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NYSE signs pact with Tokyo exchange

February 01, 2007|From Associated Press

The New York Stock Exchange and the Tokyo Stock Exchange announced an alliance Wednesday that extends the NYSE's global reach and could lead to an eventual combination of the world's two largest financial markets.

The broad, nonexclusive agreement announced by NYSE Chief Executive John Thain and TSE President Taizo Nishimuro allows the two stock markets to cooperate on joint developments such as financial products, mutual listings and technology.

The deal comes amid a backdrop of mass consolidation among domestic and global exchanges, highlighted by the NYSE's transformation into the first transatlantic market with its recent acquisition of Paris-based exchange operator Euronext. NYSE Group Inc., which is competing fiercely with Nasdaq Stock Market Inc., just weeks ago announced that it had led a team of investors to buy a 20% stake in India's largest financial market, the Mumbai-based National Stock Exchange.

Under the terms of the agreement, NYSE Group and the Tokyo exchange will establish working groups to discuss such things as infrastructure, technology and trading issues, as well as market data products and regulation and governance of listed companies. They also will examine ways to enable companies that are listed on only one exchange to have better access to investors from the other.

Shares of NYSE Group fell 77 cents Wednesday to $99.98.

The agreement with the TSE gives the New York exchange an entree into the Pacific region. It is also a first step toward a possible merger or acquisition between the two exchanges when the TSE becomes a public company in 2009.

Thain made it clear during a news conference Wednesday that the two companies planned some form of combination in the future, saying, "We're also setting the stage for a potential capital linkage."

The two exchanges did not offer any details of what form that would take. But Nishimuro said at the news conference that the two markets needed to secure a broader cooperation or risked being left out as rivals pursued their own deals.

"This is not a merger; it is an intent to explore," he said. "The environment has changed, the world is getting smaller, and the relations between New York and Tokyo should be better defined. We will be the world's first truly global marketplace."

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