Regulator Approves Merger of Japan’s Biggest Bourses

Japan Regulator Approves Merger of Nation’s Biggest Bourses
A combination photograph shows the Tokyo Stock Exchange in Tokyo, left, and the Osaka Securities Exchange in Osaka, Japan. Photographer: Tomohiro Ohsumi (Tokyo) and Tetsuya Yamada (Osaka)/Bloomberg

Japanese regulators approved a merger between the nation’s two biggest stock exchanges, paving the way for the first tie-up of major bourses after $32 billion of global deals failed since last February.

The merger is not expected to “substantially restrain” competition, the Japan Fair Trade Commission said in a statement today. Tokyo Stock Exchange Group Inc. will proceed with its 480,000 yen-per-share takeover of Osaka Securities Exchange Co., aimed at completing the tie-up on Jan. 1, the bourses said.

Osaka Securities rose 1.1 percent to 459,500 yen on the bourse’s Jasdaq market today, its highest since April 20. The Nikkei 225 Stock Average fell 0.3 percent.

“The approval was almost unconditional,” said Koya Uemura, a lawyer in Tokyo at Anderson Mori & Tomotsune.

In giving the green light, the regulator said that the exchanges had proposed sufficient steps to ensure competition in futures’ trading. Osaka now handles all domestic trading of futures on the Nikkei 22 Stock Average, while Topix Index futures are traded in Tokyo. Once the two bourses are combined, there will only be one domestic venue for trading Japanese stock index futures.

Extended Hours

The JFTC said it was satisfied with the bourses plan to extend trading hours for Topix futures on London’s NYSE Liffe during Japan market hours and reduced license fees. The TSE announced the hours changes on July 2.

Today’s decision came six months after the regulator started its review on Jan. 4. The commission last year streamlined rules to increase transparency, speed decision-making, and clarify merger and acquisition guidelines. It emphasized that a geographical market can be defined as worldwide or regional, not just Japanese, in judging whether a company would have a monopoly.

“Considering the international competition in the industry, it was appropriate for the regulator to approve this,” said Sadakazu Osaki, head of research at Nomura Research Institute Ltd. in Tokyo.

TSE’s bid, which values the Osaka bourse at 129.6 billion yen ($1.6 billion), would create the world’s third-largest exchange based on turnover, according to data compiled by Deutsche Bank AG.

$32 Billion

Global regulators scuttled $32 billion in exchange takeovers since Singapore Exchange Ltd. made a bid for ASX Ltd. in October 2010, according to data compiled by Bloomberg. The deal fell through amid calls from the Australian public to maintain domestic control of stock trading.

Hong Kong Exchanges & Clearing Ltd., Asia’s largest bourse by market value, last month announced a $2.2 billion bid for the London Metal Exchange and is waiting on LME shareholders and U.K. regulators for approval.

The Japanese exchanges will hold shareholder meetings this fall or near the end of the year to vote on the merger, OSE President Michio Yoneda told reporters on May 28 in Osaka. The Tokyo bourse, home to Sony Corp. and Toyota Motor Corp., will buy between 50 percent and 66.67 percent of Osaka’s outstanding stock.

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