NYSE, Tokyo Stock Exchange Announce Global Alliance

The New York Stock Exchange and Tokyo Stock Exchange announced an alliance Wednesday that extends the NYSE's global reach and could point the world's two largest financial markets toward an eventual combination.

The broad agreement announced by NYSE Chief Executive John Thain and TSE President Taizo Nishimuro allows the two stock markets to cooperate on joint developments such as financial products, mutual listings and technology.

The deal comes amid a backdrop of mass consolidation between domestic and global exchanges, highlighted by the NYSE's transformation into the first trans-Atlantic market with its recent acquisition of Paris-based exchange operator Euronext NV. The NYSE just weeks ago led a team of investors to buy a 20 percent stake in India's largest financial market, the Mumbai-based National Stock Exchange.

The agreement announced Wednesday gives the NYSE an entree into the Pacific. It is also a first step toward a possible merger or acquisition between the two exchanges when the TSE becomes a public company in 2009.

The NYSE Group is already a public company, trading under the stock symbol NYX. Best known for its trading operations, the firm also offers securities listing and data products and services.

Thain made it clear during the news conference that the two companies planned some form of combination in the future, saying, "We're also setting the stage for a potential capital linkage."

"I strongly believe that this agreement will be a good starting point for a much stronger tie-up with the NYSE and will contribute to the benefit of various market participants of our respective markets," Nishimuro said in prepared remarks.

Under the terms of the agreement, NYSE Group (NYX) and the TSE will establish working groups to discuss such things as infrastructure, technology and trading issues, as well as market data products and regulation and governance of listed companies.

They also will examine ways to enable companies who are listed on only one exchange to have better access to investors from the other.

"We are committed to the success of this strategic alliance, which will benefit and create growth opportunities for both markets and our respective customers, advance our global vision, and further strengthen the ties between Japan and the United States," Thain said in prepared remarks.