Japan’s Financial Services Agency (FSA) has agreed a reform document with the Agriculture Ministry and Ministry of Economy, Trade and Industry that would allow the FSA to oversee a combined stocks, financial futures and commodities exchange in the country.
The new rules, which the government plans to submit to the Japanese parliament on 24 January, are intended to boost liquidity by making it easier for Japan’s commodities and financial futures exchanges to link with the merged Tokyo Stock Exchange (TSE) and Osaka Securities Exchange (OSE). A unified exchange is expected to launch next year.
The FSA will have jurisdiction over the new combined exchange, but will work with the other two government ministries when new commodities are listed or in situations where the government feels the need to contain price volatility in the futures market. Rice and some other commodities with high domestic distribution may remain under the control of their existing ministries.
Such a plan would in theory allow investors to trade and settle securities, commodities and financial futures in the same place, thus simplifying Japan’s market structure and introducing cost savings for market participants. Previously, the Agriculture Ministry was responsible for commodities exchanges, rather than the FSA.
Exchanges around the world have been considering national mergers as a way to attract foreign investors and create cost synergies. In Vietnam, the Ho Chi Minh Stock Exchange and the Hanoi Stock Exchange are currently working towards a merger under government supervision, while Russia’s RTS and MICEX exchanges completed their own merger in December 2011.
The merger agreement between the TSE and OSE was formed in November 2011, with January 2013 tentatively proposed as the effective date for implementation of the combined bourse.
On 14 January 2012, the Tokyo Commodity Exchange (TOCOM) revealed that it would delay its own merger with the combined Tokyo and Osaka exchange, until the merged entity has decided what transaction system will be used after their integration. TOCOM has stated that it will reconsider the merger, once a decision on the transaction system at the combined TSE-OSE has been made.