices[24] .

Enterprise non-professional (non-pro) fee discount program

Under this program we introduced tiered discounts for clients based on the total amount spent on all non-pro TSX and TSXV products and a fee cap after a specific spend limit has been reached. During the 2020 eligibility window for entering the Enterprise non-pro fee discount program, we added two new clients. In Q4/20, we added an international client. As of December 31, 2020, we have 11 clients in the program including the six largest Canadian banks.

TMX Datalinx Xpress

TMX Datalinx Xpress is our new approach to market data audits. The Xpress program was designed to ensure that the clients and TMX Group have a common ongoing understanding around data feed usage, pricing and policies, and to ensure that the administration of the prior approval, contracts, entitlements, reporting, and billing are all completed as effortlessly as possible. After the introduction of TMX Datalinx Xpress in 2019, this optional program now has over 200 participants.

24 The S&P/TSX indices are a product of S&P Dow Jones Indices LLC (“SPDJI”) and TSX Inc. (“TSX”). Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC and TSX® is a registered trademark of TSX.

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Co-location Services

We provide co-location services to a broad range of domestic and international market participants. Our co-location services clients, benefit from stable, low-latency access to TSX, TSXV, Alpha, and MX trading engines and market data feeds, as well as access to other capital market clients, financial content providers, and technology providers.

Trayport

Trayport is the primary connectivity network and data and analytics platform for the European wholesale energy markets. Trayport's solutions provide price discovery, trade execution, post-trade transparency, and post-trade straight through processing.

Strategy

TMX Datalinx

• Go to market with innovations in product pricing and packaging and secure multiple-year pricing agreements

• Expand our suite of multi-asset class, real time and historical data and analytics products

• Capture the global addressable market for TMX Group content and products

• Provide new distribution platforms for TMX Group proprietary content

Trayport

Trayport intends to focus on capitalizing on four macro themes in the global energy markets that present growth opportunities in both new markets and in new services to existing clients:

• Leverage increasing demand for data and analytics, and provide a new analytic interface and new applications giving clients the ability to mine critical data sets

• Provide enhanced execution, data and analytics to both new and existing clients globally who need to access developing gas markets. Trayport clients will have one of the most complete views and trading access to the rapidly growing global gas market

• Leverage new technologies to drive automation and efficiency as business processes become digitized. This will enable Trayport to deliver increased value along the full trade lifecycle by increasing data and analytics tools available for OTC markets and facilitating broker expansion into new asset classes and geographies

• The rise of renewable energy sources is having an increasing impact on energy generation and trading. Trayport will help clients meet the increasing demand in spot power and gas markets with new trading tools

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Revenue Description

TMX Datalinx

Subscribers generally pay fixed monthly rates for access to real-time streaming data, which differ depending on the depth of information accessed. In addition to streaming data, many individual investors consume real-time quote data, for which we charge on a per quote basis. We charge market data vendors and direct feed clients a fixed monthly fee for access to data feeds.

Real-time market data revenue is recognized based on usage as reported by customers and vendors, less a provision for sales allowances from the same customers. Other Global Solutions, Insights and Analytics revenue is recognized when the services are provided.

Generally, we sell historical data products for a fixed amount per product accessed. Fees vary depending on the type of end use.

Co-location Services

Subscribers to TMX Group’s co-location services, pay a fixed monthly fee depending on the number of cabinets and other related services they receive. Co-location services are normally contracted for a period of one to five years.

Trayport

Trayport subscribers pay a monthly rate for access to the platform. While some customers are on multi-year contracts, the average term is about one year.

In 2020, approximately 48% of our GSIA (excluding Trayport) revenue was billed in U.S. dollars, and approximately 93% of our Trayport revenue was billed in British Pound Sterling. We do not currently hedge this revenue and therefore it is subject to foreign exchange fluctuations. (For details, see Financial Risk Management - Market Risk - Foreign Currency Risk . )

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Results of Operations

Non-IFRS Financial Measures

Adjusted earnings per share, adjusted diluted earnings per share and adjusted net income are non-IFRS measures and do not have standardized meanings prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other companies. We present adjusted earnings per share, adjusted diluted earnings per share, and adjusted net income to indicate ongoing financial performance from period to period, exclusive of a number of adjustments. These adjustments include amortization of intangibles related to acquisitions, impairment charges, strategic re-alignment expenses, net litigation settlement costs, gain on sale of interest in Bermuda Stock Exchange, transaction related costs, change in net deferred income tax liabilities resulting from decrease in Alberta corporate income tax rate, increase in deferred income tax liabilities relating to a change in the U.K. tax rate, and reduction in commodity tax provision. Management uses these measures, and excludes certain items, because it believes doing so results in a more effective analysis of underlying operating and financial performance, including, in some cases, our ability to generate cash. Excluding these items also enables comparability across periods. The exclusion of certain items does not imply that they are non-recurring or not useful to investors.

Year ended December 31, 2020 (2020) Compared with Year ended December 31, 2019 (2019)

The information below reflects the financial statements of TMX Group for 2020 compared with 2019. Certain comparative information has been reclassified in order to conform with the financial presentation adopted in the current year.

(in millions of dollars, except per share amounts)	2020	2019	$ increase	% increase
Revenue	$865.1	$806.9	$58.2	7%
Operating expenses	449.2	424.5	24.7	6%
Income from operations	415.9	382.4	33.5	9%
Net income	279.7	247.6	32.1	13%
Adjusted net income25	334.9	300.2	34.7	12%
Earnings per share
Basic	4.96	4.42	0.54	12%
Diluted	4.91	4.38	0.53	12%
Adjusted Earnings per share26
Basic	5.93	5.36	0.57	11%
Diluted	5.88	5.31	0.57	11%
Cash flows from operating activities	410.9	344.0	66.9	19%

25 See discussion under the heading "Non-IFRS Financial Measures".

26 See discussion under the heading "Non-IFRS Financial Measures".

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Net Income and Earnings per Share

Net income in 2020 was $279.7 million, or $4.96 per common share on a basic and $4.91 per common share on a diluted basis, compared with a net income of $247.6 million, or $4.42 per common share on a basic and $4.38 on a diluted basis, for 2019. The increase in net income reflected an increase in income from operations of $33.5 million. The increase in income from operations from 2019 to 2020 was driven by an increase in revenue of $58.2 million, offset by an increase in operating expenses of $24.7 million. The increase in operating expenses was partly attributable to net litigation settlement costs of $12.4 million (16 cents per basic and diluted common share) in Q2/20. There was also an increase in our share of income from BOX. In addition, during 2019, there was an $18.0 million (32 cents per basic and diluted common share) non-cash impairment charge related to Shorcan.

The increase in net income and earnings per share was reduced by significantly higher income tax expense, and a higher effective income tax rate, in 2020 compared with 2019.

• During 2020, there was a change in the U.K. corporate income tax rate. This resulted in an increase in deferred income tax liabilities and a corresponding increase in income tax expense of $7.4 million, which reduced net income.

• In 2019, the Alberta general corporate income tax rate decreased. This change resulted in a decrease in net deferred income tax liabilities and a corresponding decrease in income tax expense of $4.3 million. In 2019, we incurred non-cash impairment charges of $18.0 million related to Shorcan, which is not deductible for income tax purposes. This resulted in an increase in our effective tax rate, which essentially offset the positive impact from the decrease in the Alberta general corporate income tax rate.

The increase in diluted earnings per share was somewhat reduced by an increase in the number of weighted-average common shares outstanding in 2020 compared with 2019.

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Adjusted Earnings per Share[27] Reconciliation for 2020 and 2019

The following is a reconciliation of earnings per share to adjusted earnings per share:

(unaudited)	2020 2019
	Basic Diluted Basic Diluted
Earnings per share Adjustments related to: Amortization of intangibles related to acquisitions Impairment charges Strategic re-alignment expenses28 Net litigation settlement costs Gain on sale of interest in Bermuda Stock Exchange Transaction related costs29 Change in net deferred income tax liabilities resulting from decrease in Alberta corporate income tax rate Increase in deferred income tax liabilities relating to change in U.K. tax rate Reduction in commoditytaxprovision	$4.96 $4.91 $4.42 $4.38 0.67 0.67 0.68 0.67 — — 0.32 0.32 — — 0.05 0.05 0.16 0.16 — — — — (0.04) (0.04) 0.03 0.03 0.01 0.01 — — (0.08) (0.08) 0.13 0.13 — — (0.02) (0.02) — —
Adjusted earningsper share30	$5.93 $5.88 $5.36 $5.31
Weighted average number of common shares outstanding	56,425,302 56,950,290 56,045,211 56,570,669

Adjusted diluted earnings per share increased by 11% from $5.31 in 2019 to $5.88 in 2020 largely driven by increased revenue, somewhat offset by higher operating expenses, excluding net litigation settlement costs of $12.4 million. There was also an increase in our share of income from BOX and lower net finance costs.

The increase in adjusted diluted earnings per share was somewhat offset by an increase in the number of weightedaverage common shares outstanding in 2020 compared with 2019.

27 See discussion under the heading "Non-IFRS Financial Measures".

28 In 2019 we incurred approximately $3.3 million related to organizational changes, and net expense of $0.4 million related to onerous contracts. The organizational changes generated annual savings of approximately $1.8 million starting in Q2/19.

29 Includes costs related to the AST Canada transaction in 2020 and costs related to the acquisition of Visotech in 2019. See Initiatives and Accomplishments - Capital Formation - AST Canada transaction for more details.

30 See discussion under the heading "Non-IFRS Financial Measures".

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Adjusted Net Income[31] Reconciliation for 2020 and 2019

The following is a reconciliation of net income to adjusted net income:

(in millions of dollars) (unaudited)	2020	2019	$ increase / (decrease)	% increase / (decrease)
Net income	$279.7	$247.6	$32.1	13%
Adjustments related to:
Amortization of intangibles related to acquisitions	38.1	37.5	0.6	2%
Impairment charges	—	18.0	(18.0)	(100)%
Strategic re-alignment expenses32	—	2.8	(2.8)	(100)%
Net litigation settlement costs	9.1	—	9.1	n/a
Gain on sale of interest in Bermuda Stock Exchange	—	(2.0)	2.0	(100%)
Transaction related costs33	1.7	0.6	1.1	183%
Change in net deferred income tax liabilities
resulting from decrease in Alberta corporate	—	(4.3)	4.3	(100%)
income tax rate
Increase in deferred income tax liabilities relating to change in U.K. tax rate	7.4	—	7.4	n/a
Reduction in commodity tax provision	(1.1)	—	(1.1)	n/a
Adjusted net income34	$334.9	$300.2	$34.7	12%

Adjusted net income increased by 12% from $300.2 million in 2019 to $334.9 million in 2020 largely driven by increased revenue, somewhat offset by higher operating expenses, excluding net litigation settlement costs of $12.4 million. There was also an increase in our share of income from BOX and lower net finance costs.

31 See discussion under the heading "Non-IFRS Financial Measures".

32 In 2019 we incurred approximately $3.3 million related to organizational changes, and net expense of $0.4 million related to onerous contracts. The organizational changes generated annual savings of approximately $1.8 million starting in Q2/19.

33 Includes costs related to the AST Canada transaction in 2020 and costs related to the acquisition of Visotech in 2019. See Initiatives and Accomplishments - Capital Formation - AST Canada transaction for more details.

34 See discussion under the heading "Non-IFRS Financial Measures".

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Revenue

Revenue
(in millions of dollars)	2020	2019	$ increase / (decrease)	% increase / (decrease)
Capital Formation	$189.0	$180.7	$8.3	5%
Equities and Fixed Income Trading and Clearing	226.2	193.5	32.7	17%
Derivatives Trading and Clearing	126.2	133.2	(7.0)	(5)%
Global Solutions, Insights and Analytics	323.7	299.7	24.0	8%
Other	0.0	(0.2)	0.2	(100)%
	$865.1	$806.9	$58.2	7%

Revenue was $865.1 million in 2020, up $58.2 million or 7% compared with $806.9 million in 2019 attributable to increases in revenue from Capital Formation, Equities and Fixed Income Trading and Clearing as well as Global Solutions, Insights and Analytics offset by a decrease in Derivatives Trading and Clearing revenue.

Capital Formation

Capital Formation
(in millions of dollars)	2020	2019	$ increase / (decrease)	% increase / (decrease)
Initial listing fees	$10.1	$11.0	$(0.9)	(8)%
Additional listing fees	81.8	72.7	9.1	13%
Sustaining listing fees	69.3	68.9	0.4	1%
Other issuer services	27.8	28.1	(0.3)	(1)%
	$189.0	$180.7	$8.3	5%

• Initial listing fees in 2020 decreased from 2019 due to a decline in the amount of deferred initial listing fee revenue recognized in 2020 compared with 2019 on TSXV, somewhat offset by an increase in the amount of deferred initial listing fee revenue recognized on TSX. We recognized initial listing fees received in 2019 and 2020 of $8.9 million in 2020 compared with initial listing fees received in 2018 and 2019 of $10.0 million in 2019.

• Based on initial listing fees billed 2020, the following amounts have been deferred to be recognized in Q1/21, Q2/21, Q3/21 and Q4/21: $2.4 million, $2.1 million, $1.4 million and $0.4 million respectively. Total initial listing fees revenue for future quarters will also depend on listing activity in those quarters.

• Additional listing fees in 2020 increased compared to 2019 reflecting an increase in additional listing fee revenue on TSXV where there was an increase in both the number of financings and total financing dollars raised. There was also an increase in additional listing fee revenue on TSX reflecting an increase of 9% in the number of transactions billed below the maximum fee, from 2019 to 2020 somewhat offset by a 2% decrease in the number of transactions billed at the maximum listing fee of $250,000.

• Issuers listed on TSX and TSXV pay annual sustaining listing fees primarily based on their market capitalization at the end of the prior calendar year, subject to minimum and maximum fees. There was an increase in TSX, partially offset by a decrease in TSXV from 2019 to 2020.

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• Other issuer services revenue in 2020 was lower compared to 2019 reflecting decreased revenue from TSX Trust primarily due to lower margin income and a decrease in recoverable revenue. The decreases were somewhat offset by an increase in transfer agent fee revenue.

Equities and Fixed Income Trading and Clearing

(in millions of dollars)	2020	2019	$ increase	% increase
Equities and fixed income trading	$127.0	$98.0	$29.0	30%
Equities and fixed Income clearing,
settlement, depository and other	99.2	95.5	3.7	4%
services(CDS)
	$226.2	$193.5	$32.7	17%

• There was an increase in Equities and Fixed Income Trading revenue in 2020 compared with 2019 driven by significantly higher overall volumes across all of our exchanges. The impact from the higher volumes was somewhat offset by a less favourable product mix in 2020 compared with 2019. There was also an increase in fixed income trading revenue reflecting increased activity in swaps.

• The overall volume of securities traded on our equities marketplaces increased by 42% (186.4 billion securities in 2020 versus 131.4 billion securities in 2019). There was an increase in volumes of 37% on TSX, 47% on TSXV and 64% on Alpha in 2020 compared with 2019.

• Excluding intentional crosses, for TSX and TSXV listed issues, our combined domestic equities trading market share was approximately 67% in 2020, up 2% from approximately 65% in 2019.[35] We only trade securities that are listed on TSX or TSXV.

• Excluding intentional crosses, in all listed issues in Canada, our combined domestic equities trading market share was 59% in 2020, up 2% from 57% in 2019[36] .

• CDS revenue increased from 2019 to 2020 reflecting higher clearing and settlement revenue due to higher volumes, increased depository fee revenue as well as higher international revenue. The increases in revenue were partially offset by higher rebates.

Derivatives Trading and Clearing

(in millions of dollars)	2020	2019	$ (decrease)	% (decrease)
	$126.2	$133.2	$(7.0)	(5)%

• 35 Source: IIROC.

36 Source: IIROC.

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• The decrease in Derivatives Trading and Clearing revenue was primarily attributable to reduced revenue of approximately $3.8 million from BOX relating to our agreement to provide transitional services, which ended on June 30, 2020.

• The decrease in revenue was also driven by a 3% decrease in revenue from MX and CDCC. While volumes on MX were essentially unchanged from 2019 to 2020 (115.9 million contracts traded in 2020 versus 116.2 million contracts traded in 2019), there was lower revenue per contract attributable to an unfavourable product mix.

Global Solutions, Insights and Analytics

(in millions of dollars)	2020	2019	$ increase	% increase
Trayport	$136.7	$119.6	$17.1	14%
GSIA (excluding Trayport)	187.0	180.1	$6.9	4%
	$323.7	$299.7	$24.0	8%

The increase in Global Solutions, Insights and Analytics (GSIA) revenue in 2020 compared with 2019 was primarily driven by increased revenue from Trayport, including revenue from VisoTech (acquired May 15, 2019). The higher revenue includes a favourable impact from a weaker Canadian dollar relative to British Pound Sterling (GBP) in 2020 compared with 2019. Revenue from GSIA , excluding VisoTech was up 7% in 2020 from 2019.

Trayport

The following table summarizes the average number of Trayport subscribers (excluding VisoTech) over the last eight quarters:

	Q4/20	Q3/20	Q2/20	Q1/20	Q4/19	Q3/19	Q2/19	Q1/19
Trader Subscribers	5,262	5,149	4,998	5,191	5,072	4,863	4,834	4,716
Total Subscribers37	25,254	24,661	24,276	24,711	24,116	23,201	22,823	22,349
Revenue(in millions of GBP)	£20.4	£19.6	£19.7	£19.4	£18.0	£18.2	£17.8	£16.7

Total Subscribers means all chargeable licenses of core Trayport products in core customer segments including Traders, Brokers and Exchanges. Trader Subscribers are a subset of Total Subscribers. Trader Subscribers revenue represents over 50% of total Trayport revenue.

Revenue from Trayport, including VisoTech (acquired May 15, 2019), was £79.1 million in 2020, up 12% over 2019. Excluding VisoTech, revenue from Trayport was up 10%.

GSIA (excluding Trayport)

Revenue from GSIA (excluding Trayport) increased by 4% from 2019 to 2020. There were higher revenues related to usage based quotes, feeds, benchmarks and indices as well as co-location, partially offset by lower revenues related to under-reported usage of real-time quotes in prior periods. The higher revenue includes a favourable impact from a weaker Canadian dollar relative to the U.S. dollar in 2020 compared with 2019.

37 Previous amounts have been restated based on current data.

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• The average number of professional market data subscriptions for TSX and TSXV products was essentially unchanged from 2019 to 2020 (100,635 professional market data subscriptions in 2020 compared with 100,792 in 2019.)

• The average number of MX professional market data subscriptions decreased 1% from 2019 to 2020 (18,607 MX professional market data subscriptions in 2020 compared with 18,820 in 2019).

