An alliance between the Tokyo and London stock exchanges announced on Friday is the latest maneuver in a global battle to create a fully integrated, 24-hour world equities market, analysts said.
Although it was too early to say what the groups would achieve through their partnership, experts said deeper links between world financial centers was being driven by demands from clients for cheaper and more simple trading.
"The ultimate target [of the industry] is one of an international, globalized round-the-clock stock exchange," said Sebastian Schich, a financial markets analyst at the Paris-based Organization for Economic Cooperation and Development.
"But this was the impression people had 10 to 15 years ago and since then progress has been relatively slow," he said.
He identified the role of innovation in the financial products market, the liberalization of financial markets and the forces of globalization as the impetus for closer links and mergers between exchanges.
The Tokyo and London exchanges said their relationship would be focused on developing products and links to each other's markets, but they did not rule out a capital tie-up in the future.
"These sort of deals could mean a whole plethora of things," commented analyst Michael Long at brokerage Keefe Bruyette and Woods. "Previous alliances between stock exchanges have been signed and have had a wide range of outcomes."
The partnership between Tokyo and London -- the biggest exchanges in Asia and Europe -- is similar to a deal the Tokyo bourse signed recently with the New York Stock Exchange (NYSE).
It also coincided with a spike in mergers and acquisitions, with several attempted deals in the last 12 months illustrating the appetite of financial market operators and their clients to create a 24-hour, global stock exchange.
Over the past two years, the London Stock Exchange (LSE) has warded off takeover attempts from European rival Euronext, Germany's Deutsche Boerse, Australia's Macquarie Bank, and the US NASDAQ Stock Market.
NASDAQ failed with a hostile bid for the LSE this month for the second time in almost a year as a majority of shareholders in the British bourse spurned an offer of ?2.9 billion (US$5.5 billion).
In June, the the NYSE announced a US$10 billion merger with pan-European exchange operator EURONEXT, which has successfully consolidated the Paris, Amsterdam, Brussels and Lisbon exchanges.
The deal between EURONEXT and the NYSE, which might be completed as soon as April, is set to create the world's first intercontinental market.
Separately, seven US and European investment banks revealed plans in November to create a new European stock trading platform for launch this year, marking a frontal assault on established stock markets.
"Increasingly exchanges are looking more globally," said a London-based analyst at a large US investment bank, who asked not to be named.
"We've seen transatlantic deals with Europeans and then the Europeans looking east to Asia," he added, pointing to a recent deal between Deutsche Bourse and India's Mumbai stock exchange.
Deutsche Boerse, which operates the Frankfurt stock exchange, has agreed to buy five percent of the Mumbai stock exchange for US$42.7 million under a deal announced last week.
The analyst said that merger and acquisition deals, rather than alliances, were driven by considerations of cost.
"There's a clear logic for these types of deal because you can take a lot of costs out," he said, particularly by simplifying trading platforms and technology.
"If you can run more transactions over one rather than two platforms, then there is a clear logic and users would have the benefit of less complexity."
The move by the Tokyo Stock Exchange (TSE) to team up with LSE was also seen as being aimed at fending off fast-growing regional rivals.
The TSE suffered its worst-ever system crash in November 2005. Then in January last year it was forced to close early for the first time after a scandal at Internet firm Livedoor sparked a wave of selling.
Despite Japan's economic recovery after a painful decade in the deflation doldrums, the TSE is still struggling to attract foreign companies, with only 25 now listed on the main Japanese bourse.
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