How Canada Became the Cannabis Investment HubSince 2000, Canada has been at the forefront of the legalization of the medical use of cannabis. Fast forward to 2018, Canada wins the race and becomes the first country of the G7, and second in the world, after Uruguay, to legalize the recreational use of cannabis. The Cannabis Act was a catalyst for legal cannabis sales, which surpassed $1 billion CAD in 2019.

This conducive environment has led to several cannabis companies seeking access to equity capital on the TSX and TSXV. Canopy Growth, formerly Tweed, led the path and became the first publicly traded cannabis company on the TSXV in 2014. TMX is now home to over 60 cannabis issuers with a combined market capitalization in excess of $24 billion CAD and $350 million CAD of cannabis stocks traded daily.

Increasing demand from investors led to the Montréal Exchange (MX) listing options on cannabis names in 2017. As of January 2020, 11 cannabis stocks and 1 ETF have options available, with a combined options notional value outstanding of approximately $646 million CAD, representing 12% of the total stock options volume traded in Canada. Following the significant growth in cannabis options volume, MX expanded its suite of cannabis related products to include 8 share futures, facilitating the cash allocation of institutional clients. The ecosystem was gaining robustness, but key growth opportunities were still left to explore.

At the end of 2019, MX partnered with S&P to create a broad-based index that would be a barometer of the cannabis industry, capturing its ebbs and flows. This endeavour is an important stepping stone to designing a futures contract that would track this index, the first of its kind. To be included in the index, the companies are required to have a minimum market capitalization of $120 million USD and 50% of their activities related to cannabis. These activities span over various economic sectors including health care, consumer staples, financial and real estate. Most importantly, constituents must be operating legally in their federal jurisdiction for inclusion. Based on these criteria, twenty (20) of the largest cannabis related companies listed on a select number of North American exchanges are part of the index, which has a market capitalization of $25 billion CAD.

2020 now marks a new era of investing opportunities as MX launched the S&P/MX International Cannabis Index Future (SMJ) on January 31st. SMJ has a multiplier of $50 CAD per index point with a minimum price increment of 0.1 index point, democratizing the access to SMJ and specifically tailored to retail investors.

Over the course of 2019, the 30-day volatility of the index ranged between 20% and 60%, which makes the future a cost-efficient tool to manage volatility risk and get exposure to the overall cannabis industry. Given that the largest cannabis stocks and ETFs tracking the space are highly correlated to the index, SMJ is now the best way to participate in the industry.

The launch of SMJ is the culmination of TMX’s efforts to become the global leader in cannabis-related investments. To review the contract specifications and index methodology, visit m-x.ca/smj

Welcome to the Future SMJ: an Innovative Way to Invest in the Cannabis Market

For more information:T +1 514 871-7880 equityderivatives@tmx.com m-x.ca/smj

This document is provided to you for information purposes only. The information provided in this document, including financial and economic data, quotes and any analysis or interpretation thereof, is provided solely for information purposes and shall not be construed in any jurisdiction as providing any advice or recommendation with respect to the purchase or sale of any derivative instrument, underlying security or any other financial instrument or as providing legal, accounting, tax, financial or investment advice. Bourse de Montréal Inc. recommends that you consult your own advisors in accordance with your needs before making decision to take into account your particular investment objectives, financial situation and individual needs. Although care has been taken in the preparation of this document, Bourse de Montréal Inc. and/or its affiliates do not guarantee the accuracy or completeness of the information contained in this document and reserve the right to amend or review, at any time and without prior notice, the content of this document. Neither Bourse de Montréal Inc. nor any of its affiliates, directors, officers, employees or agents shall be liable for any damages, losses or costs incurred as a result of any errors or omissions in this document or of the use of or reliance upon any information appearing in this document.

The S&P/MX International Cannabis Index (the “Index”) is a product of S&P Dow Jones Indices LLC (“SPDJI”) and Bourse de Montreal Inc. (“MX”). 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 MX® is a registered trademark of Bourse de Montreal Inc., used under license. SPDJI, Dow Jones, S&P and TSX do not sponsor, endorse, sell or promote any products based on the Index and none of SPDJI, Dow Jones, S&P, MX and affiliates of MX 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 Index or any data related thereto.

Printed in Canada

© January 2020, Bourse de Montréal Inc. All rights reserved.