Other

Other
(in millions of dollars)	2020	2019	$ increase	% increase
	$—	$(0.2)	$0.2	100%

• The increase in Other revenue reflected a decrease in net foreign exchange losses on net monetary assets from 2019 to 2020.

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Operating expenses

Operating expenses
(in millions of dollars)	2020	2019	$ increase / (decrease)	% increase / (decrease)
Compensation and benefits	$226.6	$207.9	$18.7	9%
Information and trading systems	57.6	51.9	5.7	11%
Selling, general and administration	84.7	81.4	3.3	4%
Depreciation and amortization	80.3	79.6	0.7	1%
Strategic re-alignment expenses	—	3.7	(3.7)	(100)%
	$449.2	$424.5	$24.7	6%

Operating expenses in 2020 were $449.2 million, up $24.7 million or 6%, from $424.5 million in 2019. The increase in costs was partly attributable to net litigation settlement costs of $12.4 million (16 cents per basic and diluted share) included within Selling, general and administration e xpenses in Q2/20. There were also higher costs related to our short term employee performance incentive plan of $14.4 million, increased severance costs of $3.1 million (excluding Strategic realignment expenses), higher headcount, increased software licensing and information technology professional services, a write-off of leasehold improvements, as well as increased costs related to managing our business during the COVID-19 pandemic. In addition, we incurred $1.7 million (3 cents per basic and diluted share) in transaction related costs related to the proposed AST Canada transaction.

The increases were somewhat offset by a decline in recruitment, pension and long term employee performance incentive plan costs, travel and entertainment expenses, consulting fees and marketing costs. There was also a reduction of $1.5 million in a commodity tax provision (2 cents per basic and diluted share), which reduced Selling, general and administration expenses. Lastly, there were Strategic re-alignment expenses of $3.7 million in 2019 with no similar costs in 2020.

Compensation and benefits

Compensation and benefits
(in millions of dollars)	2020	2019	$ increase	% increase
	$226.6	$207.9	$18.7	9%

• The increase in Compensation and benefits expenses reflected higher short term employee performance incentive plan costs of $14.4 million, increased severance costs of $3.1 million (excluding Strategic re-alignment expenses), higher headcount as well as COVID-19 pandemic related costs, somewhat offset by lower recruitment, pension, and long term employee performance incentive plan costs.

• There were 1,383 TMX Group employees at December 31, 2020 versus 1,287 employees at December 31, 2019 reflecting an increase in headcount attributable to investing in the various growth areas of our business.

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Information and trading systems

(in millions of dollars)	2020	2019	$ increase	% increase
	$57.6	$51.9	$5.7	11%

• The increase in Information and trading systems expenses from 2019 to 2020 reflected higher software license and information technology professional services costs, as well as increased costs related to the COVID-19 pandemic as employees worked from home.

Selling, general and administration

(in millions of dollars)	2020	2019	$ increase	% increase
	$84.7	$81.4	$3.3	4%

• Selling, general and administration expenses increased by $3.3 million in 2020 compared with 2019 primarily due to incurring net litigation settlement costs of $12.4 million (16 cents per basic and diluted share) in Q2/20. In addition, we incurred $1.7 million (3 cents per basic and diluted share) in transaction related costs for the proposed AST Canada transaction. The increase was also due to higher costs attributable to the COVID-19 pandemic, and a write-off of leasehold improvement costs.

• The increases in S elling, general and administration expenses were partially offset by lower travel and entertainment expenses, consulting fees and marketing costs. There was also a reduction of $1.5 million in a commodity tax provision (2 cents per basic and diluted share), which reduced Selling, general and administration expenses.

Depreciation and amortization

(in millions of dollars)	2020	2019	$ increase	% increase
	$80.3	$79.6	$0.7	1%

• There were higher Depreciation and amortization costs reflecting increased amortization on new intangible assets.

• The Depreciation and amortization costs in 2020 of $80.3 million included $47.4 million related to amortization of intangibles assets related to acquisitions (67 cents per basic and diluted share).

• The Depreciation and amortization costs in 2019 of $79.6 million included $47.1 million related to amortization of intangibles assets related to acquisitions (68 cents per basic and 67 cents per diluted share).

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Strategic re-alignment expenses

Strategic re-alignment expenses
	2020		2019
		Basic and Diluted		Basic and Diluted
(in millions of dollars)	Pre-tax Amount	Earnings per Share	Pre-tax Amount	Earnings per Share
		Impact		Impact
	$—	$—	$3.7	$0.05

• Strategic re-alignment expenses for 2019 were $3.7 million, which included $3.3 million related to organizational changes we made in our post trade business, elimination of our centralized innovation product development unit, and changes to our enterprise risk approach. There were also non-recurring charges for onerous contracts related to our initiative on modernizing our clearing platforms of $1.3 million. In Q4/19, we recovered approximately $0.9 million of these charges (See INITIATIVES AND ACCOMPLISHMENTS - Update on Modernization of Clearing Platforms ).

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Additional Information

Share of income from equity accounted investees

(in millions of dollars)	2020	2019	$ increase	% increase
	$5.7	$3.8	$1.9	50%

• In 2020 our share of income from equity accounted investees increased by $1.9 million primarily due to an increase in our share of income from BOX reflecting higher revenues driven by an 80% increase in volumes, somewhat offset by a significant increase in long term employee performance incentive plan costs. Our share of these long term employee performance incentive plan costs was approximately $5.1 million (7 cents per basic and diluted share).

Impairment charge

Impairment charge
(in millions of dollars)	2020	2019	$ (decrease)	% (decrease)
	$—	$18.0	$(18.0)	(100)%

• In Q4/19 we determined that the fair value of Shorcan was below its carrying value, resulting in a non-cash impairment charge of $18.0 million. There was no impairment charge in 2020.

Other income

Other income
(in millions of dollars)	2020	2019	$ (decrease)	% (decrease)
	$—	$2.3	$(2.3)	(100)%

• In 2019, we completed the sale of our interest in Bermuda Stock Exchange resulting in a gain on sale of approximately $2.3 million before tax ($2.0 million after income tax, or 4 cents per basic and diluted share).

Net finance costs

Net finance costs
(in millions of dollars)	2020	2019	$ (decrease)	% (decrease)
	$32.8	$35.6	$(2.8)	(8)%

• The decrease in net finance costs for 2020 compared to 2019 reflected net lower interest expense due to decreased debt levels and lower interest rates.

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Income tax expense and effective tax rate

Income Tax Expense(in millions of dollars)	Income Tax Expense(in millions of dollars)		Effective Tax Rate(%)
2020	2019	2020		2019
$109.1	$87.3	28%		26%

Excluding adjustments, primarily related to the items noted below, the effective tax rate would have been approximately 26% for both 2020 and 2019.

2020

• In 2020, there was an increase in deferred income tax liabilities and a corresponding increase in income tax expense of $7.4 million relating to the U.K. corporate income tax rate. In Q1/20, it was announced that the U.K. corporate income tax rate would not decline as previously anticipated; therefore, we were required to revalue deferred income tax liabilities related to acquired intangible assets.

2019

• In 2019, the Alberta general corporate income tax rate decreased. This change resulted in a decrease in net deferred income tax liabilities and a corresponding decrease in income tax expense of $4.3 million. In 2019, we incurred non-cash impairment charges of $18.0 million related to Shorcan, which is not deductible for income tax purposes. This resulted in an increase in our effective tax rate, which essentially offset the positive impact from the decrease in the Alberta general corporate income tax rate.

Total equity

tal equity
(in millions of dollars)	As at December 31, 2020	As at December 31, 2019	$ increase
Total equity	$3,611.5	$3,499.1	$112.4

• As at December 31, 2020, there were 56,301,119 common shares issued and outstanding and 1,205,874 options outstanding under the share option plan.

• At February 1, 2021, there were 56,241,475 common shares issued and outstanding and 1,167,482 options outstanding under the share option plan.

• The increase in Total equity is primarily attributable to the inclusion of net income of $279.7 million less dividend payments to shareholders of TMX Group of $153.6 million. In addition, the cost of repurchasing 473,400 of our common shares under a normal course issuer bid was largely offset by proceeds received on the exercise of options.

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Segments

The following information reflects TMX Group’s segment results for 2020 compared with the 2019.

2020

(in millions of dollars)	Capital Formation	Capital Formation	Equities and Fixed Income Trading & Clearing	Equities and Fixed Income Trading & Clearing	Derivatives Trading & Clearing	Derivatives Trading & Clearing	Global Solutions, Insights & Analytics	Other	Total
Revenue from external customers	$	189.0	$	226.2	$	126.2 $	323.7 $	— $	865.1
Inter-segment revenue		0.2		1.9		—	0.3	(2.4)	—
Total revenue		189.2		228.1		126.2	324.0	(2.4)	865.1
Income (loss) from operations		100.0		119.0		60.0	207.8	(70.9)	415.9

2019

							Global
(in millions of dollars)	Capital Formation		Equities and Fixed Income Trading &		Derivatives Trading & Clearing		Solutions, Insights & Analytics	Other	Total
				Clearing
Revenue from external customers	$	180.7	$	193.5	$	133.2 $	299.7 $	(0.2) $	806.9
Inter-segment revenue		—		1.6		—	0.3	(1.9)	—
Total revenue		180.7		195.1		133.2	300.0	(2.1)	806.9
Income (loss) from operations		96.8		85.8		59.3	193.0	(52.5)	382.4

Income (loss) from operations

The increase in Income from operations from Capital Formation primarily reflected higher revenue from additional listing fees in 2020 compared with 2019. This was somewhat offset by lower initial listing fee revenue and higher operating expenses in 2020 compared with 2019.

The increase in Income from operations from Equities and Fixed Income Trading and Clearing was largely driven by significantly higher revenue from Equities trading due to substantially higher volumes across all of our exchanges. In addition, there was an increase in revenue from CDS and Fixed income trading.

The increase in Income from operations from Derivatives Trading and Clearing primarily reflected lower operating expenses in 2020 compared with 2019, including reduced expenses relating to BOX. The increase was somewhat offset by lower revenue from Derivatives Trading and Clearing. The decrease in Derivatives Trading and Clearing revenue was primarily attributable to reduced revenue of approximately $3.8 million from BOX relating to our agreement to provide

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transitional services, which ended on June 30, 2020. While volumes on MX were essentially unchanged from 2019 to 2020 , there was lower revenue per contract attributable to an unfavourable product mix.

The increase in Income from operations from Global Solutions, Insights and Analytics reflects higher revenue from Trayport, including VisoTech (acquired May 15, 2019) and TMX Datalinx. The increase in Trayport revenue reflected higher total subscribers as well as a favourable impact from a weaker Canadian dollar relative to GBP in 2020 compared with 2019. Within TMX Datalinx, there were higher revenues related to usage based quotes, feeds, benchmarks and indices as well as co-location, partially offset by lower revenues related to under-reported usage of real-time quotes in prior periods. The higher revenue includes a favourable impact from a weaker Canadian dollar relative to the U.S. dollar in 2020 compared with 2019. The increase in Income from operations was somewhat offset by an increase in operating expenses.

Other includes c ertain revenue as well as corporate and other costs related to initiatives, not allocated to the operating segments. Revenue related to foreign exchange gains and losses and other services are presented in the Other segment. Costs and expenses related to the amortization of purchased intangibles, along with certain consolidation and elimination adjustments, are also presented in Other . The increase in Other revenue reflected a decrease in net foreign exchange losses on net monetary assets from 2019 to 2020. The loss from operations for the Other segment was higher in 2020 compared to 2019, reflecting net litigation settlement costs of $12.4 million, $1.7 million in transaction related costs for the proposed AST Canada transaction, and certain COVID-19 related costs allocated to the Other segment.

LIQUIDITY AND CAPITAL RESOURCES

2020 compared with 2019

2020 compared with 2019
(in millions of dollars)	2020	2019	$ increase / (decrease) in cash
Cash flows from operating activities	$410.9	$344.0	$66.9
Cash flows (used in) financing activities	(303.1)	(234.8)	(68.3)
Cash flows (used in) investing activities	(34.8)	(95.3)	60.5

• In 2020, Cash flows from operating activities increased compared with 2019 reflecting higher income from operations (excluding depreciation and amortization), an increase in cash from trade and other payables and a decrease in income taxes paid.

• In 2020, Cash flows used in financing activities were higher than in 2019 largely due to $56.8 million of share repurchases under our normal course issuer bid program, which was launched in Q1/20, and an increase in dividends paid to TMX Group shareholders of $12.3 million.

• In 2020, C ash flows used in investing activities were lower than in 2019. This was largely due to an increase in cash of $24.6 million from the net sale of marketable securities in 2020 compared with net purchases of marketable securities in 2019 of $24.8 million In addition, during 2019, we had a cash outflow of $23.6 million related to the VisoTech acquisition, which was somewhat offset by receiving $3.8 million on the sale of our interest in the Bermuda Stock Exchange. Offsetting the increases, cash used for additions to premises and equipment increased by $9.5 million from 2019 to 2020.

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Summary of Cash Position and Other Matters38

Cash, Cash Equivalents and Marketable Securities

(in	millions	of	dollars)	As at December 2020	31,	As at December 2019	31,	$	increase
				$277.9		$229.4			$48.5

We had $277.9 million of cash, cash equivalents and marketable securities as at December 31, 2020. There was an increase in cash, cash equivalents and marketable securities primarily reflecting cash flows from operating activities of $410.9 million, and proceeds from exercised options of $31.7 million. Offsetting these increases in cash and cash equivalents were cash outflows for dividends to our shareholders of $153.6 million, additions to premises and equipment and intangible assets of $67.1 million, repurchases our shares under a normal course issuer bid of $56.8 million, interest paid, net of interest received, of $31.6 million, and a net decrease in Commercial Paper of $79.6 million. Based on our current business operations and model, we believe that we have sufficient cash resources and access to financing to operate our business, make interest payments, as well as meet our covenants under the trust indentures governing our Debentures and the terms of the Credit Agreement (as defined in this MD&A) and commercial paper program (Commercial Paper Program) (see LIQUIDITY AND CAPITAL RESOURCES - Commercial Paper, Debentures, Credit and Liquidity Facilities ), and satisfy the capital maintenance requirements imposed by regulators.

We will also have cash outlays related to the modernization of our clearing platforms (see - INITIATIVES AND ACCOMPLISHMENTS - Update on Modernization of Clearing Platforms ) and to fund the AST Canada transaction, which will be financed with a combination of cash and debt capacity (see - INITIATIVES AND ACCOMPLISHMENTS - Capital Formation - AST Canada transaction )

Our ability to obtain funding in the future will depend on the liquidity and condition of the financial markets, including the credit market, and our financial condition at the time, the covenants in the Credit Agreement and the trust indentures governing the Debentures, and by capital maintenance requirements imposed by regulators. At December 31, 2020, there was $160.0 million of Commercial Paper outstanding, and the authorized limit under the program was $500.0 million, which is fully backstopped by the TMX Group credit facility (see - LIQUIDITY AND CAPITAL RESOURCES - Credit Facility ).

Total Assets

(in	millions	of	dollars)	As at December 2020	31,	As at December 2019	31,	$ increase
				$36,098.6		$32,359.7		$3,738.9

• Our consolidated balance sheet as at December 31, 2020 includes Balances with Participants and Clearing Members related to our clearing operations. These balances have equal amounts included within Total Liabilities . The increase in Total Assets of $3,738.9 million from December 31, 2019 reflected higher collateral balances in both CDS and CDCC at December 31, 2020 driven by the Bank of Canada requiring participants to post substantially more collateral (to address Cover 1 liquidity risk under Principles of Financial Market Infrastructure (PFMI)).

38 The “S ummary of Cash Position and Other Matters ” section above contains certain forward-looking statements. Please refer to “Caution Regarding Forward-Looking Information ” for a discussion of risks and uncertainties related to such statements.

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Defined Benefits Pension Plan

Based on the most recent actuarial valuations (as at December 31, 2019 or January 1, 2020 depending on the plan), we estimate a net deficit of approximately $7.3 million of which $3.6 million was funded in 2020. The next required triannual valuation for the TMX registered pension plan (RPP) will be as at December 31, 2022.

Commercial Paper, Debentures, Credit and Liquidity Facilities

Commercial Paper

(in	millions	of	dollars)	As at December 2020	31,	As at December 2019	31,	$	(decrease)
				$160.0		$239.6			$(79.6)

There was $160.0 million of Commercial Paper outstanding, including accrued interest, under the program at December 31, 2020 reflecting a net reduction of $79.6 million from December 31, 2019. Commercial paper is short term in nature, and the average term to maturity from the date of issue was 29 days in Q4/20. The Commercial Paper Program is fully backstopped by the TMX Group credit facility (see - LIQUIDITY AND CAPITAL RESOURCES - Credit Facility ).

For additional information on our credit facilities, please see Credit Facilities under the heading LIQUIDITY AND CAPITAL RESOURCES .

Debentures

As of December 31, 2020, TMX Group had the following Debentures outstanding:

Debenture	Principal	Coupon	Maturity Date	DBRS Credit Rating
	Amount ($
	millions)
Series B	250.0	4.461% per annum, payable in	October 3, 2023	A (high)
		arrears in equal semi-annual
		installments (long first coupon)
Series D	300.0	2.997% per annum, payable in	December 11, 2024	A (high)
		arrears in equal semi-annual
		installments
Series E	200.0	3.779% per annum, payable in	June 5, 2028	A (high)
		arrears in equal semi-annual
		installments

• On June 5, 2018, TMX Group completed a Canadian private placement offering of $200.0 million aggregate principal amount of 3.779% senior unsecured debentures due June 5, 2028 ("Series E Debentures") to accredited investors in Canada. The Series E Debentures received a credit rating of A (high) with a Stable trend from DBRS Limited. TMX Group incurred financing costs of $1.1 million for the initial issuance of the Series E Debentures, and these costs are offset against the initial carrying value of the Series E Debentures.

• The Series B and Series E Debentures may be redeemed, at the option of TMX Group, in whole or in part at the redemption price together with accrued and unpaid interest to the date fixed for redemption. The redemption

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price is equal to the greater of the applicable Canada Yield Price (as defined in the relevant Trust Indenture (as defined below)) and 100% of the principal amount of the Series B and Series E Debentures being redeemed to the date fixed for redemption. If the Series B and Series E Debentures are redeemed anytime on or after three months prior to the maturity date of the series, the redemption price is equal to 100% of the aggregate principal amount outstanding on the Series B and Series E Debentures together with accrued and unpaid interest to the date of the redemption.

