Shareholders of Osaka Securities Exchange Co. and Tokyo Stock Exchange Group Inc. approved a $1.6 billion merger of Japan’s biggest bourses in a bid to reinvigorate the country’s securities markets.
Owners of the companies approved the transaction at extraordinary meetings in Tokyo and Osaka. Tokyo Stock Exchange bought 66.7 percent of the smaller exchange after a tender offer that ended in August, making today’s votes largely procedural. Shares of the Osaka exchange jumped as much as 6.4 percent today, the most since the deal was announced last November.
The merger is the first step by Japan’s government to create a national exchange trading stocks, commodities and other securities to cope with equity volumes that have shrunk by more than 3 percent since 2005 as trading shifts to greater China. Exchanges globally are seeking to merge as alternative trading venues gain market share and the demand for faster and cheaper transactions pushes costs up and margins down.
“They will need to compete with the rest of Asia,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages about $120 billion. “They can do it better as a joint force rather than individually.”
The 134-year-old Tokyo exchange, home to Toyota Motor Corp. and Canon Inc., hosted the biggest non-U.S. equity market by value as of June 30, according to the World Federation of Exchanges. Only the New York Stock Exchange and the Nasdaq market are larger, the data show.
Osaka, which was established in 1878 and has its roots in a futures exchange for rice during Japan’s Edo period, is the only domestic venue where futures on the Nikkei 225 Stock Average change hands.
About 7 billion yen ($86 million) a year could be saved through integrating information technology systems, the Tokyo and Osaka bourses said in their merger document last November. TSE president Atsushi Saito had his pay cut in August after the company was reprimanded by regulators for computer errors that disrupted trading twice this year.
Japan’s reputation as a financial hub has been hurt by the Nikkei 225’s 77 percent slide since 1989, an economy that is threatening to fall into its third technical recession in four years, and accounting scandals at companies including Olympus Corp.