The Osaka Securities Exchange (OSE) is talking to the Japan Securities Dealers Association (JSDA) about melding its Hercules trading platform (formerly NASDAQ Japan) with the JASDAQ OTC market to create a heavyweight challenger to the Tokyo Stock Exchange (TSE).
Although both markets list emerging equities, Hercules employs the auction method for its stock trading system, while JASDAQ operates a market-making model, so choosing a single platform will not be easy. It is understood that the OSE is also proposing that JASDAQ list stock index futures on its derivatives market.
OSE has struggled to make a success of Hercules since Nasdaq withdrew from Japan in October last year, though the exchange still plans to take the market public in February next year. The JSDA, on the other hand, wants to convert the JASDAQ OTC market into a proper stock exchange at some point next year.
In a separate move, the Sapporo Securities Exchange (SSE) – located in the capital of the northern island Hokkaido – is reported to be considering merging its emerging stocks market with the Hercules-JASDAQ tie-up. Regional exchanges, like their alternative equivalents are suffering from a shift in listing and liquidity to the TSE – which is itself working on an IPO in 2005-06.
“It is widely expected that the possible link-up of Hercules and JASDAQ will trigger a wholesale consolidation among regional stock exchanges in Japan,” says a spokesman for Bank of Tokyo Mitsubishi in Tokyo. “The Financial System Council, the advisory body to Prime Minister, is expected to include a comment suggesting the need for a sizable stock market to rival the TSE, in a report it is finalizing later this month.”