• The Series D Debentures may be redeemed, in whole or in part, at the option of TMX Group, at the redemption price together with accrued and unpaid interest to the date fixed for redemption. The redemption price is equal to the greater of the Canada Yield Price (as defined in the relevant Trust Indenture) and 100% of the principal amount of the Series D Debentures being redeemed. If the Series D Debentures are redeemed anytime on or after two months prior to the maturity date of the series, the redemption price will be equal to 100% of the aggregate principal amount outstanding on the Series D Debentures together with accrued and unpaid interest to the date of the redemption.

• The trust indenture and the supplements thereto which govern the Debentures (collectively, the Trust Indentures and each a Trust Indenture) include the following covenants:

• A negative pledge which restricts the ability of TMX Group and each of its material subsidiaries (as defined in the Trust Indentures) to create a lien on these entities’ assets unless the Debentures are similarly secured on an equal and rateable basis.

• A limitation on the ability of material subsidiaries of TMX Group to enter into certain types of indebtedness.

• In the event of a change of control (as such term is defined in the Trust Indentures) of either TSX Inc. or MX, if the rating of the Debentures is lowered to below investment grade (as defined in the Trust Indentures), TMX Group will be required, at the option of the Debenture holder to repurchase, in whole or in part, the holder’s Debentures at a cash price of 101% of the outstanding principal amount of the Debentures plus all accrued and unpaid interest up to the date of repurchase.

• A requirement for TMX Group to maintain at least one credit rating from a Specified Credit Rating Agency (as defined in the Trust Indentures).

(in millions of dollars)	As at December 31, 2020	As at December 31, 2019	$ increase
Series B - Non-Current Debentures	$249.8	$249.6	$0.2
Series D - Non-Current Debentures	$298.7	$298.6	$0.1
Series E - Non-Current Debentures	$199.0	$198.9	$0.1
	$747.5	$747.1	$0.4

Credit Facilities

In 2016, TMX Group entered into an amended and restated credit agreement (as amended on each of December 14, 2017 and September 12, 2018, the Credit Agreement) which replaced our existing 2014 credit agreement. The Credit Agreement provides 100% backstop to the Commercial Paper Program and is also available for general corporate purposes. $500 million (or the USD equivalent) is available under the Credit Agreement which amount is reduced by the outstanding amount of Commercial Paper and any outstanding inter-company notes payable to CDS and CDCC. The maturity date of the Credit Agreement is May 2, 2021.

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Under the terms of the Credit Agreement there is:

• an Interest Coverage Ratio of more than 4.0:1. The Interest Coverage Ratio is the ratio of adjusted EBITDA for the period comprised of the four most recently completed financial quarters to the consolidated interest expense for such four financial quarters. Adjusted EBITDA means earnings on a consolidated basis before interest, taxes, extraordinary, unusual or non-recurring items, depreciation and amortization, as well as non-cash items;

• a Total Leverage Ratio of not more than 3.5:1. Total Leverage Ratio at any time is the ratio of consolidated debt as at such time to adjusted EBITDA for the period comprised of the four most recently completed financial quarters.

As at December 31, 2020, all covenants were met under the Credit Agreement.

The following table summarizes the Applicable Rates and Fee Rates and corresponding Total Leverage Ratios under the Credit Agreement. The Standby Fee is charged on the unutilized portion of the revolving facility. The Applicable Rate represents the corporate spread that is included in the interest rate that is applied to the drawn portion of the facility.

	Applicable Margin	Pricing Matrix
Total Leverage Ratio (x)	Standby Fee for undrawn	Prime Rate Loans and US	BA Instruments/ LIBOR
	portion of Revolving Facility	Base Rate Loans	Loans / Letters of Credit
≤ 2.0	21.5 bps	7.5 bps	107.5 bps
> 2.0 and ≤ 2.5	24.5 bps	22.5 bps	122.5 bps
> 2.5 and ≤ 3.0	27.5 bps	37.5 bps	137.5 bps
> 3.0 and ≤ 3.5	32.5 bps	62.5 bps	162.5 bps

Effective Interest Rates

The effective interest rates as at December 31, 2020 for the Debentures and Commercial Paper are shown below:

Debentures and Commercial Paper	Principal ($CAD millions)	Maturity	All-in Rate
Series B Debentures	250	Oct. 3, 2023	4.461%
Series D Debentures	300.0	Dec. 11, 2024	2.997%
Series E Debentures	200.0	Jun. 5, 2028	3.779%
Commercial Paper	160.0	Jan 4 to Jan 29, 2021	0.249%

Other Credit and Liquidity Facilities

CDCC maintains daylight liquidity facilities for a total of $975.0 million to provide liquidity on the basis of collateral in the form of securities that have been received by, or pledged to, CDCC. The daylight liquidity facilities must be cleared to zero at the end of each day.

CDCC maintains a $27,012 million REPO uncommitted facility ($18,102.0 million at December 31, 2019) that is in place to provide end of day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero. On April 30, 2020, the amount was further amended from $20,622.0 million at March 31, 2020 to $27,012.0 million. On

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February 28, 2020, CDCC extended this facility to February 26, 2021. The facility would provide liquidity in exchange for securities that have been received by, or pledged to, CDCC.

CDCC also maintains a $320.0 million syndicated revolving standby liquidity facility ($400.0 million at December 31, 2019) to provide end of day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero. Advances under the facility are secured by collateral in the form of securities that have been pledged to or received by CDCC. On February 28, 2020, this facility was extended to February 26, 2021.

As at December 31, 2020, CDCC had drawn $4.3 million to facilitate a failed REPO settlement. The amount is fully collateralized by liquid securities included in cash and cash equivalents and was fully repaid subsequent to the reporting date.

CDS Clearing maintains a secured standby liquidity facility of US$720.0 million, or Canadian dollar equivalent, that can be drawn in either United States (US) or Canadian currency. On March 24, 2020, CDS Clearing extended the maturity date to March 23, 2021.

CDS Clearing also has a secured standby liquidity facility of $2.0 billion or US equivalent that can be drawn in either Canadian or US currency. On March 24, 2020, CDS Clearing extended the maturity date to March 23, 2021.

Contractual Obligations

Contractual Obligations	Contractual Obligations
(in millions of dollars) December 31, 2020 Total Less than 1 year Between 1 and 5 years Greater than 5 years
Participants’ tax withholdings 153.3 153.3 — Accrued interest payable 3.8 3.8 — Other trade and other payables 71.8 71.8 — Provisions 9.1 1.1 8.0 Lease liabilities 94.3 8.1 32.1 Balances with Participants and Clearing Members 30,270.4 30,270.4 — Total return swaps 2.4 2.4 — Commercial Paper 160.0 160.0 — Debentures 747.5 — 548.5	— — — — 54.1 — — — 199.0

*The above financial liabilities are covered by assets that are restricted from use in the ordinary course of business.

MANAGING CAPITAL

The Company’s primary objectives in managing capital, which we define to include our cash and cash equivalents, marketable securities, share capital, Commercial Paper, Debentures, and various credit facilities, include:

• Maintaining sufficient capital for operations to ensure market confidence and to meet regulatory requirements and credit facility requirements (see Commercial Paper, Debentures, Credit and Liquidity Facilities for a description of certain financial covenants under the Credit Agreement). Currently, we target to retain a minimum of $165 million in cash, cash equivalents and marketable securities, a decrease from $185 million in Q3/20. This amount is subject to change;

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• Maintaining a credit rating in a range consistent with the Company’s current A (high) and R1-low credit ratings from DBRS;

• Using excess cash to invest in and continue to grow the business;

• Returning capital to shareholders through methods such as dividends paid to shareholders and purchasing shares for cancellation pursuant to normal course issuer bids; and

• Maintaining debt levels to be below the total leverage ratios as discussed in (a) below, which decrease over time.

TMX Group aims to achieve the above objectives while managing its capital subject to capital maintenance requirements imposed on TMX Group and certain subsidiaries as follows:

• a. In respect of the TMX Group Limited credit facility that requires TMX Group to maintain:

• i. an interest coverage ratio of more than 4.0:1;

• ii. a total leverage ratio of not more than 3.50:1

• b. In respect of TSX and Alpha Exchange Inc, to maintain the following requirements, on both a consolidated and non-consolidated basis, as set out in the amended and restated recognition order issued by the Ontario Securities Commission (OSC) effective September 2020:

• i. maintain sufficient financial resources for the proper performance of its functions and to meet its responsibilities; and

• ii. calculate on a monthly basis:

  1. a current ratio;

  2. a debt to cash flow ratio; and

  3. a financial leverage ratio.

• c. In respect of TSX Venture Exchange, as required by certain provincial securities commissions, to maintain sufficient financial resources to perform its functions.

• d. In respect of MX, as required by the AMF, to maintain certain financial ratios as defined in the AMF recognition order, as follows:

• i. a working capital ratio of more than 1.5:1;

• ii. a cash flow to total debt outstanding ratio of more than 20%; and

• iii. a financial leverage ratio of less than 4.0.

• e. In respect of CDCC, to maintain certain amounts, as follows:

• i. maintain sufficient financial resources as required by the OSC and AMF;

• ii. $5.0 million cash and cash equivalents or marketable securities as part of the Clearing Member default recovery process plus an additional $5.0 million in the event that the initial $5.0 million is fully utilized during a default;

• iii. sufficient cash, cash equivalents and marketable securities to cover 12 months of operating expenses, excluding amortization and depreciation; and

• iv. $30.0 million total shareholder's equity.

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• f. In respect of CDS and CDS Clearing, as required by the OSC and the AMF to maintain certain financial ratios as defined in the OSC recognition order, as follows:

• i. a debt to cash flow ratio of less than or equal to 4:1; and

• ii. a financial leverage ratio of less than or equal to 4:1.

In addition, the OSC requires CDS and CDS Clearing to maintain working capital to cover 6 months of operating expenses (excluding, in the case of CDS, the amount of shared services fees charged to CDS Clearing).

CDS is required to dedicate a portion of its own resources in the CNS default waterfall for the CNS function. The Company maintains $1.0 million in cash and cash equivalents or marketable securities to cover potential losses incurred as a result of a Participant default.

• g. In respect of Shorcan:

• i. by IIROC which requires Shorcan to maintain a minimum level of shareholders’ equity of $0.5 million;

• ii. by the National Futures Association ("NFA") which requires Shorcan to maintain a minimum level of net capital; and

• iii. by applicable Canadian securities commissions which requires Shorcan to maintain a minimum level of excess working capital.

• h. In respect of TSX Trust:

• i. as required by the Office of the Superintendent of Financial Institutions, to maintain the following minimum capital ratios:

  1. common equity tier 1 capital ratio of 7%;

  2. tier 1 capital ratio of 8.5%; and

  3. total capital ratio of 10.5%

• ii. as required by IIROC, to maintain in excess of $100.0 million of paid up capital and surplus on the last audited balance sheet for the acceptable institution designation.

As at December 31, 2020 and 2019, we were in compliance with each of the externally imposed capital requirements in effect at the applicable period-end.

FINANCIAL INSTRUMENTS

Cash, Cash Equivalents and Marketable Securities

Our financial instruments include cash, cash equivalents and investments in marketable securities which are held to earn investment income. Marketable securities consist of Federal and Provincial treasury bills.

We have designated our marketable securities as fair value through profit and loss. Fair values have been determined by reference to quoted market prices.

The primary risks related to cash, cash equivalents and marketable securities are credit risk, market risk and liquidity risk. For a description of these risks, please refer to Enterprise Risk Management - Financial Risks .

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Restricted Cash and Cash Equivalents

Restricted cash and cash equivalents contains tax withheld by CDS on entitlement payments made by CDS on behalf of CDS participants. The restricted cash and cash equivalents related to this withheld tax is ultimately under the control of CDS; however, the amount is payable to various taxation authorities within a relatively short period of time and so is restricted from use in normal operations. An equivalent and offsetting amount is included in the consolidated balance sheet under the caption Participants' tax withholdings. At December 31, 2020, we had restricted cash and cash equivalents of $153.3 million.

The primary risks related to restricted cash and cash equivalents are credit risk and liquidity risk. For a description of these risks, please refer to Enterprise Risk Management - Financial Risks .

Trade Receivables

Our financial instruments include accounts receivable, which represents amounts that our customers owe us. The carrying value is based on the actual amounts owed by the customers, net of loss allowances for trade receivables measured at an amount equal to lifetime expected credit losses, calculated using historical credit loss experience taking into account current observable data at the reporting date to reflect the effects of any relevant current market conditions and forecasts of future economic conditions.

The primary risks related to trade receivables are credit risk and market risk. For a description of these risks, please refer to Enterprise Risk Management - Financial Risks .

CDS – Participant cash collateral and entitlements and other funds

As part of CDS’s clearing operations, CDS Participant Rules require participants to pledge collateral to CDS in the form of cash or securities in amounts calculated in relation to their activities. Cash pledged and deposited with CDS is recognized as an asset and an equivalent and offsetting liability is recognized as these amounts are ultimately owed to the participants. There is no impact on the consolidated income statement. Securities pledged do not result in an economic inflow to CDS, and therefore, are not recognized.

The primary risks associated with these financial instruments are credit risk, market risk and liquidity risk. For a description of these risks, please refer to Enterprise Risk Management - Financial Risks .

CDCC – Daily Settlements due to and due from Clearing Members

As part of CDCC’s clearing operations, amounts due from and to Clearing Members as a result of marking to market open futures positions and settling options transactions each day are required to be collected from or paid to Clearing Members prior to the commencement of trading the next day. The amounts due from and due to Clearing Members are recognized in the consolidated assets and liabilities as Balances with Participants and Clearing Members. There is no impact on the consolidated statements of income.

CDCC – Clearing Members’ cash margin deposits and clearing fund cash deposits

These balances represent the cash deposits of Clearing Members held in the name of CDCC as margins against open positions and as part of the clearing fund. The cash held is recognized as an asset and an equivalent and offsetting liability is recognized as these amounts are ultimately owed to the Clearing Members. There is no impact on the consolidated income statement.

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CDCC – Net amounts receivable/payable on open REPO agreements

CDCC clears fixed income REPO agreements. OTC REPO agreements between buying and selling Clearing Members are novated to CDCC whereby the rights and obligations of the Clearing Members under the REPO agreements are cancelled and replaced by new agreements with CDCC. Once novation occurs, CDCC becomes the counterparty to both the buying and selling Clearing Member. As a result, the contractual right to receive and return the principal amount of the REPO as well as the contractual right to receive and pay interest on the REPO is thus transferred to CDCC. These balances represent outstanding balances on open REPO agreements. Receivable and payable balances outstanding with the same Clearing Member are offset when they are in the same currency and are to be settled on the same day, as CDCC has a legally enforceable right to offset and the intention to net settle. The balances include both the original principal amount of the REPO and the accrued interest, both of which are carried at amortized cost. As CDCC is the central counterparty, an equivalent amount is recognized in both TMX Group's’ assets and liabilities.

The primary risks associated with these financial instruments are credit risk, market risk and liquidity risk. For a description of these risks, please refer to Enterprise Risk Management - Financial Risks .

Commercial Paper

TMX Group maintains a Commercial Paper Program to offer potential investors up to $500.0 million (or the equivalent U.S. dollars) of Commercial Paper to be issued in various maturities of up to one year from the date of issue. The Commercial Paper bears interest rates based on the prevailing market conditions at the time of issuance. The Commercial Paper Program is supported by the Credit Agreement. The Commercial Paper issued represents an unsecured obligation and ranks equally with all other senior unsecured obligations of TMX Group. The Commercial Paper has been assigned a rating of “R-1 (low)” with a Stable trend by DBRS.

The Commercial Paper is subject to market risk and liquidity risk. For a description of these risks, please refer to Enterprise Risk Management - Financial Risks .

Debentures

TMX Group has the following Debentures outstanding: a $250-million Series B Debentures with a 4.461% coupon and a 10-year term, a $300.0-million principal amount Series D Debentures with a 2.997% coupon and a 7-year term, and a $200.0-million Series E Debentures with a 3.779% coupon and a 10-year term. The Debentures received and maintain a credit rating of A (high) with a Stable trend from DBRS.

The Debentures are subject to market risk and liquidity risk. For a description of these risks, please refer to Enterprise Risk Management - Financial Risks .

Total Return Swaps (TRS)

We have entered into a series of TRSs, which synthetically replicate the economics of purchasing our shares as a partial economic hedge to the share appreciation rights of the RSUs and DSUs.

We have classified our series of TRSs as fair value through profit and loss and mark to market the fair value of the TRSs as an adjustment to income. We also simultaneously mark to market the liability to holders of the units as an adjustment to income. Fair value is based on the share price of our common shares at the end of the reporting period. The fair value of the TRSs and the obligation to unit holders are reflected on the consolidated balance sheet. The contracts are settled in cash upon maturity.

For the year ended December 31, 2020, unrealized losses and realized gains on the TRSs of $1.4 million and $8.7 million, respectively have been reflected in the consolidated income statement (2019 – unrealized and realized gains of $2.8 million and $10.8 million, respectively).

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TRSs are subject to credit risk and market risk. For a description of this risk, please refer to Enterprise Risk Management - Financial Risks .

CRITICAL ACCOUNTING ESTIMATES

Goodwill and Intangible Assets – Valuation and Impairment Testing

We recorded goodwill and intangible assets valued at $5,047.7 million as at December 31, 2020, up by $6.5 million from $5,041.2 million at December 31, 2019. Management has determined that the testing for impairment of goodwill and intangible assets involves making critical accounting estimates.

Goodwill is recognized at cost on acquisition less any subsequent impairment in value. We measure goodwill arising on a business combination as the fair value of the consideration transferred less the fair value of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date.

Intangible assets are measured at cost less accumulated amortization, where applicable, and any impairment in value. Cost includes any expenditure that is directly attributable to the acquisition of the asset. The cost of internally developed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the assets to a working condition for their intended use.

Assets are considered to have indefinite lives where management believes that there is no foreseeable limit to the period over which the assets are expected to generate net cash flows.

We test for impairment as follows:

The carrying amounts of our goodwill and intangible assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, are tested for impairment at least annually even if there is no indication of impairment, and the recoverable amount is estimated each year at the same time.

For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit, or CGU). For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to the CGU, or the group of CGUs, that is expected to benefit from the synergies of the combination and reflects the lowest level at which that goodwill is monitored for internal reporting purposes.

The recoverable amount of an asset or CGU is based on the higher of the value in use or fair value. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. The cash flow projections cover a period of five years with the exception of Capital Formation - Listings , which covers seven years and Global Solutions, Insights and Analytics - Trayport, which covers eight years.

