London exchange agrees to a link with Tokyo rival
LONDON: The London Stock Exchange agreed Friday to a venture with its rival exchange in Tokyo, in a further sign that competition in the industry is heating up.
The London exchange, the largest stock market in Europe, said it signed a cooperation agreement with the Tokyo Stock Exchange to facilitate access to each others markets with the aim of creating a 24-hour trading environment. The two bourses also plan to promote and develop new trading products.
The announcement follows similar agreements by Deutsche Bцrse in Frankfurt, the Korea Exchange and the Chicago Mercantile Exchange over the past six months, as exchanges try to position themselves and improve trading platforms and investors demand lower trading costs.
The London exchange has been facing rising competition in Europe since NYSE Group agreed last year to buy the Paris-based Euronext for $13.3 billion. The chief executive of the London exchange, Clara Furse, fought off four takeover attempts in two years, the most recent one an offer by Nasdaq Stock Market valued at 2.7 billion, or $5.3 billion, and she since has said she will focus on collaborations and other opportunities.
“Stock exchanges around the world are under pressure from shareholders and their clients to consolidate as they are looking for lower fees and more liquidity,” said Kevin Lyne-Smith, a fund manager at Julius Baer Holding in Switzerland. “We are only partway through the process.”
The agreement comes less than a month after the Tokyo exchange signed a similar cooperation plan with NYSE, operator of the worlds largest stock exchange.
As part of the cooperation between London and Tokyo, the two exchanges said they also would share information on technology and work together on operating markets for growth companies.
“The Tokyo Stock Exchange is an immensely important global market, and we see our cooperation agreement with it as an exciting opportunity to broaden the scope of the services that we are able to offer issuers, investors and member firms,” the chairman of the London exchange, Chris Gibson- Smith, said in a statement.
For the Tokyo exchange, where an average of 2.7 trillion, or $22.4 billion, of stocks changes hands daily, the pact will help broaden its presence ahead of a planned initial public offering in 2009. It may also help investor confidence in the exchange, whose reputation suffered from trading errors and computer breakdowns that interrupted trading for several hours twice in 2005.
In addition, Mizuho Financial Group, a major Japanese banking company, is seeking 41.5 billion in compensation for a loss that occurred when the exchange failed to stop an erroneous trade.
The chief executive of the Tokyo exchange, Taizo Nishimuro, has said he is investing 30 billion to upgrade its computer systems by the end of 2009.
The Tokyo exchange, home to companies including Toyota Motor and Mitsubishi UFJ Financial Group, faced competition after Nomura Holdings, the largest Japanese securities firm, bought the American electronic brokerage Instinet for $1.2 billion this month, gaining access to its hedge fund clients. Goldman Sachs Group last October joined Japans first after-hours stock-trading system, run by the online brokerage unit of Mitsubishi UFJ.
The London exchange, where an average of 26.6 billion of shares is traded each day, this week signed an agreement with The Tel Aviv Stock Exchange to work more closely together and help Israeli companies attract more foreign investment.
It said in November that its profit for the six months through September more than doubled to 54.1 million from 24.4 million a year earlier because of an increase in electronic trading and higher revenue from initial public offerings.