NYSE Group and Tokyo Stock Exchange to explore alliance
01 Feb 2007
NYSE Group, Inc, chief executive officer John A. Thain and his counterpart from the Tokyo Stock Exchange, Inc, Taizo Nishimuro have signed a letter of intent that establishes a strategic alliance between the two world financial market leaders to jointly develop and explore new opportunities in trading systems and technology, investor and issuer services, investment products, and governance and regulation.
The CEOs of the two largest exchanges have shared a strong rapport since they first met in 2001 during a business exchange event in Japan, and personally hammered out the details of the alliance. They were recently together at the World Economic Forum in Davos and are known to organise dinners for each other when in their countries.
"It is important that the leaders of the two largest stock exchanges have a strong relationship, and we do," Thain said.
The agreement, which is non-exclusive, also sets the stage for a potential capital alliance between between the world''s two largest financial markets in to an eventual alliance. Currently, the New York Stock Exchange has 19 listed companies from Japan.
Global and domestic stock markets have been consolidating and the NYSE became the first trans-Atlantic market with its acquisition of Paris-based exchange operator Euronext NV in 2006, even as rival Nasdaq Stock Market Inc. is still pursuing a hostile takeover of the London Stock Exchange and is looking to striking a deal in Asia.
Now, the NYSE is looking over the Pacific. Last month it acquired a 5-per cent stake in India''s largest exchange, the National Stock Exchange
Japan''s biggest exchanges also find themselves under the pressure of rival Hong Kong and Singapore exchanges, as they begin to expand, with some of the world''s best stock performers last year being listed on them.
Earlier on 4 June, 2002, the NYSE and TSE had signed a memorandum of understanding (MOU) to share market surveillance information in their respective markets.
"Tokyo Stock Exchange is pleased that both exchanges are proceeding to the next level of cooperation, " said Nishimuro. "I strongly believe that this agreement will be a good starting point for a much stronger tie-up with the NYSE and will contribute to the benefit of various market participants of our respective markets," he added.
Under the terms of the agreement, NYSE Group and the TSE will examine cooperation in the listing process to enable issuers who are listed on only one Exchange to have improved access to investors in the other.
In a statement, Thain said, "We welcome this opportunity to work more closely on areas of mutual interest with Mr Nishimuro and his colleagues at the Tokyo Stock Exchange, the world''s second largest equity market. We are committed to the success of this strategic alliance, which will benefit and create growth opportunities for both markets and our respective customers, advance our global vision, and further strengthen the ties between Japan and the United States."
The two exchanges have decided to begin by establishing formal working groups to meet regularly to engage in consultations and undertake development activities on specific areas of common interest, covering information and market infrastructure systems, technology, trading services, market data products, issuer and investor services, cross-marketing and promotional activities, and listed company regulation and governance.
NYSE and TSE will explore global strategic trends affecting each organisation''s respective business and will exchange personnel if necessary. The chief executive officers of each organization will confer at least quarterly to review progress on developmental initiatives and on implementation of the agreement.
According to the second-quarter 2006 Global Trading Cost Analysis report by Elkins / McSherry, a State Street Company providing independent transaction cost analysis, rated the New York Stock Exchange as providing the world''s lowest overall cost of trading with the TSE ranked second in overall trading cost efficiency.
Ranked as the world''s most liquid and the largest stock exchange, NYSE Group''s average daily trades of 2.3 billion shares valued at $86.8 billion on its two securities exchanges: the New York Stock Exchange LLC (the NYSE) and NYSE Arca, Inc, formerly known as the Pacific Exchange.
Tokyo Stock Exchange, Inc, Japan''s central capital market, with stock trading volumes of 502 billion shares in 2006, and an average daily trading volume of 2,026.0 million shares, with a daily average trading value of ¥2,716.7 billion. The 2,416, companies listed on the exchange have a combined market capitalisation of ¥549.7 trillion.
The Tokyo exchange is in the midst of demutualisation, much like the NYSE did before it went public last year, and would not be able to have any cross shareholdings with the NYSE until that is complete.
One obstacle both exchanges face is symmetry between the regulatory bodies that govern them combined by different regulatory standards, Thain and Nishimuro both said.