An impairment loss is recognized if the carrying amount of an asset, or its CGU, exceeds its estimated recoverable amount. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the units, and then to reduce the carrying amounts of the other assets in the unit on a pro rata basis. Impairment losses along with any related deferred income tax effects are recognized in the consolidated income statement.

There was a non-cash impairment related to the goodwill associated with Shorcan of $18.0 million for 2019 (see RESULTS OF OPERATIONS - Impairment Charge ). There was no impairment charge for 2020.

Considerable judgement is required to predict future operating performance and to estimate cash flows. Economic weakness due to macroeconomic factors moderating activity and heightening risks may impact our business. Such

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factors include political and civil uncertainty in Hong Kong as well as the tensions over trade deficits and technology companies between China and the United States, softened international trade and investment, the impact of COVID-19 on economic recovery and timing of recovery, and financial market pressures. These factors could result in future impairment charges related to goodwill and intangible assets. A significant impairment charge in the future could have a significant impact on our reported net income.

In 2020, management updated its growth projections. Based on current assumptions, the recoverable amount for Capital Formation - Listings, Equities Trading, CDS, Derivatives Trading and Clearing - MX/CDCC, GSIA - TMX Datalinx, GSIA - Trayport, and Other - Shorcan remains above carrying value, and as such no impairment has been identified for these CGUs. Management has identified three key assumptions, the pre-tax discount rate, the terminal growth rate, and the cash flow projections, that have a significant impact on the estimate of the recoverable amount.

At December 31, 2019, we determined that the fair value of the Shorcan CGU was lower than its carrying amount. This fair value of Shorcan had declined below the carrying value primarily due to lower revenue projections for the business. This resulted in a non-cash impairment charge of $18.0 million.

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SELECT ANNUAL INFORMATION

(in millions of dollars expect per share amounts)		2020		2019		2018
Revenue	$		865.1		806.9		820.7
Net income			279.7		247.6		286.0
Total Assets (as at December 31)			36,098.6		32,359.7		31,657.9
Non-current liabilities (as at December 31)			1,706.0		1,707.6		1,615.7
Earnings per share:
Basic			4.96		4.42		5.14
Diluted			4.91		4.38		5.10
Adjusted earnings per share:39
Basic			5.93		5.36		5.20
Diluted			5.88		5.31		5.16
Cash dividends declaredper common share			2.72		2.52		2.24

2020 compared with 2019

(See RESULTS OF OPERATIONS and LIQUIDITY AND CAPITAL RESOURCES - Year ended December 31, 2020 (2020) compared with Year ended December 31, 2019 (2019) ).

2019 compared with 2018

Revenue

Revenue was $806.9 million in 2019, down $13.8 million or 2% compared with $820.7 million in 2018. There was a decrease in Capital Formation revenue driven by lower additional listings fees, a reduction in Other revenue as well as lower Equities and Fixed Income Trading revenue. These decreases were partially offset by an increase in Global Solutions, Insights and Analytics revenue, including higher revenue from Trayport and VisoTech (acquired May 15, 2019), as well as higher Derivatives Trading and Clearing and CDS revenue.

Net income, Earnings per share and Adjusted earnings per share

Net income in 2019 was $247.6 million, or $4.42 per common share on a basic and $4.38 per common share on a diluted basis, compared with a net income of $286.0 million, or $5.14 per common share on a basic and $5.10 on a diluted basis, for 2018. The decrease in net income and earnings per share was largely driven by lower gains on the sale of investments in 2019 compared with 2018 and higher income tax expense:

• In 2018, we recognized a gain on the sale of our interest in TMX FTSE of $26.8 million before and after income tax (48 cents per basic and diluted share). In 2019, we recognized a gain of $2.3 million before income tax ($2.0 million after income tax, or 4 cents per basic and diluted share) on the sale of our interest in the Bermuda Stock Exchange.

• In 2018, the income tax expense was lower because we carried back a capital loss to reduce prior year income tax paid by approximately $10.0 million.

39 See discussion under the heading "Non-IFRS Financial Measures".

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• In 2019, the Alberta general corporate income tax rate decreased. This change resulted in a decrease in net deferred income tax liabilities and a corresponding decrease in income tax expense of $4.3 million (8 cents per basic and diluted common share).

In addition, during 2019, we determined that the fair value of Shorcan was below its carrying value, resulting in a non-cash impairment charge of $18.0 million (32 cents per basic and diluted common share), which reduced net income.

Offsetting the declines in net income, income from operations increased by $13.4 million. The increase in income from operations from 2018 to 2019 was largely driven by a decrease in operating expenses of $27.2 million from 2018 to 2019. In 2018, we recorded a commodity tax provision of $7.6 million (10 cents per basic and diluted share) and a lease termination payment of $4.5 million (6 cents per basic and diluted share). There was also a decrease in severance costs of approximately $7.8 million and a reduction in short term employee performance incentive plan costs of approximately $6.8 million from 2018 to 2019. The decreases in expenses were somewhat offset by higher long term employee performance incentive plan costs of approximately $0.5 million. Revenue declined by $13.8 million from 2018 to 2019. There was a decrease in Capital Formation revenue driven by lower additional listings fees, a reduction in Other revenue as well as lower Equities and Fixed Income Trading revenue. These decreases were partially offset by an increase in Global Solutions, Insights and Analytics revenue, including higher revenue from Trayport and VisoTech (acquired May 15, 2019), as well as higher Derivatives Trading and Clearing and CDS revenue. In addition, net finance costs declined by $4.8 million from 2018 to 2019.

Adjusted diluted earnings per share increased by 3% from $5.16 in 2018 to $5.31 in 2019. The increase in adjusted diluted earnings per share from 2018 to 2019 was largely driven by lower operating expenses related to lease termination, a decrease in severance costs, a reduction in short term employee performance incentive plan costs as well as lower net finance costs. The decreases in expenses were slightly offset by higher long term employee performance incentive plan costs. There was also an increase in revenue from Global Solutions, Insights and Analytics revenue, including higher revenue from Trayport and VisoTech (acquired May 15, 2019), as well as higher Derivatives Trading and Clearing and CDS revenue. The increases in revenue were more than offset by decreases in Capital Formation revenue driven by lower additional listings fees, a reduction in Other revenue as well as lower Equities and Fixed Income Trading revenue. The increase in adjusted diluted earnings per share was also somewhat reduced by an increase in the number of weightedaverage common shares outstanding in 2019 compared with 2018.

Total assets

Our consolidated balance sheet as at December 31, 2019 includes outstanding balances on open REPO agreements within Balances with Participants and Clearing Members. These balances have equal amounts included within Total Liabilities. The increase in Total Assets of $701.4 million from December 31, 2018 reflected higher balances in CDCC at December 31, 2019 related to both REPO agreements and increased collateral. There was also an increase in Total Assets relating to the implementation of IFRS 16 (see Accounting and Control Matters - ADOPTION OF IFRS 16 in 2019 MD&A). On transition to IFRS 16, we recognized $94.9 million of right-of-use assets. The amount included in Total Assets at December 31, 2019 was $93.0 million.

Non-current liabilities

Non-current liabilities as at December 31, 2019 were $91.9 million higher than as at December 31, 2018. The increase was largely driven by the recognition of current lease liabilities that arose with the transition to IFRS 16 in 2019.

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QUARTERLY FINANCIAL INFORMATION

(in millions of dollars except	Dec 31	Sep 30	Jun 30	Mar 31	Dec 31	Sep 30	Jun 30	Mar 31
per share amounts - unaudited)	2020	2020	2020	2020	2019	2019	2019	2019
Capital Formation	$50.6	$50.2	$48.1	$40.1	$42.6	$43.7	$52.6	$41.8
Equities and Fixed Income Trading	30.6	28.5	34.7	33.2	22.7	23.5	25.6	26.2
Equities and fixed
Income - clearing,
settlement, depository	25.7	23.7	24.8	25.0	28.4	21.8	23.0	22.3
and other services
(CDS)
Derivatives Trading & Clearing	30.8	24.9	30.0	40.5	33.3	33.5	33.8	32.6
Global Solutions, Insights and Analytics	82.6	80.3	81.0	79.8	75.9	73.6	75.6	74.6
Other	(0.8)	—	(0.9)	1.7	(0.1)	0.2	(0.3)	—
Revenue	219.5	207.6	217.7	220.3	202.8	196.3	210.3	197.5
Operating expenses	113.4	107.2	119.3	109.3	106.3	104.7	106.2	107.3
Income from operations	106.1	100.4	98.4	111.0	96.5	91.6	104.1	90.2
Net income	71.8	70.0	67.8	70.1	47.5	61.7	77.2	61.2
Earnings per share40
Basic	1.27	1.24	1.20	1.25	0.85	1.10	1.38	1.10
Diluted	1.26	1.23	1.19	1.24	0.84	1.09	1.37	1.09

Q4/20 compared with Q4/19

• Revenue was $219.5 million in Q4/20, up $16.7 million or 8% from $202.8 million in Q4/19 attributable to increases in revenue from Capital Formation, Equities and Fixed Income Trading as well as Global Solutions, Insights and Analytics offset by a decrease in CDS, Derivatives Trading and Clearing and Other revenue.

• Operating expenses in Q4/20 were $113.4 million, up $7.1 million or 7%, from $106.3 million in Q4/19. The increase in costs was primarily attributable to higher short term employee performance incentive costs of $7.1 million, increased severance costs of $3.1 million (excluding Strategic re-alignment expenses), higher long term performance incentive plan costs of $1.5 million, as well as higher headcount, higher software licensing and information technology professional services costs, the write-off of costs related to discontinued initiatives as well as increased costs related to managing our business during the COVID-19 pandemic. In addition, we incurred $0.3 million in transaction related costs related to the proposed AST Canada transaction.

Offsetting these increases, in Q4/19, recoverable costs of $5.3 million related to CDS's clearing operation that were previously netted, were reclassified and included in both CDS revenue and Selling, general and administration expenses. There were $1.3 million of these recoverable costs in Q4/20. The increases were also somewhat offset by a decline in recruitment costs, pension expenses, travel and entertainment expenses, consulting fees and occupancy costs, and a $0.2 million reduction in commodity tax provision in Q4/20. Lastly, we recovered Strategic re-alignment expenses of approximately $0.9 million in Q4/19 with no similar recovery in Q4/20.

40 Earnings per share information is based on net income.

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• Income from operations increased from Q4/19 to Q4/20 largely due to higher revenue somewhat offset by higher operating expenses.

• Net income in Q4/20 was $71.8 million, or $1.27 per common share on a basic and $1.26 on a diluted basis, compared with a net income of $47.5 million, or $0.85 per common share on a basic and $0.84 on a diluted basis, for Q4/19. The increase in net income and earnings per share from Q4/19 to Q4/20 was largely driven by an increase in revenue and a $18.0 million (32 cents per basic and diluted common share) non-cash impairment charge related to Shorcan in 2019. These increases were somewhat offset by an increase in operating expenses. There was a decrease in our share of income from BOX driven by an increase of approximately $5.1 million (7 cents per basic and diluted share) in our share of long term employee performance incentive plan costs for the full year 2020.

Q4/20 compared with Q3/20

• Revenue was $219.5 million in Q4/20, up $11.9 million or 6% from $207.6 million in Q3/20 largely attributable to increases in revenue from Capital Formation, Equities and Fixed Income Trading, CDS, Derivatives Trading & Clearing, and GSIA partially offset by lower Other revenue.

• Operating expenses in Q4/20 were $113.4 million, up $6.2 million or 6%, from $107.2 million in Q3/20. The increase reflected higher severance costs of $3.4 million, increased short term employee performance incentive plan costs, higher software license and information technology professional services costs, the write-off of costs related to discontinued initiatives and increased marketing costs. In addition, the recovery in a commodity tax provision, which reduced operating expenses, was $0.2 million in Q4/20 compared with $1.3 million in Q3/20. These increases were somewhat offset by decreases in long term employee performance incentive plan costs and lower COVID-19 pandemic related costs. Transaction related costs pertaining to the proposed AST Canada acquisition declined by $1.1 million from Q3/20 to Q4/20.

• Income from operations increased from Q4/20 to Q3/20 largely due to the higher revenue somewhat offset by higher operating expenses.

• Net income in Q4/20 was $71.8 million, or $1.27 per common share on a basic and $1.26 on a diluted basis, compared with a net income of $70.0 million, or $1.24 per common share on a basic and $1.23 on a diluted basis, for Q3/20. The increase in net income and earnings per share was driven by the higher income from operations in Q4/20 compared with Q3/20. This increase was partially offset by a loss of $0.9 million in equity accounted investees in Q4/20 compared to a gain of $2.9 million in Q3/20. This was driven by an expense of approximately $5.1 million representing our share of BOX's long term employee performance incentive plan costs for 2020 which were recorded in Q4/20.

Q3/20 compared with Q2/20

• Revenue was $207.6 million in Q3/20, down $10.1 million or 5% from $217.7 million in Q2/20 largely attributable to decreases in revenue from Equities and Fixed Income Trading and Clearing, Derivatives Trading and Clearing, and GSIA, excluding Trayport, largely offset by increases in revenue from both Capital Formation and Trayport.

• Operating expenses in Q3/20 were $107.2 million, down $12.1 million or 10%, from $119.3 million in Q2/20. The decrease was largely attributable to a decline in Selling, general and administration expenses, which included $12.4 million of net litigation settlement costs in Q2/20. Increases in short term employee performance incentive plan costs, severance, consulting fees and transaction related costs of $1.4 million were largely offset by decreases in long term employee performance incentive plan costs, bad debt expense, the reversal of a commodity tax provision of $1.3 million and lower COVID-19 pandemic related costs.

• Income from operations increased from Q2/20 to Q3/20 largely due to the lower operating expenses largely offset by lower revenue.

• Net income in Q3/20 was $70.0 million, or $1.24 per common share on a basic and $1.23 on a diluted basis, compared with a net income of $67.8 million, or $1.20 per common share on a basic and $1.19 on a diluted basis, for Q2/20. The increase in net income and earnings per share was driven by the higher income from operations in Q3/20 compared with Q2/20.

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Q2/20 compared with Q1/20

• Revenue was $217.7 million in Q2/20, down $2.6 million or 1% from $220.3 million in Q1/20 largely attributable to decreases in revenue from Derivatives Trading and Clearing, CDS, Trayport, as well as Other revenue, largely offset by increases in Capital Formation, Equities and Fixed Income Trading and GSIA, excluding Trayport.

• Operating expenses in Q2/20 were $119.3 million, up $10.0 million or 9%, from $109.3 million in Q1/20. The increase was largely related to net litigation settlement costs. There were also higher short term employee performance incentive plan, recruitment and COVID-19 pandemic related costs, which were offset by lower salary and benefits costs and reduced travel and entertainment expenses from Q1/20 to Q2/20.

• Income from operations decreased from Q1/20 to Q2/20 largely due to the lower revenue and higher operating expenses.

• Net income in Q2/20 was $67.8 million, or $1.20 per common share on a basic and $1.19 on a diluted basis, compared with a net income of $70.1 million, or $1.25 per common share on a basic and $1.24 on a diluted basis, for Q1/20. The decrease in net income and earnings per share was driven by the lower income from operations in Q2/20 compared with Q1/20. During Q1/20, there was a change in the expected U.K. corporate income tax rate. This resulted in an increase in deferred income tax liabilities and a corresponding increase in income tax expense of $7.4 million, which reduced net income for Q1/20. The decrease in basic and diluted earnings per share was also due to an increase in the number of weighted-average common shares outstanding in Q2/20 compared with Q1/20.

Q1/20 compared with Q4/19

• Revenue was $220.3 million in Q1/20, up $17.5 million or 9% from $202.8 million in Q4/19 largely attributable to increases in revenue from Equities and Fixed Income Trading, Derivatives Trading and Clearing, GSIA, including Trayport, as well as Other revenue, somewhat offset by decreases in Capital Formation and CDS revenue. Certain recoverable costs related to CDS's clearing operation, previously netted, are now included in both CDS revenue and Selling, general and administration expenses. The amount reclassified to CDS revenue in Q4/19 was $5.3 million compared with $1.1 million in Q1/20.

• Operating expenses in Q1/20 were $109.3 million, up $3.0 million or 3%, from $106.3 million in Q4/19. The increase in costs was largely related to higher short term and long term employee performance incentive plan costs of $8.1 million. There was also an increase in payroll taxes of $3.0 million. Offsetting these increases, certain recoverable costs related to CDS's clearing operation, previously netted, are now included in both CDS revenue and Selling, general and administration expenses. The amounts reclassified to Selling, general and administration expenses were $5.3 million for Q4/19 compared with only $1.1 million in Q1/20. In addition, there was also a decrease in travel and entertainment expenses as well as in recruitment costs from Q4/19 to Q1/20.

• Income from operations increased from Q4/19 to Q1/20 largely due to the higher revenue somewhat offset by higher operating expenses.

• Net income in Q1/20 was $70.1 million, or $1.25 per common share on a basic and $1.24 on a diluted basis, compared with a net income of $47.5 million, or $0.85 per common share on a basic and $0.84 on a diluted basis, for Q4/19. The increase in net income and earnings per share was driven by the higher income from operations in Q1/20 compared with Q4/19. In addition, there was a non-cash impairment charge of $18.0 million related to Shorcan in Q4/19 and no similar charge in Q1/20. However, during Q1/20, there was a change in the expected U.K. corporate income tax rate. This resulted in an increase in deferred income tax liabilities and a corresponding increase in income tax expense of $7.4 million, which reduced net income for Q1/20. The increase in basic and diluted earnings per share was also somewhat reduced by an increase in the number of weighted-average common shares outstanding in Q1/20 compared with Q4/19.

Q4/19 compared with Q3/19

• Revenue was $202.8 million in Q4/19, up $6.5 million from Q3/19 reflecting increases increases in CDS and Global Solutions, Insights and Analytics revenue. Certain recoverable costs related to CDS's clearing operation, previously netted, are now included in both CDS revenue and Selling, general and administration expenses. The

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amount reclassified to CDS revenue in Q4/19 was $5.3 million. The increases were partially offset by decreases in Capital Formation, and Equities and Fixed Income Trading revenue.

• Operating expenses increased from Q3/19 to Q4/19. Certain recoverable costs related to CDS's clearing operation, previously netted, are now included in both CDS revenue and Selling, general and administration expenses. The amount reclassified to Selling, general and administration expenses in Q4/19 was $5.3 million. There was also an increase in operating costs related to Selling, general and administration expenses, including project spending and fees, as well as staffing costs. These increases were largely offset by a decrease in short term and long term employee performance incentive plan costs of approximately $2.3 million and approximately $8.0 million, respectively. The latter costs decreased by approximately $4.0 million due to the decrease in our share price between Q3/19 and Q4/19 as well as the reversal of an accrual of approximately $4.0 million relating to long term employee performance incentives that were forfeited upon the execution of an agreement on January 10, 2020 in respect of the CEO's retirement.

