The push to consolidate the trading business took another step Tuesday, with news that Japan’s two biggest exchanges, the Tokyo Stock Exchange Group, Inc. and Osaka Securities Exchange Co., Ltd., are planning to merge.
The TSE operates the world’s third largest cash equities market and a derivatives market. It’s the biggest market in Asia, and accounts for approximately 90% of the trading value of the shares listed in Japan. The OSE focuses on derivative, such as stock index futures/options trading.
The merger would create the world’s third-biggest bourse with listed stocks worth US$3.6 trillion.
The firms note that the deal comes amid increasingly fierce competition among exchanges across borders, and increasing complex investor needs. “In light of this environment, domestic mergers and cross-border mergers between exchanges have been gathering momentum overseas. For a Japanese stock exchange to survive such global competition as a player, it must establish a highly liquid and efficient market and enhance the convenience of investors and companies through strengthening its competitiveness by such means as expanding its scale, diversifying the financial instruments in which it deals, and reducing costs,” they say.
They say that significant synergies should be created by combining their businesses, and that a merger will improve their presence as an international financial center which “should generate substantial benefits to market participants and other market users, such as improved convenience, and should also contribute to the enhanced competitiveness of all the financial and capital markets of Japan, which would be a step towards the revitalization of the Japanese economy.”
Under the terms of the deal, the TSE will conduct a tender offer for the OSE’s common shares, and convert the OSE into a subsidiary. The merger is expected to take effect on Jan. 1, 2013.