Korea, Tokyo bourses sign agreement on cross-trading

10-Dec-2011 Intellasia | Business Week - Bloomberg | 7:01 AM Print This Post

Korea Exchange Inc. and Tokyo Stock Exchange Group Inc. began listing prices of each other’s equities and may soon allow the mutual listing of exchange- traded funds and derivatives.

Stock prices of each bourse will be listed on the other’s web site, with a 20-minute delay, according to a statement from the South Korean exchange. The exchanges will begin developing the technology to allow for cross trading, aiming to list the same exchange-traded funds and derivatives in both markets, according to statements from both bourses.

“In the rapidly evolving global exchange environment, cooperation and coordination between global exchanges are becoming increasingly important as a strategy toward growth and survival,” Bongsoo Kim, Korea Exchange’s chair and chief executive officer, said in the TSE’s statement. “Our cooperative agreement with TSE Group will expand capital flow between our countries through the creation of a leading capital market network in Asia and enhance the competitiveness of both our markets.”

The Tokyo bourse said yesterday it had completed a link of electronic trading and data platforms with NYSE Euronext that may allow investors access to the two venues using their existing networks. More than $30 billion of mergers have been proposed in the industry worldwide, including a November 22 bid by the Tokyo exchange for Osaka Securities Exchange Co., as exchanges pursue more lucrative derivatives markets and lower costs.

Derivatives Market

Osaka has a broader derivatives platform than Tokyo, including futures on the Nikkei 225 Stock Average. The possibility of cross-listing Korean derivatives is all part of Tokyo’s push to expand into this area.

“We have to do anything to facilitate our derivatives market,” Takuzo Kinoshita, a manager in corporate strategy at the TSE, said in a telephone interview today. He declined to give a timeline for when cross-listing of ETFs and derivatives may happen with South Korea but said the two bourses would likely create a timeline in the next two months.

There are no plans for cross-listing of stocks, Kinoshita said, but the link will make it easier for Japanese and Korean broker-dealers to trade with each other. Once a connection is established, broker-dealers will be able to use existing pathways created by the exchanges to enter buy and sell orders with counterparties in the other country.

Korea and Tokyo have been studying cross-trading for at least five months. Officials of both exchanges agreed to discuss detailed plans, Hwang Sung Yun, an executive director at Korea Exchange’s Kospi market division, said on June 21.-By Eleni Himaras and Rose Kim



Category: Korea

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