The New York and Tokyo stock exchanges (NYSE, TSE) unveiled a strategic alliance yesterday that their leaders said could encompass an equity tie-up within two years.
The alliance was announced by NYSE chief executive John Thain and TSE head Taizo Nishimuro, who stressed the benefits of collaboration in technology platforms and cross-listings by US and Japanese firms.
"This historic alliance will launch a new era of collaboration" between the world's most powerful bourses, Thain said.
The head of the New York market, which is merging with pan-European exchange operator Euronext to create the world's first intercontinental bourse, evoked a "potential capital linkage between the NYSE and the TSE in the future."
It would be difficult for the NYSE to form a capital alliance with the TSE before the Tokyo bourse completes its own stock market listing, which is now planned for 2009 after a series of technical problems.
Nishimuro said "we are hopeful that we will be able to be listed by the end of 2009 or even earlier than that."
But he stressed: "This is not a merger signing ceremony. This is a letter of intent to explore cooperative relationships between New York and Tokyo.
"I also believe that this alliance between our two world-premier exchanges may serve as a pioneering business model in the exchange industry," he said.
"The world is getting much smaller, and relationships between the major exchanges should be defined better. We came to the conclusion that a tie-up between NYSE and Tokyo will give us a great potential for the future," he said.
Thain reaffirmed his goal that after Euronext and Tokyo, the NYSE could find a partner in China.
"We are hopeful that at some point between now and 2009, that there are opportunities to have capital linkages [with the TSE]," he said, while stressing there were no further details to give at this time.
Stock market operators are racing to broaden their reach and cut costs as investors seek more globalized trading opportunities as well as cheaper transaction costs.
The industry's push for globalization has also been accelerated by the move to electronic trading platforms at the expense of raucous trading floors, although the NYSE still runs such a floor on Wall Street.
"The TSE thinks that if it doesn't tie up with the NYSE and create a 24-hour global trading platform it won't be able to survive the global competition," said Fumiaki Nakanishi, market research head at SMBC Friend Securities.
"It is desperate to survive in the face of the growing power of other markets, such as in China. So by tying up with the world's No. 1 market, the TSE hopes to be able to stay on board," he added.
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