Notes to the Consolidated Financial Statements
Years ended December 31, 2008 and 2007 (In thousands of dollars, except per share amounts)

Foreign currency risk

The Company is exposed to foreign currency risk on revenue, cash and cash equivalents, marketable securities, accounts receivable and accounts payable principally denominated in U.S. dollars. At December 31, 2008, cash and cash equivalents and accounts receivable, excluding BOX, and current liabilities, excluding BOX, include US $14,962 (December 31, 2007 – US $8,746), and US $420 (December 31, 2007 – US $nil) respectively, which are exposed to changes in the U.S. – Canadian dollar exchange rate. The approximate impact of a 10% rise in the Canadian dollar compared to the US dollar on these exposed balances at December 31, 2008 is a $1,610 decrease in net income. The approximate impact of a 10% decline in the Canadian dollar compared to the US dollar on these exposed balances at December 31, 2008 is a $1,771 increase in net income. In addition, net assets related to BOX are denominated in US dollars, and the effect of exchange rate movements on the Company’s share of these net assets is included in other comprehensive income. The approximate impact of a 10% rise in the Canadian dollar compared to the US dollar on the translation of the net assets related to BOX at December 31, 2008 is a $14,110 decrease in other comprehensive income. The approximate impact of a 10% decline in the Canadian dollar compared to the US dollar on the translation of the net assets related to BOX at December 31, 2008 is a $15,521 increase in other comprehensive income.

Interest rate risk

The Company is exposed to interest rate risk on its marketable securities, non-revolving term loan payable and interest rate swaps.

External investment fund managers have been engaged by the Company to manage the asset mix and the risks associated with its marketable securities. At December 31, 2008 the Company held $96,251 in these funds (December 31, 2007 – $249,399). The approximate impact on the carrying value of these investments of a 1% rise and a 1% fall in interest rates is ($1,919) and $1,962 respectively.

The Company has entered into a series of interest rate swaps agreements to partially manage its exposure to interest rate fluctuations on the non-revolving term loan (note 14). At December 31, 2008, the fair value of these interest rate swaps was a liability of $12,477. The approximate impact of a 1% rise and a 1% fall in interest rates on the fair value of the swaps is a $4,261 decrease in the liability and a $4,360 increase in the liability respectively.

Equity price risk

The Company is exposed to equity price risk arising from its long-term incentive plan, as the Company’s obligation under the plan is partly based on the price of the Company’s shares. The Company has entered into TRSs as a partial fair value hedge to the share appreciation rights of the restricted and deferred share units awarded under the plan. The fair value of the TRSs is based upon the excess or deficit of the volume weighted average price of the Company’s shares for the last five trading days of the month compared with the Company’s share price at the date of entering into the TRSs. As at December 31, 2008, a 25% increase in the share price of the Company would result in a net $176 increase in net income. A 25% decrease in the share price of the Company would result in a net $141 decrease in net income.

Other market price risk

The Company is exposed to other market price risk from the activities of Shorcan, NGX and CDCC if a customer, contracting party or clearing member, as the case may be, fails to take or deliver either securities, derivative products or energy products on the contracted settlement date where the contracted price is less favourable than the current market price.

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 the securities and the amount paid to acquire the securities.

Both NGX’s and CDCC’s measure of total potential exposure, as described previously, includes measures of market risk which are factored into the collateral required from each contracting party or clearing member.

The Company is also exposed to other market price risk on a portion of its sustaining fees revenue, which is based on quoted market values of listed issuers as at December 31 of the previous year.