Ontario Teachers' Pension Plan, one of the country's largest pension funds, said Thursday it supports TMX Group Inc.'s (X.T) planned merger with the London Stock Exchange Group PLC (LSE.LN),joining the fray over the proposed deal as some of Canada's biggest financial players line up for and against it.

In a release on its Website, Ontario Teachers', which oversees more than C$100 billion in assets but doesn't own shares in either exchange operator, said the proposed merger will generate lower trading costs, and provide Canadian companies with greater access to investors in Europe and the Middle East. The pension plan said approval of the deal should ensure that publicly traded companies in Canada remain subject to Canadian regulatory oversight.

TMX needs approval from the federal government as well as from the securities commissions of Ontario, Quebec, Alberta and British Columbia. Last week, senior executives at the brokerage units of three of Canada's biggest banks - Toronto-Dominion Bank (TD), Canadian Imperial Bank of Commerce (CM) and National Bank of Canada (NA.T), publicly opposed the transaction in an open letter. They argued the transatlantic tie-up would hurt the ability of small- and mid-sized exploration, technology and manufacturing companies to raise money because the merged exchange would focus less on this segment. The Ontario government is expected to release its recommendation on the proposed merger by the end of this month.

TMX and LSE executives have defended the deal as a way of adding scale amid a global rush among international exchanges to consolidate.

Ontario Teachers' said the government risks damaging the country's reputation internationally and isolating Canada's capital markets if it blocks the deal.

"Should Canadian governments treat foreign investors less favourably than domestic investors, it will be viewed by other countries as parochial at best, and at worst as protectionist; and we may lose access to foreign investment opportunities on behalf of our beneficiaries, Ontario's teachers," the pension plan said in its statement.

It also noted that TMX is better off playing a meaningful role in a "larger global exchange," given Canada represents less than 3% of the total global market capital.

TMX "risks becoming irrelevant entirely if it cannot compete in the global market place through a merger with other exchanges," the pension fund said.

Ontario Teachers' decision comes as Ontario Municipal Employees Retirement System, or OMERS, another large pension plan based in Ontario, is studying the proposed merger. Last month, the pension plan's Chief Executive Michael Nobrega said he personally supported the deal. OMERs oversees about C$53.3 billion in assets.

-By Ben Dummett; Dow Jones Newswires; 416-306-2024; ben.dummett@dowjones.com
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