• Income from operations increased from Q3/19 to Q4/19 due to the higher revenue, which was partially offset by the higher operating expenses.

• Net income in Q4/19 was $47.5 million, or $0.85 per common share on a basic and $0.84 on a diluted basis, compared with net income of $61.7 million, or $1.10 per common share on a basic and $1.09 on a diluted basis in Q3/19. The decrease in net income was largely driven by impairment charges of $18.0 million in Q4/19 related to Shorcan.

Q3/19 compared with Q2/19

• Revenue was $196.3 million in Q3/19, down $14.0 million from Q2/19 reflecting decreases in all segments including Capital Formation driven by lower additional listing fees, Equities and Fixed Income Trading & Clearing, and Global Solutions, Insights and Analytics.

• Operating expenses decreased in Q3/19 compared with Q2/19 reflecting a reduction in Strategic re-alignment expenses, a decrease in project spending and fees as well as increased recoverable expenses. The decreases were somewhat offset by an increase of approximately $3.9 million in long term employee performance incentive plan costs driven by the increase in our share price.

• Income from operations decreased from Q2/19 to Q3/19 due to lower revenue partially offset by lower operating expenses.

• Net income in Q3/19 was $61.7 million, or $1.10 per common share on a basic and $1.09 on a diluted basis, compared with net income of $77.2 million, or $1.38 per common share on a basic and $1.37 on a diluted basis in Q2/19. There were lower revenues in Q3/19 compared with Q2/19 partially offset by lower operating expenses.

Q2/19 compared with Q1/19

• Revenue was $210.3 million in Q2/19, up $12.8 million from Q1/19 reflecting increases in Capital Formation driven by higher additional listing fees , Derivatives Trading & Clearing, and Global Solutions, Insights and Analytics driven by Trayport.

• Operating expenses were down in Q2/19 compared with Q1/19 reflecting lower strategic re-alignment costs, reduced payroll taxes and pension adjustments as well as lower Deprecation and Amortization costs. The decreases were largely offset by higher severance costs, project spending, long-term employee performance incentive plan costs as well as expenses and transaction costs related to VisoTech (acquired May 15, 2019).

• Income from operations increased from Q1/19 to Q2/19 largely reflecting the higher revenue and also the lower operating expenses.

• Net income in Q2/19 was $77.2 million, or $1.38 per common share on a basic and $1.37 on a diluted basis, compared with net income of $61.2 million, or $1.10 per common share on a basic and $1.09 on a diluted basis in Q1/19. There were significantly higher revenues and also lower operating expenses in Q2/19 compared with Q1/19. There was also a gain on sale of interest in Bermuda Stock Exchange of approximately $2.0 million after

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tax (4 cents per basic and diluted share) and a deferred income tax recovery of $4.3 million related to a decrease in the Alberta corporate income tax rate (8 cents per basic and diluted share) in Q2/19.

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ENTERPRISE RISK MANAGEMENT

Executive Summary

TMX Group provides essential services to the Canadian capital and global commodity markets and effectively managing risks and objective certainty[41] is fundamental to our ability to execute on our enterprise and business strategies. The purpose of enterprise risk management (ERM) is to facilitate and support the businesses in their pursuit of their objectives to ensure the outcomes of these activities are transparent and understood, consistent with our risk appetite, appropriately balance risk and reward, and serve as inputs into the enterprise strategy formulation process.

We have identified a number of principles which guide our management of risks, including the following:

• We promote and maintain an enterprise-wide ethical culture that values the importance of effective risk management in day-to-day business activities and decision making, and encourages frank and open communication.

• Our business units and corporate functions own the objectives, and therefore risks, assumed in their activities and are accountable for the effective management of those risks, supported by the risk management and internal audit functions. TMX uses Five Lines of Accountability (see below) which enhances the Three Lines of Defence model while recognizing the role of senior management and the Board in risk management. We define these roles and responsibilities and associated levels of authority for risk-taking across the enterprise.

• We employ effective and consistent risk management processes across the enterprise to ensure that objectives and risks are transparent, well understood, and remain within an accepted and approved level of risk appetite.

• We employ sufficient resources and effective tools, methods, models and technology to support our risk management processes.

• Our ERM framework reflects industry standards and legal and regulatory requirements, and is regularly reassessed.

The management of risk is essential to the successful execution of our Strategic Plan. Consequently, we have adopted an Objective Centric Risk Management (“OCRM”) approach to risk management. Rather than managing our risks in isolation, we use OCRM to address opportunities, uncertainties and threats to the successful achievement of our objectives. An OCRM approach to risk management does not change the risks faced by our organization. Instead, it anchors the risk management process to our objectives which supports the proper allocation of resources across the enterprise. As illustrated in the diagram below, using OCRM requires senior management, under the supervision of the Board, to (i) clearly define roles across the businesses; (ii) explicitly specify risk and assurance requirements; and (iii) determine the business objectives that warrant more formal and visible risk assessment processes. This ensures the integration of the enterprise's objectives, risks, risk treatments, and performance. The Board has established a set of enterprise objectives and the Strategy and Risk Committee (“SRC”), a management committee of TMX Group, determines the key risks to the successful achievement of our objectives, identifies new or emerging risks, evaluates our execution strategy and allocates resources as required.

41 TMX has adopted an Objective Centric Risk Management ("OCRM") approach where the emphasis is on Objective Certainty rather than risk registers. OCRM is an approach to managing risks that is anchored in objectives through an integrated approach that aligns risk activities to strategies, objectives and performance. It reaffirms responsibility for risk to individuals who are responsible for achieving the objectives.

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==> picture [376 x 306] intentionally omitted <==

Key risks identified are:

Market and Macroeconomic Risk: A significant portion of our revenue comes from trading revenue. Similar to other exchanges, this is highly sensitive to macroeconomic conditions. Canada is our largest geographic concentration of revenue. Given the majority of business is conducted domestically, macroeconomic factors such as GDP growth, regulations, interest rates, volatility, and market activity, can impact our business.

Cyber Risk: Our processes and networks and those of our third-party service providers may be vulnerable to information risks, including unauthorized access, computer viruses, denial of service attacks, and other security issues. Remote working necessitated by the COVID-19 pandemic has placed a greater emphasis on the integrity and capacity of our networks. Attempted cyber attacks were on the rise in 2020 and a successful cyber scam or attack could adversely impact our business.

Pandemic Risk: The economic and market conditions in Canada, the United States, Europe, China and the rest of the world impact different aspects of our business and our revenue drivers. The COVID-19 pandemic has created significant volatility, uncertainty and economic disruption, which may adversely affect our business, financial condition, liquidity, results of operations and long-term financial objectives. Listing, trading and clearing activities can be significantly affected by economic, political and market conditions as well as the overall level of investor confidence. These factors can impact the level of initial public offerings, secondary financings, market capitalization of our issuers, transfer agent and trustee services, trading volumes, energy data and network connectivity, client hosting revenue, and sales of market data across our markets. We have witnessed high levels of volatility which, when coupled with prolonged negative economic conditions, can cause dramatic fluctuations in trading volumes, equity financings and demand for market data. This can also lead to slower collections of accounts receivable as well as increased counterparty risk which, in turn, could adversely affect our business. Additionally, if we are required to suspend trading for a prolonged period of time or shorten trading hours, our business, operating results, long term financial objectives, cash flows, or financial condition could be materially adversely affected.

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While key initiatives continue, some could be delayed or postponed indefinitely due to lack of client availability for effective engagement and business development. Although we continue to plan and engage with new and prospective clients, their level of readiness and commitment is outside of our control; therefore, revenues could be lower than anticipated.

In response to COVID-19, the vast majority of our staff are working remotely, which may increase our exposure to cyber security and operational risks. The impacts of the pandemic could also materially interrupt our business operations and cause material financial loss, human resource constraints, result in adverse regulatory actions, lead to delays in obtaining regulatory or government approvals, interrupt services received from third parties or provided to clients, result in reputational harm or legal liability. This in turn could materially adversely affect our business, cash flows, financial condition, operating results and long-term financial objectives. While all our business units and corporate functions have business continuity plans to support critical operations and mitigate such risks, a prolonged interruption in our key services could materially adversely affect our reputation, business, operating results, long term financial objectives, cash flows, and financial condition.

Competition Risk: We compete with other exchanges domestically and internationally on listings, cash equities and equity option trading. Muted capital markets activity may result in lower revenue related to capital raising activities.

Execution Risk: We are exposed to the risk that we lack capabilities or fail to prioritize initiatives to deliver against our strategy and objectives in an efficient and effective manner.

Concentration Risk: A large portion of the Canadian economy is based in natural resources and energy related business and as such, we are exposed to downturns in these sectors as they can impact capital formation business and the trading and clearing activity.

Key Person Risk: Should key senior management positions become vacant there could be a loss of knowledge and expertise resulting in risk to executing our strategy.

These risks and uncertainties are further expanded upon below. The risks and uncertainties discussed in this section are not the only ones facing TMX Group. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business. If any of the following risks actually occur, our reputation, business, financial condition, or operating results could be adversely affected.

Competition Risk

We are exposed to the risk that established and new competitors, including disruptive technology providers, will challenge our business model and objectives.

Our Capital Formation business competes with other exchanges and other financing platforms

We compete for listings with North American exchanges in a broad range of sectors and also internationally, particularly for resource companies and small and medium sized enterprises. We also face competition from North American and international exchanges for Canadian listings. Domestically, we currently compete for listings with two other exchanges.

While some Canadian issuers seek a listing on another major North American or international exchange, historically, the vast majority of these issuers who qualify also list on TSX or TSXV and do not bypass our markets. We also compete with institutions and various market participants that offer alternative forms of financing including private equity, venture capital and various forms of debt financing. Many of these alternative forms of financing may subject issuers to different regulatory rules and oversight and different obligations from those associated with being listed on our markets.

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TSX, TSXV and TSX Alpha Exchange face competition from other exchanges, other marketplaces and trading mechanisms

We face competition for business from other exchanges, especially those in the U.S. as investing becomes more global. In particular, these competitors could look to attract Canadian issuers that are listed on one of our exchanges. For example, two of our U.S.-based competitors operate a Canadian market. It is possible that these competitors could, in addition to competing for listing and trading of Canadian issuers, enter into other business areas in which we currently operate.

In addition, the variety of other marketplaces and trading venues in the U.S. that trade Canadian securities, including dark markets and internalization facilities, places increasing competitive pressure on our business. For example, some market participants in the U.S., known as wholesalers, are currently able to pay our customers for order flow under U.S. securities laws and regulations. This practice is not permitted in Canada, and therefore puts us at a competitive disadvantage. IIROC published guidance and a technical notice to clarify the requirements for investment dealers when orders in Canadian-listed securities are executed away from Canadian markets, an important step in IIROC’s approach to addressing concerns about the routing of orders to the U.S. If we are unable to continue to provide competitive trade execution, the volume traded in all interlisted issuers on our equity exchanges could decrease in the future and adversely affect our operating results. Our combined market share (including TSX, TSXV, and Alpha) of the total volume traded in Canadian based interlisted issues was approximately 31% in 2020, unchanged from 2019. Our cash equities sales team is focused on attracting more foreign participants and order flow by raising the level of awareness of the benefits of trading on TSX, TSXV and Alpha.

Domestic competition in our cash equities trading business has intensified since the establishment of ATSs in Canada. Technological advances have lowered barriers to entry and have created a multiple marketplace environment for trading TSX and TSXV listed securities. There are currently 15 Canadian equity marketplaces which trade TSX and/or TSXV listed securities, including dark and visible trading venues. There are also sophisticated mechanisms to internalize order flow, liquidity aggregators and smart order routers that facilitate trading on other venues. New market entrants have fragmented domestic equities market share and we continue to face significant competitive pressure from existing venues, and potential new entrants. Excluding intentional crosses, in the issues we trade, our combined domestic equities trading market share was 67%[42] in 2020, up from 65% 2019. We only trade securities that are listed on TSX or TSXV. Excluding intentional crosses, in all listed issues in Canada, our combined domestic equities trading market share was 59% in 2020, up from 57% 2019.

These trading venues may, among other things, respond more quickly to competitive pressures, develop similar or alternative products and services to those that TSX, TSXV and Alpha offer that are preferred by customers, develop and expand their network infrastructures and offerings more efficiently, adapt more swiftly to new or emerging technologies and changes in customer requirements, and adopt better, more user friendly and reliable technology. If these trading venues attract significant order flow, or other market structure changes occur in the marketplace which negatively impacts our ability to effectively compete, our listing, trading and GSIA revenue could be materially adversely affected.

There is also intense price competition in the cash equities markets where competitors may price their trading and data products more attractively. While we have developed a pricing mix to attract greater liquidity to our markets, the competitive environment in which we operate places significant pricing pressures on our trading and market data offerings. Some competitors may seek to increase their share of trading by reducing their transaction fees, by offering larger liquidity payments, by offering inverted pricing and/or by offering other forms of financial or other incentives. We have in the past lowered our equity trading fees and we may, in the future, be required to adjust our pricing to respond to competitive pricing pressure. If we are unable to compete successfully with respect to the pricing of our offerings, our business, financial condition and results of operations could be materially adversely affected.

42 Source: IIROC

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MX and CDCC face competition from other venues and OTC markets

While MX is the only Canadian financial derivatives exchange offering standardized products and CDCC the only clearing house headquartered in Canada clearing such products, their various component activities are exposed. MX already competes with, among others, options and other derivatives exchanges as well as the OTC market. This competition from other exchanges exists particularly in the US, but also in Europe and Asia. For example, in the U.S., MX competes for market share of trading single stock options on Canadian-based inter-listings, or dual listings. However, options traded in the U.S. are not fungible with those traded in Canada. In addition, OTC regulatory reform that is underway in Canada could encourage the entry of new competition within the Canadian clearing space. OTC inter-dealer and dealer-to-client trading platforms represent increased competitive risk to MX with their lookalike and substitute products. We may, in the future, also face competition from other Canadian marketplaces. These competitors may, among other things, respond more quickly to competitive pressures, develop similar products to those MX offers that are preferred by customers or they may develop alternative competitive products. Furthermore, they may price their products more competitively, develop and expand their network infrastructures and offerings more efficiently, adapt more swiftly to new or emerging technologies and changes in customer requirements and use better, more user friendly and reliable technology. Increased competition could lead to reduced interest in MX’s products which could materially adversely affect our business and operating results.

The Canadian clearing services market may become more competitive as some competitors receive recognition or exemption orders from regulators to operate as clearing agencies. Provincial regulators have also exempted from recognition in their respective province a number of foreign clearing agencies, allowing those exempted clearing agencies to provide clearing services to participants in the province under the terms of the applicable exemption orders, including Eurex Clearing AG and Chicago Mercantile Exchange Inc.

Increasing regulatory requirements imposed upon banks through higher capital requirements imposed under the Basel regulatory framework, which increase the costs of acting as a futures clearing agent on behalf of end customers may make clearing services more challenging for end customers to obtain, which could limit growth in the futures clearing business. Other major competitors may gain some of this business as they have started to offer clearing services directly to end customers, attenuating challenges end customers may face in obtaining clearing agent services from banks.

The derivatives trading industry is characterized by intense price competition. While our derivatives markets have developed a pricing mix to attract greater liquidity to these markets while maintaining our average price per contract, market conditions may result in increased competition which, in turn, may place significant pricing pressures in the future. Some competitors may seek to increase their share of trading by reducing their transaction fees, by offering larger liquidity payments or by offering other forms of financial or other incentives. Our business, financial condition and results of operations could be materially adversely affected as a result of these developments.

Shorcan faces competition from OTC markets and other sources

Shorcan has several competitors in the fixed income IDB market. If Shorcan fails to attract institutional dealer order flow from this market, it would adversely affect its business and operating results.

Global Solutions, Insights and Analytics faces competition in bringing products to market

We face competition in market data and analytics, from other trading venues and vendors. Market data is generated from trading activity and the success of certain data products is linked to maintaining order flow. There is a risk that products may not meet market needs that may impact revenue.

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Trayport faces competition from other trade matching and execution vendors

Trayport has competition from other vendors who offer matching and execution tools for brokers, exchanges and traders in its core European energy markets and in new global markets and asset classes Trayport looks to enter. Success of these competitor vendors could reduce the number of Trayport venue customers and total subscribers, and limit the ability for Trayport to enter new markets.

Trayport’s venue customers face competition from other venues or trading platforms and a reduction in Trayport’s customers market share or liquidity could lead to a reduction in Trayport subscriber numbers.

Economic Risk

We are exposed to the risk that the macroeconomic and industry conditions (among others, the commodity cycle and economic growth) will challenge our business model and objectives.

We depend on the economy of Canada

Our financial results are, and continue to be affected by the Canadian economy, including by commodity prices in the resource sector. Any prolonged economic downturn, could have a significant negative impact on our business. We have increased our focus on the innovation sector. However, capital raised in this sector is often lower than that raised in the resource sectors. If the profit growth of Canadian-based companies is generally lower than the profit growth of companies based in other countries, the markets on which those other issuers are listed may be more attractive to investors than our equity exchanges. A prolonged economic downturn may have a negative impact on investment performance, which could materially adversely affect the number of issuers and new listed issuers, the market capitalization of our listed issuers, additional securities being listed or reserved, trading volumes across our markets, the number of transactions related to our equity and fixed income clearing and settlement, depository, custodial and entitlement services and market data sales.

Our operating results may be adversely impacted by global economic conditions

The economic and market conditions in Canada, the United States, Europe, China and the rest of the world impact the different aspects of our business and our revenue drivers. In particular, lower commodity prices, can, and has, negatively impacted our business. Changes in the economic and political climate in the United States and Asia Pacific, including changes relating to trade agreements, could impact our business. In addition, increased uncertainty in Europe, including the impact of Brexit and the possibility of sovereign defaults on debt, may also impact our business, including Trayport. Political and civil uncertainty in Hong Kong as well as tensions over trade deficits and technology companies between China and the United States may impact growth plans in Asia in the short term. Because listing, initial and additional financing, trading and clearing activities are significantly affected by economic, political and market conditions and the overall level of investor confidence, they impact the level of listing activity (including IPOs), the market capitalization of our issuers, trading and clearing volumes and sales of data across our markets. In addition, our clearing customers face higher credit costs associated with complying with margining regimes which could result in lower volumes.

