The NYSE & Tokyo

Ashley Milne-Tyte Oct 27, 2006


KAI RYSSDAL:The Tokyo Stock Exchange announced earlier today that it’s in talks with the New York Stock Exchange about an alliance. The exchange is keeping pretty quiet about the details, but if a deal were to come off it would link two of the world’s most important markets. This news comes at a time when the NYSE is already pretty busy on the merger front: it’s finalizing a deal to buy pan-European exchange Euronext. And in the past two weeks the NYSE’s arch rival, the Nasdaq, has announced it’s in early stage talks with Japan’s Jasdaq market, and the Shanghai stock exchange. Ashley Milne-Tyte reports on the impetus behind these global get-togethers.

ASHLEY MILNE-TYTE:Here’s the problem with the current system:

If a trader in New York wants to trade a stock after the close of the New York markets, they have to resort to after-hours trading. It’s more expensive because there are fewer trades taking place, so there’s less liquidity. Joe Grundfest teaches law and business and Stanford University.

JOE GRUNDFEST:The vision that many people have in the marketplace is really to create a globalized, 24-hour market that will allow people to access a single platform and trade any stock any place in the world at any time, at low cost.

That vision is starting to be realized, he says, as markets around the world liaise to discuss how they can bring off economies of scale. James Cox is a professor of corporate and securities law at Duke University. He says if the NYSE owned a chunk of the Tokyo exchange and the Euronext, there’d be benefits for the exchange as well as investors.

GRUNDFEST:So it would be great for IBM to be traded in each of those markets with some understanding of revenue sharing back to the home market for trading revenues, going back to the New York Stock Exchange.

So why the flurry of inter-exchange courtship now?

Joe Grundfest of Stanford says the technologies that make a global marketplace feasible are getting cheaper. But that’s not the only reason.

GRUNDFEST:Many of these markets are now privately held, they have their own publicly-traded stocks and now they’re beginning to look at the function of market trading as a for-profit business.

And if going global can make them more money, they’re all for it.

In New York I’m Ashley Milne-Tyte for Marketplace.

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