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Glitch at Tokyo Exchange Won’t Derail Merger, OSE Chief Says

Osaka Securities Exchange Co. President Michio Yoneda
Michio Yoneda, president of Osaka Securities Exchange Co. Photographer: Yuzuru Yoshikawa/Bloomberg

  Feb. 9 (Bloomberg) -- The merger of Japan’s two biggest bourses won’t be derailed by the Tokyo Stock Exchange’s worst trading disruption in six years or European regulators blocking another deal last week, Osaka Securities Exchange Co. President Michio Yoneda said.

Trading of 241 companies including Sony Corp. was halted on the Tokyo Stock Exchange for 2 1/2 hours on Feb. 2 because of a computer server error. The exchange is still investigating the glitch and has yet to brief Osaka, Yoneda, 62, said in an interview yesterday.

The disruption at the TSE came a day after the European Union vetoed a plan by Deutsche Boerse AG and NYSE Euronext to create the world’s largest exchange, concluding the deal would hurt competition. Tokyo Stock Exchange Group Inc. and its Osaka rival cited a global wave of bourse mergers and cost savings from integrating computer systems as reasons for combining when they announced the takeover bid on Nov. 22.

“The glitch last week doesn’t affect the deal,” Yoneda said in Osaka. “What’s happened elsewhere won’t impact developments here,” he said, referring to the failed deal between Deutsche Boerse, operator of the Frankfurt Stock Exchange and NYSE Euronext, which runs the New York Stock Exchange and venues in Amsterdam, Lisbon, London and Paris.

Regulatory Resistance

Japan’s Fair Trade Commission last week started the second phase of its review into the merger between Osaka and the 133-year-old Tokyo Stock Exchange. Deals worth $37 billion have been proposed between global exchanges in the past 15 months, with cross-border plans meeting resistance from regulators.

Tokyo Stock Exchange handles 89 percent of the trading volume on the Topix index, while Osaka is the only Japanese venue for trading futures on the Nikkei 225 Stock Average, according to data compiled by Bloomberg.

The planned merger between Tokyo and Osaka comes after Japan lost its place as the world’s second-largest equity market to China and as trading volume and foreign listings fall.

One of the aims of the merger is boosting global competitiveness as “money is moving not just in Japan, but globally,” said Yoneda, who is slated to become chief operating officer of the new company if the deal goes through. The combined venue may expand its trading hours in order to lure foreign companies, he said.

“If the trading hours for equities were extended, it might make it easier for investors not just in Tokyo, but in other countries to buy and sell,” said Tatsushi Maeno, head of investment at PineBridge Investments Japan Co. in Tokyo. “For global players like us, it would also be a positive.”

The number of companies based outside Japan that list on the Tokyo Stock Exchange fell to 11 last year from 125 in 1990. By contrast, the number of foreign companies listed in Hong Kong has more than double to 24 in the past 10 years, according to Scott Sapp, a spokesman for Hong Kong Exchanges and Clearing Ltd.

“After the merger, we’re open to considering partnerships or even mergers with overseas exchanges if that proves to be more efficient,” Yoneda said.

Related News and Information: Exchange news: NI EXC <GO> Link to Tokyo Stock Exchange: TOEZ JP <EQUITY> CN <GO> Link to Osaka Securities Exchange: 8697 JP <EQUITY> CN <GO> Stories on M&A: {NI MNA<GO>}

To contact the reporter on this story: Masatsugu Horie in Osaka at mhorie3@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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