Global market and economic conditions have fluctuated in recent years, and we have witnessed both high and low levels of volatility. While higher volatility in markets can generate increased transaction volume, when coupled with prolonged negative economic conditions higher volatility can adversely affect trading volumes and the demand for market data and can lead to slower collections of accounts receivable as well as increased counterparty risk which, in turn, could adversely affect our business, financial condition, and operating results. A low-volatility environment can

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result in lower levels of trading and clearing, particularly for derivative products, placing downward pressure on operating results.

We depend on market activity that is outside of our control

Our revenue is highly dependent upon the level of activity on our exchanges and clearing houses, including: the volume of securities traded on our cash markets; the number of transactions, volume of contracts or products traded and cleared on our derivatives markets; the number and market capitalization of listed issuers; the number of new listings; the number of active traders and brokerage firms; the number of transactions related to our equity and fixed income clearing and settlement, depository services; and the number of subscribers to market data and Trayport services.

We do not have direct control over these variables. Among other things, these variables depend upon the relative attractiveness of securities listed and traded on our exchanges and the relative attractiveness of our exchanges as a place to list and trade those securities as compared to other exchanges and other trading mechanisms. Those variables are in turn influenced by:

• the overall economic conditions and monetary policies in Canada, the United States, Europe, China, and in the world in general (especially growth levels, political stability and debt crisis);

• broad trends in business and corporate finance, including trends in the exchange industry, capital market trends and the mergers and acquisitions environment;

• the economic health of the resource sector;

• the level and volatility of interest rates and resulting attractiveness of alternative asset classes;

• the regulatory environment for investment in securities and derivatives, including the regulation of marketplaces and other market participants, both in Canada and other jurisdictions;

• the relative activity and performance of global capital markets;

• investor confidence in the prospects and integrity of our listed issuers, and the prospects of Canadian-based listed issuers in general;

• pricing volatility of global commodities and energy markets; and

• changes in tax legislation that would impact the relative attractiveness of certain types of securities or derivatives, or listing in certain countries.

We may be able to indirectly influence the volume of trading and clearing by providing efficient, reliable and cost effective trading and clearing; maximizing the availability of timely, reliable information upon which research, advice and investment decisions can be based; and maximizing the ease of access to listings, trading and clearing facilities. However, those activities may not have a positive effect on or effectively counteract the factors that are outside of our control. We face a risk that regulators may impose higher burdens on our clients that could impinge on their ability to invest.

Strategic Risk

We are exposed to the risk of attaining sub-optimal enterprise business performance due to:

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Opportunity Cost Risk: failure to develop, assess and select optimal pathways for portfolio-level success in context of enterprise capabilities, resources, and the external environment

Implementation Risk: failure to commit to chosen pathways and translate them into clear actions and goals

Execution and Change Management Risk: failure to execute committed plans, identify changes in the strategic context of the business with sufficient foresight, and to develop, select and execute effective responses

Our strategic planning processes may not enable us to identify and properly respond to opportunities or threats resulting in our inability to develop new products and services that meet clients’ evolving needs

Our strategic planning process includes a thorough analysis of the business context in which we operate as well as significant peer and competitive analysis. While we regularly test the key assumptions underlying our strategic plan, it is possible that we may not identify or respond to opportunities or threats in our industry despite the investment of time and resources in this process.

Execution Risk

We are exposed to the risk that we lack capabilities or fail to prioritize initiatives to deliver against our strategy and objectives in an efficient and effective manner. It is possible that our capital allocation decisions may not be optimal.

We may not be successful in executing our strategy

We invest significant resources in the development and execution of our corporate strategy to grow profitability and maximize shareholder value. We may not succeed in executing our strategies effectively because of, among other things, increased global competition, inability to mobilize or co-ordinate internal resources on a timely basis, difficulty developing and introducing products or regulatory restrictions. In addition, we may have difficulty obtaining financing for new business opportunities, due to financial restrictions that currently or may in the future be placed on TMX Group under our Commercial Paper Program, Debentures, Credit Facility, Recognition Orders and under our regulatory oversight agreements. While we have established process and tools for effective and rigourous oversight of our key initiatives, any of these factors could materially adversely affect the successful execution of our strategies. Inadequate succession planning could slow the successful execution of our strategy. The execution of our strategy could also be impacted if we failed to respond quickly to a changing landscape.

New business activities may adversely affect income

We may enter new business activities which, while they could provide opportunities for us, may also impose restrictions on us and/or have an adverse effect on our existing profitability. While we would expect to realize new revenue from these new activities, there is a risk that this new revenue would not be greater than the associated costs or any related decline in existing revenue sources.

Expansion of our operations internationally involves unique challenges that we may not be able to meet

We continue to expand our operations internationally, including making acquisitions, opening offices and acquiring distribution, technology and other systems in foreign jurisdictions, and obtaining regulatory authorizations or exemptions to allow remote access to our markets by approved participants outside Canada. We expect that the expansion of access to our electronic markets will continue to increase the portion of our business that is generated from outside Canada. We face certain risks inherent in doing business in international markets, particularly in the regulated exchange and clearing businesses. These risks include, but are not limited to:

• restrictions on the use of trading terminals direct connectivity to our marketplace or the contracts that may be traded;

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• geopolitical unrest;

• reduced protection for intellectual property rights;

• difficulties in staffing and managing foreign operations;

• potentially adverse tax consequences;

• enforcing agreements and collecting receivables through certain foreign legal systems; and

• foreign currency fluctuations for international business.

We would be required to comply with the laws and regulations of foreign governmental and regulatory authorities of each country in which we need to obtain authorizations or exemptions for remote access to our markets. These may include laws, rules and regulations relating to any aspect of the business. In many cases, the additional costs related to compliance can be substantial, and could outweigh the potential benefits. International expansion may expose TMX Group to geographic regions that may be subject to greater political, economic and social uncertainties than countries with developed economies.

Any of these factors could have a material adverse effect on the success of our plans to grow our international presence and market products and services and consequently on our business, financial condition and results of operations.

Integration/Divestitures Risk

We are exposed to the risk that we fail to integrate acquisitions to achieve the planned economics or divest underperforming businesses effectively.

We face risks associated with integrating the operations, systems, and personnel of acquisitions

As part of our strategy to sustain growth, we have and expect to continue to pursue appropriate acquisitions of other companies and technologies. An acquisition will only be successful if we can integrate the acquired businesses’ operations, products and personnel; retain key personnel; and expand our financial and management controls and our reporting systems and procedures to accommodate the acquired businesses. It is possible that integrating an acquisition could result in less management time being devoted to other parts of our core business. In addition, pursuant to the Final Recognition Orders[43] , prior regulatory approval is required before TMX Group can implement significant integration, combination or reorganization of businesses, operations or corporate functions among TMX Group entities. The requirement to obtain these approvals may restrict or delay TMX Group’s ability to make planned changes to these aspects of its operations in the future which could have a material adverse effect on TMX Group’s business, financial condition and results of operations. If an investment, acquisition or other transaction does not fulfill expectations, we may have to write down its value in the future and/or sell at a loss.

We face risks associated with not being able to divest under-performing businesses

As part of our normal course of operations and strategic review processes, we may from time to time identify under performing assets or businesses that we choose to divest.

Similar to integration risks, we also face the risks of not divesting under-performing businesses in a timely and effective manner to enable better utilization of our capital and other resources.

43 Recognition orders issued by the securities regulators with respect to the Maple Transaction.

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Operational Risks

Technology Risk

We are exposed to the risk that our technology and underlying IT processes do not enable us to develop and/or deliver our products and services effectively.

We depend heavily on information technology, which could fail or be subject to disruptions

We are extremely dependent on our information technology systems. Trading and data on our cash equities markets, data on energy markets, trading, clearing and data on our derivatives markets and clearing, settlement and depository activity for equities and fixed income securities are conducted exclusively on an electronic basis.

We have incident and disaster recovery and contingency plans as well as back-up procedures to mitigate the risk of an interruption, failure or disruption, including those due to cyber attacks on our critical information technology including that of TSX, TSXV, Alpha, MX, Trayport, CDCC and CDS. We also test and exercise our disaster recovery plans. However, depending on an actual failure or disruption, those plans may not be adequate as it is difficult to foresee every possible scenario and therefore, we cannot entirely eliminate the risk of a system failure or interruption. We have experienced occasional information technology failures and delays in the past, and we could experience future information technology failures, delays or other interruptions.

The current technological architecture for our cash equities, derivatives trading and clearing, and market data information technology systems may not effectively or efficiently support our changing business requirements. We are heavily invested in a Post Trade Modernization project; the significant delay or failure of which may impact participant confidence and expose us to system reliability issues.

We are continually improving our information technology systems so that we can accommodate increases and changes in our trading, clearing, settlement and depository activities and market data volumes to respond to customer demand for improved performance. This requires ongoing analysis and expenditures, and may require us to expend significant amounts of resources in the future. System changes, including the introduction of new technologies, may introduce risk; while we have and follow, standard deployment processes for managing and testing these changes, we cannot entirely eliminate the risk of a system failure or interruption.

If the TMX Quantum XA trading enterprise, the SOLA derivatives trading enterprise, the SOLA Clearing platform, or CDS's CDSX system fail to perform in accordance with expectations, our business, financial condition and operating results may be materially adversely affected.

Information Security and Privacy Risk

We are exposed to the risk that information security breaches will adversely affect the operations, intellectual property and reputation of TMX Group.

Our processes and networks and those of our third-party service providers may be vulnerable to data security risks, including cyber attack

Our processes and networks and those of our third-party service providers, our POs, approved participants, clearing members and our customers may be vulnerable to information risks, including unauthorized access, computer viruses, theft of data, denial of service attacks, and other security issues. Persons who circumvent security measures could wrongfully use our information or cause interruptions or malfunctions in our operations which could damage the integrity of our markets and data provision, any of which could have a material adverse effect on our business, financial condition and results of operations. We may be required to expend significant resources to protect against the threat of security breaches or to alleviate problems, including reputational harm and litigation, caused by any breaches. Although we intend to continue to implement industry-standard security measures, these measures may prove to be

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inadequate and result in system failures and delays that could lower trading volume and have a material adverse effect on our business, financial condition and results of operations.

Geopolitical & External Disruption Risks

We are exposed to the risks that geopolitical upheavals (e.g. a terrorist attack) or non-political external events (e.g. extreme weather, pandemics) will affect the provision of our critical services.

Geopolitical, climate change and other factors could interrupt our critical business functions

The continuity of our critical business functions could be interrupted by geopolitical upheaval, including terrorist, criminal and political, or other types of external disruptions, including pandemics, human error, climate change, natural disasters, extreme weather, power loss, telecommunication failures, theft, sabotage and vandalism. Given our position in the Canadian capital markets, we may be more likely than other companies to be a target of such activities.

Our Business Resilience program consists of a series of integrated crisis management, disaster recovery, pandemic and business continuity plans for critical business functions to mitigate the risk of an interruption. Within these plans, leaders and managers have identified critical roles and critical processes that we are ready to maintain should a situation worsen.

All critical operations maintain a split operation for both data centres and office space, to provide redundancy and back-up in terms of technology, facilities and staffing to reduce the risk and maintain recovery time objectives in the event of a disruption. Any interruption to our key services could impair our reputation, damage our brand name, and negatively impact our financial condition and operating results.

Talent Management Risk

We are exposed to the risk that we are unable to attract and/or retain talented employees, which adversely affects the achievement of our objectives.

We need to retain and attract qualified personnel

Our success depends to a significant extent upon the continued employment and performance of a number of key management personnel whose compensation is partially tied to share options and other long-term incentive plans that mature over time. The value of this compensation is dependent upon total shareholder return performance factors, which includes appreciation in our share price. The loss of the services of key personnel could materially adversely affect our business and operating results.

We also believe that our future success will depend in large part on our ability to attract and retain highly skilled technical and managerial personnel. We have a commitment to diversity, equity and inclusion to ensure we have recruiting practices that support diverse talent pools and that we are responsive to evolving social conditions in alignment with our organizational values. A changing work environment due to a pandemic presents additional risks including: (i) a potential decline in performance or productivity for some personnel who cannot adapt to remote work conditions, (ii) an inability to drive and support our desired corporate culture without co-located personnel, and (iii) a rapid shift in the need for new skills that we cannot acquire quickly. Each of these risks could negatively affect our business and operational results. To mitigate these risks, we are investing in new training programs to support personnel in adapting to remote / hybrid working conditions and are regularly surveying staff on their needs and preferences.

Given that COVID-19 and the shift to a largely remote workforce has prompted a review our of future workforce model, we are exposed to the risk that existing high caliber or future personnel will not be aligned with the model or may not perform to the best of their abilities under new workforce conditions. We have established an enterprise committee to

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gather employee feedback/preferences and evaluate the strategic costs and benefits of various workforce models to reduce the risk that the future model is misaligned with employee expectations

Insider Threat Risk

We may be exposed to a threat where an authorized employee may take bad faith actions towards our employee base, technology, information or operations. We conduct background checks prior to the offer of employment and throughout the individual's employment; the frequency of which is based on their level of access. Access levels are reviewed on a regular basis and all access changes/terminations are communicated in a timely manner. All access is monitored by Security on a continuous basis.

Our trading, clearing and depository businesses could be exposed to loss due to operational failures

If our systems are significantly compromised or disrupted or if we suffer repeated failures, this could interrupt our cash equities trading services, MX’s trading and CDCC’s clearing services, CDS’ clearing, settlement and depository services; cause delays in settlement; cause us to lose data; corrupt our trading and clearing operations, data and records; or disrupt our business operations, or BOX’s operations for the period in which we provide transition services. This could undermine confidence in our exchanges and clearinghouses, materially adversely affect our reputation or operating results, and may lead to customer claims, litigation and regulatory sanctions. Failure of CDS’ systems could also affect other systemically important financial infrastructures such as the Large Value Transfer System operated by Payments Canada.

CDS holds securities on behalf of its participants in safe keeping. A small portion of this securities inventory is held in physical form. This risk is mitigated through layers of physical security arrangements as well as insurance coverage. However, CDS may be exposed to the risk of the loss or theft of these securities.

The operational processes at CDS and CDCC which provide clearing and central-counterparty services, are subject to the risk of failure for which they may be held liable. These process failures may result in material financial losses. To mitigate this risk, CDS and CDCC have instituted a comprehensive set of internal controls, which are audited by an external party on at least an annual basis. CDS and CDCC are the sole clearers for the transactions they process.

Operations Risk relating to Transfer Agent and Corporate Trust, and Registered Plan Trustee Services Business

Our transfer agent and corporate trust services business could be exposed to losses due to operational risks

The principal risks associated with the services and products offered by TSX Trust are operational in nature as TSX Trust is not involved in deposit taking and lending activities, nor does it trade in marketable securities. The most significant operational risks include securities issuance and transfers, corporate actions processing, disbursements, escrows, corporate trust and segregated accounts reconciliation activities. To mitigate these risks, its management has instituted a comprehensive set of internal controls, which are audited by an external party on at least an annual basis.

Model Risk

We are exposed to the risk that our clearing and settlement risk models used within our clearing houses are not designed or operating effectively, thereby exposing us to systemic failure.

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We are dependent on the accuracy and effective implementation of risk models

CDS and CDCC use financial models to estimate risk exposures and the value of margin and collateral to mitigate those exposures. These models are subject to risks including the incorrect use of variables input into the models, the misspecification of the model or errors in the implementation and/or use of models and their results which could result in the risks resulting from a clearing member failure being inadequately collateralized. The model risks are mitigated through model testing prior to implementation and the existence of a risk management framework with necessary governance to regularly assess the adequacy of the models. In addition, our clearinghouse risk models are subject to independent vetting and validation thereby ensuring that those models continue to perform as they were originally designed to do. Failure of the models may result in under or over estimation of financial risk exposures and may create systemic risks.

Third Party Risk

We are exposed to the risk that the use of third party vendors or outsourcing service providers for technology and/or business processes will result in loss of critical business data and/or compromise controls.

We depend on third-party suppliers and service providers

We depend on a number of third parties, such as IIROC, cloud services, data processors, software and hardware suppliers, communication and network suppliers, suppliers of electricity, and many other vendors, for elements of our businesses including trading, clearing, routing, providing market data and other products and services. These third parties may not be able to provide their services without interruption, or in an efficient, cost-effective manner. In addition, we may not be able to renew our agreements with these third parties on favourable terms or at all. These third parties also may not be able to adequately expand their services to meet our needs. We have established a central procurement function focused on vendor selection and management. However, if a third party suffers an interruption in or stops providing services and we cannot make suitable alternative arrangements, or if we fail to renew certain of our agreements on favourable terms or at all, our business, financial condition or operating results could be materially adversely affected.

Client Concentration Risk

We depend on an adequate number of clients

If we determine that there is not a fair market, the markets will be shut down. There will not be a fair market if too few POs, or approved participants are able to access our cash equity or derivatives exchanges, including market data information generated from these exchanges. If trading on our exchanges is interrupted or ceases, it could materially adversely affect our equity or derivatives operations, our financial condition and our operating results.

Our trading and clearing operations depend primarily on a small number of clients

During 2020, approximately 81% of our trading and related revenue, net of rebates, on TSX and approximately 68% of our trading and related revenue on TSXV were accounted for by the top ten POs on each exchange based on volumes traded.

Approximately 59% of CDS’s revenue, net of rebates, in 2020 was accounted for by the top ten customers (excluding securities regulators).

Approximately 71% of MX and CDCC’s trading and clearing revenue, net of rebates, in 2020 was accounted for by the top ten participants based on volume of contracts traded.

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If there was a significant decrease in revenue from several of these customers, there would be a negative impact on our business.

Legal & Regulatory Risk

Regulatory Climate & Compliance

We are exposed to the risks that are associated with the complexity and unpredictability of our legal and regulatory environment, including legislation and regulations that impact our listed issuers. Our response to regulatory requirements could result in higher operating costs. Moreover, we are also exposed to the risk that we fail to comply with laws and regulations, resulting in financial and reputational loss.

Cost of Regulation

We incur costs to comply with the regulatory requirements that are imposed pursuant to the Recognition Orders.

For more information on the regulatory impact on our business, please see the TMX Group Annual Information Form, dated March 24, 2020.

We operate in a highly regulated industry and are subject to extensive regulation and could be subject to increased regulatory scrutiny in the future

We are subject to significant regulatory constraints. We operate in a highly regulated industry and are subject to extensive government regulation and we could be subject to increased regulatory scrutiny in the future. Regulators in Canada, as well as regulators in other jurisdictions where we do business, such as the U.S., regulate us, our exchanges, our clearing houses and certain of our other businesses. Regulators in other jurisdictions may regulate our future operations. Canadian regulators propose changes, including amendments to National Instruments, on an ongoing basis.

Our regulators have broad powers over the entities they regulate to audit, investigate and enforce compliance with applicable regulations and impose sanctions for non-compliance.

