UPDATE 1-TMX to move into private market in race with rival Aequitas

(Adds TMX executive and analysts comments)

By Euan Rocha and Cameron French

TORONTO, March 25 (Reuters) - TMX Group Ltd, theoperator of the Toronto Stock Exchange and the TSX VentureExchange, said on Tuesday it plans to launch a new business toallow capital raising and the trading of securities of privatelyowned entities.

The move to launch the business appears to be a pre-emptivegambit to thwart the threat posed by privately-held AequitasInnovations Inc, which is in the process of seeking regulatoryapproval in order to launch a new Canadian stock exchange.

Toronto-based TMX said the new business dubbed TSX PrivateMarkets will serve companies throughout their evolution from thestart-up stage, and further down the road.

"We are always looking for ways to facilitate companies andthis is one more tool in that toolbox," Kevan Cowan, presidentof TSX Markets and group head of equities at TMX Group, toldReuters.

Aequitas, which is backed by Barclays Plc, BCE Inc, CI Financial Corp, IGM Financial Inc, OMERS Capital Markets and Royal Bank of Canada , among others, last year outlined plans to also launch aunique trading platform for private securities that would seekto allow for capital raising and liquidity for small andmid-sized issuers.

"The way I look at it this is a pre-emptive move to secureTMX's monopoly position in the listing business," CIBC WorldMarkets analyst Paul Holden said in an interview.

Asked if Aequitas was motivation to get in to the privatemarket, Cowan noted TMX "has always been committed to companiesat all levels of the maturity cycle."

He said the segment is appealing in part because of signspolicymakers are opening the door to alternative funding forsmall enterprise, pointing to proposed rules by the OntarioSecurities Commission earlier this month that would allowsmaller businesses to raise equity online.

The TSX Private Markets platform will be run by TMXsubsidiary Shorcan Brokers Limited, and is expected to launch inthe third quarter of 2014, subject to final regulatory approval.

TMX said it will provide capital formation and secondarytrading of companies in the exempt market, which is a low-costmarket for small companies, with lighter disclosure requirementsand availability to a narrower group of investors.

Shares of TMX were up 41 Canadian cents at C$53.25.

(Editing by Marguerita Choy)