NYSE, Tokyo exchange deal imminent

NYSE, Tokyo exchange deal imminent

	Published : Tue, 30 Jan 2007 00:39 By : Agencies Print this Story

NEW YORK (AFX) - The New York Stock Exchange and Tokyo Stock Exchange are expected to announce an alliance as soon as Tuesday, which could be a first step to creating a the first financial market with operations in North America, Europe and Asia.

NYSE Group Inc. Chief Executive John Thain and Tokyo Stock Exchange President Taizo Nishimuro met in Paris on Sunday to discuss how the two exchanges can better cooperate. Nishimuro is scheduled to fly to New York Tuesday for a lunchtime speech before the Japan Society, and is expected to meet again with Thain Wednesday.

Nishimuro brought up the idea of an alliance last year after NYSE Group announced it would acquire Paris-based stock exchange operator Euronext NV.

'The CEO of the Tokyo Stock Exchange, when he heard about NYSE/Euronext, himself said that it was a great combination that would make a logical partner for them,' Thain said in a November interview. 'If you think about it, we'd have dollars, euros, and yen -- the three main currencies of the world.'

The Tokyo market is in the process of demutualizing, much like the NYSE did before its own public listing in March, so any alliance could be considered an engagement of sorts until each is able to hold the other's shares.

The NYSE on Jan. 10 announced it led a team of investors to buy a 20 percent stake in India's largest financial market, the Mumbai-based National Stock Exchange. The NYSE has said it intends to make similar deals around the world.

'There's been a big build up about the possibility of a deal, and if something big doesn't come of it, this will all be very anticlimactic,' said Octavio Marenzi, chief executive of financial consulting firm Celent.

Most likely the alliance will be a broader memorandum of understanding between the two sides to cooperate more closely on technology and listings, he said. There is also a possibility the TSE might sell the NYSE a small stake in the privately-held exchange.

'There's not much interest in going public for the TSE because they like having control over the exchange and market structure,' Marenzi said. 'Just saying they might merge somewhere down the line isn't enough. Engagements are broken off all the time.'

Thain and Nishimuro, while attending the World Economic Forum in Davos, Switzerland last week, confirmed last week that both sides were in the final phase of talks. Any alliance could not come at a better time as stock, commodity, and futures exchanges are in the midst of a mass consolidation.

For the NYSE, a deal would solidify plans to go global and outpace Nasdaq Stock Market Inc., which is in the midst of a hostile takeover bid for the London Stock Exchange. Nasdaq has said a deal in Asia remains a strong option.

Thain could also be hoping to lure Japanese companies to list on the NYSE. Mizuho Financial Group Inc., Japan's second-largest bank by assets, which began trading last year on the NYSE was the 19th listing on the NYSE from Japan. It's the third-largest listing from Japan, with a market value of $92 billion.

Tokyo, with pressure from rival exchanges in Hong Kong and Singapore, needs to maintain its edge as the world's second largest financial market after the NYSE. An agreement would indicate the TSE won't be left behind as rivals pair off.

Such an alliance might also help the TSE regain some luster following criticism last year after its trading system temporarily shut down on Jan. 18. The exchange closed early that day after massive trading volume, sparked by a prosecutor's raid on Japanese Internet service provider Livedoor Co., threatened to overload its computer system.

The Tokyo Exchange, formed in 1878, lists about 2,300 companies, and has a total market value of more than $4 trillion.

The TSE trading floor was closed in 1999 as it switched to electronic trading. NYSE completed its roll out of electronic trading last week, but still plans to maintain floor traders.