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TSE President Expects IPOs to Surge After Systems Merger

Newly appointed Tokyo Stock Exchange Group Inc. President & CEO Akira Kiyota expects initial public offerings to surge this year after the Tokyo and Osaka bourses integrate their cash-equities markets on July 16.

The group is targeting 70 IPOs in 2013, up more than 40 percent from last year’s 48, as the combined market makes it easier for companies to go public, Kiyota said in a press briefing in Tokyo on July 8. Thereafter the goal is 100 per year, short of the record of 204 in 2000, he said.

Japan Exchange Group Inc., criticized for trading-system failures in the last two years, doesn’t foresee any technical issues with the cash-market merger, Kiyota said. After looking into whether it’s possible to integrate commodities and equities markets in Japan, the group will seek to increase its overseas operations, he said, citing CME Group Inc., which already offers Nikkei 225 Stock Average futures trading, as a possible partner. The group will also aim to enhance ties with Asian exchanges such as Singapore Exchange Ltd., Kiyota said.

“We’ve very high hopes the switch will go smoothly,” Kiyota said. “During a changeover it’s easy to run into problems, but the systems have passed every imaginable test.”

Data from the Osaka Securities Exchange and the Jasdaq market have already been transferred to the TSE database, Kiyota said. The group will do a final trial run on July 14 before the July 16 merger and a further test on July 15, a public holiday, if there any problems, he said.

Easier Listing

The merged bourse will host the largest equity market outside the United States. The new structure will make it easier for companies to list, because applications previously had to be submitted separately to Tokyo and Osaka, Kiyota said. Now it can all be done through Tokyo, which will house the TSE first and second sections as well as the Jasdaq, Mothers and Tokyo Pro markets, he said.

The merged bourse will focus on developing its derivatives business to compete with other global markets, he said.

“For Japan Exchange Group to be on par with the world’s best derivatives markets, we must first reorganize our relationships with domestic commodities markets,” said Kiyota. “To do that, we would have to be sure that creating a combined equities and commodities exchange is even possible in Japan.” The Tokyo Commodity Exchange and the Osaka Dojima Commodity Exchange are Japan’s two commodities markets.

Many obstacles must be overcome before a combined exchange can be created, Kiyota said. These include securing agreements between various regulatory agencies and making sure that Japan’s two commodities exchanges want to merge, he said.

Kawasaki Heavy

The TSE is also considering revising disclosure standards, Kiyota said, mentioning a recent u-turn on disclosed information by Kawasaki Heavy Industries Ltd., Japan’s second-biggest maker of heavy equipment. The company said on June 14 it ended talks to merge with Mitsui Engineering & Shipbuilding Co., two months after denying they had entered discussions to combine.

“We’ll investigate what actually happened with Kawasaki Heavy and based on analysis of our results we’ll come up with guidelines for how companies should act in similar situations,” Kiyota said.

On corporate governance, the exchange is looking to ensure more independent directors at public companies, Kiyota said. “Although independent directors have increased at Japanese listed companies, we’re working to get companies to appoint more such directors and trying to get Japan’s Financial Services Agency to make them obligatory on boards,” he said.

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