Our regulators are vested with broad powers to prohibit us from engaging in certain business activities and to suspend or revoke existing approval to engage in certain business activities, including exchange, clearing agency and SRO related activities. In the case of actual or alleged non-compliance with legal or regulatory requirements, our regulated entities could be subject to investigations and administrative or judicial proceedings that may result in substantial penalties, including the suspension or revocation of approval to act as an exchange, clearing agency or SRO, as applicable. Any such investigation or proceeding, whether successful or not, would result in substantial costs and diversions of resources and might also harm our reputation, any of which may have a material adverse effect on our business, financial condition and results of operations.

The regulation of our businesses may impose barriers or constraints which limit our ability to build an efficient, competitive organization and may also limit our ability to expand global operations. Securities and other regulators also impose financial and corporate governance restrictions on us and our equity and derivatives exchanges and clearing agencies and operations. Some of our regulators must approve or review our regulated entities’ listing rules, trading rules, clearing, settlement and depository rules, fee structures and features and operations of, or changes to, our systems. These approvals or reviews may increase our costs and delay our plans for implementation. There could also be regulatory changes that impact our customers and that could materially adversely affect our business and results of operations.

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We could be subject to increased regulatory scrutiny in the future. The multi-market environment in Canada and the impact of global economic conditions continue to lead to more aggressive regulation of our businesses by securities and other regulatory agencies in Canada, the U.S. and abroad and could extend to areas of our businesses that to date have not been regulated.

There may be a conflict of interest, real or perceived, between our regulatory responsibilities and our own business activities. While we have implemented stringent governance measures and have and will continue to put into place policies and procedures to manage such conflicts, any failure to diligently and fairly manage such conflicts may significantly harm our reputation, prompt regulatory action and could materially adversely affect our business, financial condition and results of operations.

New regulatory requirements may make it more costly to comply with relevant regulation, to operate our existing businesses or to enter into new business areas

A number of regulatory initiatives and changes have been identified or proposed or are being implemented by regulators, including in Canada, the U.S. and Europe. We cannot be certain whether, or in what form, regulatory changes will take place, and cannot predict with certainty the impact of such changes on our businesses and operations. Changes in, and additions to, the rules affecting our exchanges and clearing houses could require us to change the manner in which we and our customers conduct business or govern ourselves. Failure to make the required changes and comply on a timely basis could result in material reductions to activity or revenue, sanctions and/or restrictions by the applicable regulatory authorities.

Unexpected and new regulatory requirements could make it more costly to comply with relevant regulations and for affected entities to operate their existing businesses or to enter into new business areas. In addition, high levels of regulation may stifle growth and innovation in capital markets generally and may adversely affect our business, financial condition and results of operations.

CDS Clearing and CDCC operate financial market infrastructures, including as central counterparties for cash and derivative markets, a securities settlement system and a central securities depository, that are subject to the CPMIIOSCO Principles for Financial Market Infrastructure (PFMIs) for these types of services. The PFMIS are reflected in the requirements of such entities’ regulators and applicable securities law including National Instrument 24-102 Clearing Agency Requirements. Adherence to the PFMIs by these businesses will continue to impact the cost of regulatory compliance.

European energy market regulatory changes could potentially affect the structure of these markets and hence the number of trading venues supported by Trayport.

Our Recognition Orders impose significant regulatory constraints

Under the Recognition Orders, we are subject to extensive regulation and regulatory oversight with respect to, among other things, fees, fee models, discounts and incentives. The Recognition Orders also impose significant regulatory constraints on our ongoing business. The additional regulatory and oversight provisions provided for in the Recognition Orders provide the applicable regulators with broad powers that could, depending on how such powers are exercised in the future, impose barriers or constraints that limit our ability to build an efficient, competitive organization, which could have a material adverse effect on our business, financial condition and results of operations.

With respect to the fees charged by all of our equity exchanges (TSX, Alpha, and TSXV), the Recognition Orders impose restrictions or prohibitions on certain types of fee discounts or incentives that such exchanges may provide, including discounts or incentives that are accessible only to a particular marketplace participant or class of marketplace participants. Such prohibitions and restrictions may limit the ability of our equity exchanges to introduce new products in the future or to introduce them on a timely basis, which could materially adversely affect the success of our future strategies, financial condition and results of operations. In addition, under the Recognition Orders the OSC has the right to require TSX and Alpha to submit a fee, fee model or incentive that has previously been approved by the OSC for re-

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approval. In such circumstances, if the OSC decides not to re-approve the fee, fee model or incentive, it must be revoked.

We incur costs to comply with the regulatory requirements that are imposed pursuant to the Recognition Orders. In addition, we and certain of our businesses are subject to participation and activity fees imposed by provincial securities regulators. The overall scope of the additional regulatory costs may have a material adverse effect on our business, financial condition, and results of operations.

Pursuant to certain of the Recognition Orders, prior regulatory approval is also required before we can implement changes to a number of aspects of our operations. This includes prior regulatory approval of (a) changes to internal cost allocation models and any transfer pricing between affiliated entities, (b) significant integration, combination or reorganization of businesses, operations or corporate functions between TMX Group entities, (c) non-ordinary course changes to TSXV’s operations, and (d) any outsourcing of key services or systems by a clearing agency or by Montreal Exchange. The requirement to obtain approvals may restrict or delay our ability to make planned changes to these aspects of our operations in the future which could have a material adverse effect on our business, financial condition and results of operations.

Our Recognition Orders impose ownership restrictions on our voting shares

Under the OSC and AMF Recognition Orders, no person or combination of persons, acting jointly or in concert, is permitted to beneficially own or exercise control or direction over more than 10% of any class or series of voting shares of TMX Group without prior approval of the OSC and the AMF. Should a person or combination of persons, acting jointly or in concert, beneficially own or exercise control or direction over more than 10% of any class or series of voting shares of TMX Group without prior approval of the OSC and the AMF, in accordance with the contrasting documents of TMX Group, their respective voting rights may be limited to no more than 10% until such time as approval has been granted by the OSC and the AMF in accordance with the contrasting documents of TMX Group, their respective voting rights may be limited to no more than 10% until such time as approval has been granted by the OSC and the AMF.

Litigation/Legal Proceedings Risk

We are exposed to the risk that litigation or other legal proceedings are launched against us.

We are subject to risks of litigation and other legal proceedings

Some aspects of our business involve risks of litigation. Dissatisfied customers or vendors, among others, may make claims with respect to, among other things, the manner in which we operate or they may challenge our regulatory actions, decisions or jurisdiction. Although we may benefit from certain contractual indemnities and limitations on liabilities, these rights may not be sufficient. In addition, with civil liability for misrepresentations in our continuous disclosure documents and statements and for the failure to make timely disclosures of material changes in Ontario and certain other jurisdictions, dissatisfied shareholders have a statutory right to make claims against us. We could incur significant legal expenses defending claims, even those without merit. If a lawsuit or claim is resolved against us, it could materially adversely affect our reputation, business, financial condition and operating results.

Intellectual Property Risk

We are exposed to the risk that we fail to protect our intellectual property resulting in material financial loss to us. We are exposed to the risk that an infringement claim may be asserted against us.

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We may be unable to protect our intellectual property

To protect our intellectual property rights, we rely on a combination of trademark laws, copyright laws, patent laws, trade secret protection, confidentiality agreements, and other contractual arrangements with our affiliates, customers, strategic partners, and others. This protection may not be adequate to deter others from misappropriating our proprietary rights. We may not be able to detect the unauthorized use of, or take adequate steps to enforce, our intellectual property rights. If we are unable to protect our intellectual property adequately, it could harm our brand, affect our ability to compete effectively and may limit our ability to maintain or increase revenue. It could also take significant time and money to defend our intellectual property rights, which could adversely affect our business, financial condition, and operating results.

We are subject to risks of intellectual property claims

We license a variety of intellectual property from third parties. Others may bring infringement claims against us or our customers in the future because of an alleged breach of such a license. We may also be subject to claims alleging that we are infringing on a third party's intellectual property rights without a license. If someone successfully asserts an infringement claim, we may be required to spend significant time and money to develop or license intellectual property that does not infringe upon the rights of that other person or to obtain a license for the intellectual property from the owner. We may not succeed in developing or obtaining a license on commercially acceptable terms, if at all. In addition, any litigation could be lengthy and costly and could adversely affect us even if we are successful.

Financial Risks

Operational Risk

Most of our expenses are fixed and cannot be easily lowered in the short-term if our revenue decreases, which could have an adverse effect on our operating results and financial condition. We are exposed to the risk that we fail to develop, implement and maintain the appropriate corporate finance model and capital structure. The Trust Indentures governing the Debentures impose various restrictions on TMX Group and its subsidiaries, including restrictions on the ability of TMX Group and each of its material subsidiaries (as defined in the Trust Indentures) to create a lien on these entities’ assets, limitations on the ability of material subsidiaries of TMX Group to enter into certain types of indebtedness, and requirements to repurchase outstanding Debentures on change of control of TSX Inc. or MX coupled with a triggering event (i.e., rating of the Debentures is lowered to below investment grade). Notwithstanding our treasury and capital allocation programs which include leverage ratio and dividend payout ratio analysis, some, or all, of these restrictions could limit our flexibility to change our capital structure.

Our Credit Agreement requires us to satisfy and maintain an interest coverage ratio and a leverage ratio, among other covenants, including the timely payment of principal and interest when due. It is important that we meet all of the terms under our Credit Facility since it provides a 100% backstop to our Commercial Paper Program. Based on the current level of operations and anticipated growth, we believe that our cash flows from operations and our available cash are adequate to meet our current liquidity needs. However, we cannot guarantee that our businesses will generate sufficient earnings or cash flows from operations or that anticipated growth will be realized or that we will be able to control our expenses in an amount sufficient to enable us to satisfy the financial ratios and other covenants, or pay our indebtedness or fund our other liquidity needs. If we do not have sufficient funds, we may be required to renegotiate the terms of, restructure, or refinance all or a portion of our indebtedness on or before our stated maturity, reduce or delay capital investments and acquisitions, reduce or eliminate our dividends, or sell assets. Our ability to renegotiate, restructure, or refinance our indebtedness would depend on the condition of the financial markets and our financial condition at that time. Failure to comply with the financial ratios as well as covenants of the Credit Agreement could result in a default under the Trust Indentures, which, if not cured or waived, could result in TMX Group being required to repay outstanding borrowings under both the Credit Agreement and the Debentures before their due dates. In addition, an event of default under the Trust Indentures governing the Debentures that

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would result in an acceleration of maturity of the applicable series of Debentures could lead to an acceleration of the maturity of the Credit Agreement.

In addition, if we fail to comply or are reasonably likely to fail to comply with any financial covenant or ratio contained in any Final Recognition Order, such failure could result in a default under the Credit Agreement as well, if a governmental authority issues a decision or orders restrictions on us or any of our subsidiaries as a result of the noncompliance where a requisite majority of the lenders determine that the restrictions have or will have a material adverse effect as defined in the Credit Agreement. It will also be a default under the Credit Agreement if a governmental authority issues a decision or orders restrictions on our or any of our subsidiaries’ ability to move cash or cash equivalents among TMX Group and our subsidiaries, where a requisite majority of the lenders determine that the restrictions have or will have a material adverse effect. If these events of default under the Credit Agreement were to result in an acceleration of maturity under the Credit Agreement, the event(s) could constitute an event of default under the Trust Indentures, which in turn would result in the acceleration of maturity of the outstanding Debentures. If we are forced to refinance these borrowings on less favourable terms or cannot refinance these borrowings, our business, results of operations, and financial condition would be adversely affected. Borrowings under the Commercial Paper Program and Credit Agreement incur interest at variable rates and expose us to interest rate risk. If interest rates increase, our debt service obligations on our variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing the indebtedness, would correspondingly decrease. TMX Group has an issuer rating of A (high) from DBRS with a Stable trend. Our Debentures have the same credit rating from DBRS with a Stable trend. The Commercial Paper has been assigned a rating of “R-1 (low)” with a Stable trend by DBRS.

DBRS regularly evaluates and monitors the rating of our Commercial Paper and the rating of our Debentures outstanding. A downgrade from our existing rating could adversely affect our cost of borrowing and/or our ability to access sources of liquidity and capital and reduce financing options available to us.

Credit Risk

Credit risk is the risk of loss due to the failure of a borrower, counterparty, clearing member or participant to honour their financial obligations. It arises principally from the clearing operations of CDS Clearing and CDCC, the operations of TSX Trust, the brokerage operations of Shorcan, cash and cash equivalents, restricted cash and cash equivalents, marketable securities, trade receivables, and total return swaps.

Credit Risk – Clearing Houses

Credit Risk - CDS

CDS Clearing is exposed to the risk of loss due to the failure of a Participant in CDS Clearing’s clearing and settlement services to honour its financial obligations. To a lesser extent, CDS Clearing is exposed to credit risk through the performance of services in advance of payment.

Through the clearing and settlement services operated by CDS Clearing, credit risk exposures are created. During the course of each business day, transaction settlements can result in a net payment obligation of a Participant to CDS Clearing or the obligation of CDS Clearing to pay a Participant. The potential failure of the Participant to meet its payment obligation to CDS Clearing results in payment risk, a specific form of credit risk. Payment risk is a form of credit risk in securities settlement whereby a seller will deliver securities and not receive payment, or that a buyer will make payment and not receive the purchased securities. Payment risk is mitigated by delivery payment finality in CDSX, CDS' multilateral clearing and settlement system, as set out in the CDS Participant Rules.

In the settlement services offered by CDS Clearing, payment risk is transferred entirely from CDS Clearing to Participants who accept this risk pursuant to the contractual rules for the settlement services. This transfer of payment risk occurs primarily by means of Participants acting as extenders of credit to other Participants through lines of credit managed within the settlement system or, alternatively, by means of risk-sharing arrangements whereby groups of

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Participants cross-guarantee the payment obligations of other members of the group. Should a Participant be unable to meet its payment obligations to CDS Clearing, these surviving Participants are required to make the payment. Payment risk is mitigated on behalf of Participants through the enforcement of limits on the magnitude of payment obligations of each Participant and the requirement of each Participant to collateralize its payment obligation. Both of these mitigants are enforced in real time in the settlement system.

The risk exposure of CDS Clearing in its central counterparty services is mitigated through a daily mark-to-market of each Participant’s obligations as well as risk-based collateral requirements calculated daily. These mitigants are intended to cover the vast majority of market changes and are tested against actual price changes on a regular basis. This testing is supplemented with analysis of the effects of extreme market conditions on a collateral valuation and market risk measurements which are used to determine additional collateral requirements of Participants to a default fund established in 2015. Should the collateral of a defaulter in a central counterparty service be insufficient, either because the value of the collateral has declined or the loss to be covered by the collateral exceeded the collateral requirement, the surviving participants in the service are required to cover any residual losses.

Credit Risk – CDCC

CDCC is exposed to loss in the event that Clearing Members fail to satisfy any of the contractual obligations as stipulated within CDCC’s rules.

CDCC is exposed to the credit risk of its Clearing Members since it acts as the central counterparty for all transactions carried out on MX’s markets and on certain OTC markets which are serviced by CDCC. As such, in the event of a Clearing Member default, the obligations of those defaulting counterparties would become the responsibility of CDCC.

The first line of defense in CDCC's credit risk management process is the adoption of strict membership criteria which include both financial and regulatory requirements. In addition, CDCC performs on-going monitoring of the financial viability of its Clearing Members against the relevant criteria as a means of ensuring the on-going compliance of its Clearing Members. In the event that a Clearing Member fails to continue to satisfy any of its membership criteria, CDCC has the right through its rules, to impose various sanctions on such Clearing Members.

One of CDCC’s principal risk management practices with regard to counterparty credit risk is the collection of risk-based margin deposits in the form of cash, equities and liquid government securities. Should a Clearing Member fail to meet settlements and/or daily margin calls or otherwise not honour its obligations under open futures, options contracts and REPO agreements, margin deposits would be seized and would then be available to apply against the potential losses incurred through the liquidation of the Clearing Member’s positions.

CDCC’s margining system is complemented by a Daily Capital Margin Monitoring (DCMM) process that evaluates the financial strength of a Clearing Member against its margin requirements. CDCC monitors the margin requirement of a Clearing Member as a percentage of its capital (net allowable assets). CDCC will make additional margin calls when the ratio of margin requirement/net allowable assets exceeds 100%. The additional margin is equal to the excess of the ratio over 100% and is meant to ensure that Clearing Member leverage in the clearing activities does not exceed the value of the firm. CDCC also has additional margin surcharges to manage the risk exposures associated with certain idiosyncratic risks. These include: concentration charges for Clearing Members that are overly concentrated in certain positions, wrong-way risk charges for those Clearing Members holding positions which are highly correlated with their own credit risk profile, mismatched settlement surcharges which are meant to mitigate the risk of cherry-picking by a potential defaulter in the settlement process.

Credit Risk – Shorcan

Shorcan is exposed to credit risk in the event that customers fail to settle on the contracted settlement date. This risk is limited by their status as agents, in that they do not purchase or sell securities for their own account. As agents, in the event of a failed trade, Shorcan has the right to withdraw its normal policy of anonymity and advise the two counterparties to settle directly.

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Credit Risk – All Other

We manage our exposure to credit risk on our cash and cash equivalents and restricted cash and cash equivalents by holding the majority of our cash and cash equivalents with major Canadian chartered banks or in Government of Canada and provincial treasury bills and US treasury bills. We manage exposure to credit risk arising from investments in marketable securities by holding high-grade individual fixed income securities with credit ratings of A/R1-low or better.

Our exposure to credit risk resulting from uncollectable accounts is influenced by the individual characteristics of our customers, many of whom are banks and financial institutions. We invoice our customers on a regular basis and maintain a collections team to monitor customer accounts and minimize the amount of overdue receivables. Due to the bilateral nature of the TRSs, we are exposed to the counterparty credit risk. To manage this credit risk, we only enter into the TRSs with major Canadian chartered banks.

TSX Trust is exposed to credit risk on foreign exchange transactions processed for clients in the event that either the client or the financial counterparty fails to settle contracts for which foreign exchange rates have moved unfavourably. The risk of a financial counterparty failing to settle a transaction is considered remote as TSX Trust deals only with reputable financial institutions comprised of major Canadian chartered banks.

Market Risk

Market risk is the risk of loss due to changes in market prices and rates such as equity prices, interest rates and foreign exchange rates. We are exposed to market risk relating to equity prices when we grant DSUs, RSUs and PSUs to our directors and employees, as our obligation under these arrangements are partly based on our share price. We have entered into TRSs as a partial fair value hedge to the share appreciation rights of RSUs and DSUs.

We are exposed to market risk on interest earned on our cash, cash equivalents and marketable securities. This risk is partially mitigated by having variable interest rates on our short-term debt (Commercial Paper). We are exposed to market risk relating to interest paid on our Commercial Paper.

Other Market Price Risk – CDS, CDCC, TSX, TSX Venture Exchange and Shorcan

We are exposed to market risk factors from the activities of CDS Clearing, CDCC, and Shorcan if a Participant, Clearing Member, or Client, as the case may be, fails to take or deliver either securities or derivatives products on the contracted settlement or delivery date where the contracted price is less favourable than the current market price.

CDS

CDS is exposed to market risk through its CCP function in the event a participant defaults as it becomes the legal counterparty to all of the defaulters' novated transactions and must honor the financial obligations that arise from those novated transactions. Adverse changes to market prices and rates would expose CDS to credit risk losses.

The principal mitigation of this credit risk exposure post default is the default management process. CDS has developed default management processes that would enable it to neutralize the market exposures via open market operations within prescribed time periods. Any losses from such operations would be set-off against the collateral contributions of the defaulting participant to the Participant Fund and Default Fund for the CCP service, thereby minimizing credit losses.

CDCC

CDCC is exposed to market risk through its CCP functions in the event of a Clearing Member default as it becomes the legal counterparty to all of the defaulter's novated transactions and must honor the financial obligations that arise from those novated transactions. Adverse changes to market prices and rates would expose CDCC to credit risk losses.

The principal mitigation of this credit risk exposure post default is the default management process. CDCC has developed detailed default management processes that would enable it to neutralize the market exposures through

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either its auction process or via open market operations within prescribed time periods. Any losses from such operations would be set-off against the margin and clearing fund (if necessary) collateral that are pre-funded by all Clearing Members for these purposes, thereby minimizing the credit losses.

TSX and TSX Venture Exchange

We are exposed to market price risk on a portion of our sustaining services revenue, which is based on quoted market values of listed issuers as at December 31 of the previous year.

Shorcan

Shorcan’s risk is limited by its status as an agent, in that it does not purchase or sell securities for its own account, the short period of time between trade date and settlement date, and the defaulting customer’s liability for any difference between the amounts received upon sale of, and the amount paid to acquire, the securities.

Foreign Currency Risk

We are exposed to foreign currency market risk on revenue and expenses where we invoice or procure in a foreign currency, principally in U.S. dollars and GBP.

We do not currently employ currency hedging strategies with respect to our operating activities, and therefore significant moves in exchange rates, specifically a strengthening of the Canadian dollar against the U.S. dollar and GBP can have an adverse effect on the value of our revenue or assets in Canadian dollars.

Settlements in the clearing and settlement services offered by CDS occur in both Canadian and U.S. dollars. Market risk relating to foreign exchange rates could be created if there is a default and the currency of the payment obligation is different from the currency of the collateral supporting that payment obligation. This risk is mitigated by discounting the collateral value of securities where these mismatches occur.

Based on 2020 revenue and operating expenses, the approximate impact of a 10% rise or a 10% decline in the Canadian dollar compared with the U.S. dollar on revenue, net of operating expenses, is approximately $7.7 million. Based on Trayport's 2020 revenue and operating expenses, the approximate impact of a 10% rise or a 10% decline in the Canadian dollar compared with Great British Pounds (GBP) on revenue, net of operating expenses, is approximately $5.5 million.

We are also exposed to market risk relating to foreign currency rates applicable to our cash and cash equivalents, trade receivables and trade payables, principally denominated in U.S. dollars. At December 31, 2020, cash and cash equivalents and trade receivables, net of current liabilities, include US$10.0 million, which are exposed to changes in the US-Canadian dollar exchange rate (2019 – US$15.8 million), £0.8 million which are exposed to changes in the GBPCanadian dollar exchange rate (2019 - £0.7 million), and less than €0.1 million to changes in the Euro-Canadian dollar exchange rate (2019 - €0.1 million). The approximate impact of a 10% rise or a 10% decline in the Canadian dollar compared with the U.S. dollar, GBP and Euro on these balances as at December 31, 2020 is a $1.4 million decrease or increase in income before income taxes, respectively.

Liquidity Risk - Operations

Liquidity risk is the risk of loss due to the inability of TMX Group or its borrowers, counterparties, Clearing Members, or Participants to meet their financial obligations in a timely manner or at reasonable prices. We manage liquidity risk through the management of our cash and cash equivalents and marketable securities, all of which are held in short term instruments, and our Debentures, Commercial Paper as well as credit and liquidity facilities. In clearing and depository services, liquidity risk results from the requirement to convert collateral to cash in the event of the default of a participant/customer.

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Cash and cash equivalents and restricted cash and cash equivalents consist of cash and highly liquid investments. Our investment policy will only allow excess cash to be invested within money market securities or fixed income securities. Individual fixed income securities held have credit ratings of A/R1-low or better and are highly liquid.

Liquidity Risk - Clearing Houses

The margin deposits of CDCC and CDS and clearing fund margins of CDCC are held in liquid instruments. Cash margin deposits and cash clearing fund deposits from Clearing Members, which are recognized on the consolidated balance sheet, are held by CDCC with the Bank of Canada. Non-cash margin deposits and non-cash clearing fund deposits pledged to CDCC under irrevocable agreements are in government securities and other securities and are held with approved depositories. Cash collateral from CDS’ participants, which is recognized on the consolidated balance sheet, is held by CDS at the Bank of Canada and commercial banks with a minimum credit rating of A/R1-low or better and are highly liquid and NSCC/DTC. Non-cash collateral, which is not recognized on the consolidated balance sheet, pledged by participants under Participant Rules is held by CDS in liquid government and fixed income securities.

CDS

The design of CDS' New York Link service does not apply strict limits to a Participant's end-of-day payment obligation, creating the potential for unlimited liquidity risk exposure if a user of the service were to default on its obligation. CDS manages this risk through active monitoring of payment obligations and a committed liquidity facility which covers the vast majority of potential Participant default scenarios.

CDS maintains two secured standby liquidity facilities that can be drawn in either U.S. or Canadian currency. These arrangements are available to support processing and settlement activities in the event of a participant default in either the CNS or NYL service lines. Borrowings under the secured facilities are obtained by pledging securities that are settled through CNS or NYL services or providing collateral pledged by participants primarily in the form of debt instruments issued or guaranteed by federal, provincial and/or municipal governments in Canada or U.S. treasury instruments. As a designated FMI, CDS has access to the Emergency Lending Assistance (ELA) program offered by the Bank of Canada and is meant to provide emergency funding in the event of liquidity shortfalls at CDS that may occur under market stress events. The ELA is offered at the full discretion of the Bank of Canada and is meant to be fully collateralized by SLF-eligible assets.

CDCC

The syndicated revolving standby liquidity facility for a total of $320.0 million is also in place to provide end of day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero as well as to provide a source of overnight funding for securities that are not eligible to be pledged at the Bank of Canada or for emergency liquidity needs in the event of a Clearing Member default. Advances under the facility will be secured by collateral in the form of securities that have been received by CDCC. The syndicated REPO facility is also in place to provide end of day liquidity in the event that CDCC is unable to clear the daylight liquidity facilities to zero or for emergency liquidity needs in the event of a Clearing Member default. It will provide liquidity in exchange for securities that have been pledged to or received by CDCC. As a designated FMI CDCC has access to the Emergency Lending Assistance (ELA) program offered by the Bank of Canada and is meant to provide emergency funding in the event of liquidity shortfalls at CDCC that may occur under market stress events. The ELA is offered at the full discretion of the Bank of Canada and is meant to be fully collateralized by SLF-eligible assets.

Commercial Paper Program

We rely on our Commercial Paper Program, Debentures and Credit Facility as a source of financing. The specific liquidity risk related to Commercial Paper is that we are unable to borrow under a new Commercial Paper issuance in order to pay for Commercial Paper that is coming due because of a lack of liquidity or demand for our Commercial Paper in the market. To mitigate this risk, we maintain a Credit Agreement that provides 100% coverage or backstop to the Commercial Paper Program.

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Accounting and Control Matters

Changes in accounting policies

The following amendments were effective for TMX Group from January 1, 2020:

• IFRS 3, Business Combinations;

• IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimate and Errors; and

• Amendments to conceptual framework.

• We adopted the amendment to the leasing standard IFRS 16, COVID-19 Related Rent Concessions issued on March 28, 2020. The amendment introduces an optional practical expedient for lessees to account for rent concessions that are a direct consequence of the COVID-19 pandemic as variable lease payments as opposed to lease modifications.

There was no significant impact on the financial statements as a result of their adoption.

Future changes in accounting policies

The following new standards and amendments to standards and interpretations are not yet effective for the year ending December 31, 2020, and have not been applied in the preparation of the financial statements. These new and amended standards and interpretations are required to be implemented for financial years beginning on or after January 1, 2021, unless otherwise noted:

• IAS 1 Presentation of Financial Statements – Amendments clarify that liabilities are classified as either current or noncurrent, depending on the rights that exist at the end of the reporting period. The amendments also clarify what IAS 1 means when it refers to the ‘settlement’ of a liability. Classification is unaffected by the expectations of the entity or events after the reporting date. The amendments apply for annual reporting periods beginning on or after January 1, 2023. We do not expect the amendments to have a material impact on our financial statements.

• IAS 37, Provisions, Contingent Liabilities and Contingent Assets – Amendments clarify that the direct costs of fulfilling a contract include both the incremental costs of fulfilling the contract and an allocation of other costs directly related to fulfilling contracts. Before recognizing a separate provision for an onerous contract, the entity recognizes any impairment loss that has occurred on assets used in fulfilling the contract. The amendments apply for annual reporting periods beginning on or after January 1, 2022 to contracts existing at the date when the amendments are first applied. We do not expect the amendments to have a material impact on our financial statements.

• Reference to the Conceptual Framework – Amendments to IFRS 3, Business Combinations – Minor amendments were made to IFRS 3 to update the references to the Conceptual Framework for Financial Reporting and add an exception for the recognition of liabilities and contingent liabilities within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets and Interpretation 21 Levies. The amendments also confirm that contingent assets should not be recognized at the acquisition date. The amendments apply for annual reporting periods beginning on or after January 1, 2022. We do not expect the amendments to have a material impact on our financial statements.

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Disclosure Controls and Procedures and Internal Control over Financial Reporting

Disclosure Controls and Procedures

TMX Group’s disclosure controls and procedures (DCP), as defined in National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109) are designed to provide reasonable assurance that information required to be disclosed in our filings under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation. They are also designed to provide reasonable assurance that all information required to be disclosed in these filings is accumulated and communicated to management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) as appropriate, to allow timely decisions regarding public disclosure. We regularly review our disclosure controls and procedures; however, they cannot provide an absolute level of assurance because of the inherent limitations in control systems to prevent or detect all misstatements due to error or fraud.

Our management, including the CEO and interim CFO, conducted an evaluation of the effectiveness of our DCP as of December 31, 2020. Based on this evaluation, the CEO and interim CFO have concluded that our DCP were effective as of December 31, 2020.

Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting (ICFR), as defined in NI 52-109. ICFR means a process designed by or under the supervision of the CEO and CFO, and effected by our board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS, and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of TMX Group; (2) are designed to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS, and that receipts and expenditures of TMX Group are being made only in accordance with authorizations of management and directors of TMX Group; and (3) are designed to provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of TMX Group’s assets that could have a material effect on the financial statements.

All internal control systems have inherent limitations and therefore our ICFR can only provide reasonable assurance and may not prevent or detect misstatements due to error or fraud.

Our management, including the CEO and interim CFO, conducted an evaluation of the effectiveness of our ICFR as of December 31, 2020 using the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework (2013). Based on this evaluation, the CEO and interim CFO have concluded that our ICFR were effective as of December 31, 2020.

Changes in Internal Control over Financial Reporting

There were no changes to internal control over financial reporting (ICFR) during the quarter and year ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our ICFR.

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Related Party Relationships and Transactions

Parent

The shares of TMX Group are widely held and, as such, there is no ultimate controlling party of TMX Group. Under the OSC and AMF Recognition Orders, no person or combination of persons, acting jointly or in concert, is permitted to beneficially own or exercise control or direction over more than 10% of any class or series of voting shares of TMX Group without prior approval of the OSC and the AMF.

Key management personnel (KMP) compensation

Compensation for key management personnel, including TMX Group’s Board of Directors, was as follows for the year:

(in millions of dollars)	2020	2019
Salaries and other short-term employee benefits, and termination benefits	$10.4	$9.7
Post-employment benefits	0.6	0.6
Share-basedpayments	12.9	17.0
	23.9	27.3

There was a decrease of $3.4 million related to key management personnel compensation driven by lower share-based payments. This decrease reflects lower share price appreciation in 2020 compared with 2019, and also reduced sharebased payments due to certain KMP roles transitioning during 2020.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

This MD&A of TMX Group contains “forward-looking information” (as defined in applicable Canadian securities legislation) that is based on expectations, assumptions, estimates, projections and other factors that management believes to be relevant as of the date of this MD&A. Often, but not always, such forward-looking information can be identified by the use of forward-looking words such as “plans,” “expects,” “is expected,” “budget,” “scheduled,” “targeted,” “estimates,” “forecasts,” “intends,” “anticipates,” “believes,” or variations or the negatives of such words and phrases or statements that certain actions, events or results “may,” “could,” “would,” “might,” or “will” be taken, occur or be achieved or not be taken, occur or be achieved. Forward-looking information, by its nature, requires us to make assumptions and is subject to significant risks and uncertainties which may give rise to the possibility that our expectations or conclusions will not prove to be accurate and that our assumptions may not be correct.

Examples of forward-looking information in this MD&A include, but are not limited to, growth objectives; our target dividend payout ratio; the ability of TMX Group to de-leverage and the timing thereof; the modernization of clearing platforms, including the expected cash expenditures related to the modernization of our clearing platforms and the timing of the modernization; other statements related to cost reductions; the impact of the market capitalization of TSX and TSXV issuers overall (from 2019 to 2020) on TMX Group's revenue; future changes to TMX Group's anticipated statutory income tax rate for 2020; factors relating to stock, and derivatives exchanges and clearing houses and the business, strategic goals and priorities, market conditions, pricing, proposed technology and other business initiatives and the timing and implementation thereof, the proposed timing for the completion of the acquisition of AST Canada, including the ability to obtain the required regulatory approvals and financing required to complete this acquisition, the composition of AST Canada's client base and the products and services it will provide, the anticipated benefits and

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synergies of the AST Canada acquisition, including the expected impact on TMX Group's earnings and adjusted earnings per share and the timing thereof, financial results or financial condition, operations and prospects of TMX Group which are subject to significant risks and uncertainties.

These risks include, but are not limited to: competition from other exchanges or marketplaces, including alternative trading systems and new technologies, on a national and international basis; dependence on the economy of Canada; adverse effects on our results caused by global economic conditions (including COVID-19) or uncertainties including changes in business cycles that impact our sector; failure to retain and attract qualified personnel; geopolitical and other factors which could cause business interruption (including COVID-19); dependence on information technology; vulnerability of our networks and third party service providers to security risks, including cyber-attacks; failure to properly identify or implement our strategies; regulatory constraints; constraints imposed by our level of indebtedness, risks of litigation or other proceedings; dependence on adequate numbers of customers; failure to develop, market or gain acceptance of new products; failure to close and effectively integrate acquisitions to achieve planned economics, or divest underperforming businesses; currency risk; adverse effect of new business activities; adverse effects from business divestitures; not being able to meet cash requirements because of our holding company structure and restrictions on paying dividends; dependence on third-party suppliers and service providers; dependence of trading operations on a small number of clients; risks associated with our clearing operations; challenges related to international expansion; restrictions on ownership of TMX Group common shares; inability to protect our intellectual property; adverse effect of a systemic market event on certain of our businesses; risks associated with the credit of customers; cost structures being largely fixed; the failure to realize cost reductions in the amount or the time frame anticipated; dependence on market activity that cannot be controlled; the regulatory constraints that apply to the business of TMX Group and its regulated subsidiaries, costs of on exchange clearing and depository services, trading volumes (which could be higher or lower than estimated) and revenues; future levels of revenues being lower than expected or costs being higher than expected.

Forward-looking information is based on a number of assumptions which may prove to be incorrect, including, but not limited to, assumptions in connection with the ability of TMX Group to successfully compete against global and regional marketplaces; business and economic conditions generally; exchange rates (including estimates of exchange rates from Canadian dollars to the U.S. dollar or GBP), commodities prices, the level of trading and activity on markets, and particularly the level of trading in TMX Group’s key products; business development and marketing and sales activity; the continued availability of financing on appropriate terms for future projects, including the acquisition and integration of AST Canada; the amount of revenue and cost synergies resulting from the AST Canada acquisition; productivity at TMX Group, as well as that of TMX Group’s competitors; market competition; research and development activities; the successful introduction and client acceptance of new products; successful introduction of various technology assets and capabilities; the impact on TMX Group and its customers of various regulations; TMX Group’s ongoing relations with its employees; and the extent of any labour, equipment or other disruptions at any of its operations of any significance other than any planned maintenance or similar shutdowns.

In addition to the assumptions outlined above, forward looking information related to long term revenue cumulative average annual growth rate (CAGR) objectives, and long term adjusted earnings per share CAGR objectives are based on assumptions that include, but not limited to:

• TMX Group's success in achieving growth initiatives and business objectives;

• continued investment in growth businesses and in transformation initiatives including next generation post-trade systems;

• no significant changes to our effective tax rate, recurring revenue, and number of shares outstanding;

• moderate levels of market volatility;

• level of listings, trading, and clearing consistent with historical activity;

• economic growth consistent with historical activity;

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• no significant changes in regulations;

• continued disciplined expense management across our business;

• continued re-prioritization of investment towards enterprise solutions and new capabilities;

• free cash flow generation consistent with historical run rate; and

• a limited impact from the COVID-19 pandemic on our plans to grow our business over the long term including on the ability of our listed issuers to raise capital.

While we anticipate that subsequent events and developments may cause our views to change, we have no intention to update this forward-looking information, except as required by applicable securities law. This forward-looking information should not be relied upon as representing our views as of any date subsequent to the date of this MD&A. We have attempted to identify important factors that could cause actual actions, events or results to differ materially from those current expectations described in forward-looking information. However, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended and that could cause actual actions, events or results to differ materially from current expectations. There can be no assurance that forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. These factors are not intended to represent a complete list of the factors that could affect us. A description of the abovementioned items is contained in the section “ Enterprise Risk Management ” of this MD&A.

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