TRADING ON THE INTERNET:
Nasdaq Japan May Start as Early as Next Year
July 30, 1999
The birth of a Nasdaq market in Japan could turn out to be even more explosive than the "Big Bang" program of sweeping financial system reforms. A domestic version of the online U.S. exchange--the biggest in the world--could start as early as the end of 2000. The new market will be managed jointly by the U.S. National Association of Securities Dealers, which operates the U.S. exchange, and the entrepreneurial communications firm Softbank Corp. Once Nasdaq Japan is established, domestic investors will be able to trade shares on the U.S. market directly from Japan, and local start-ups will have a much quicker route to market listing, opening up investment and capital procurement opportunities. Moreover, increased competition with other exchanges is expected to lead to the general rejuvenation of Japan's financial markets.
Direct Access to U.S. Stocks
According to the NASD and Softbank, the online market they will create in Japan through a 50-50 joint venture will give participating Japanese securities firms direct access to the Nasdaq computer system in the United States, allowing them to buy and sell shares in real time. At present, investors who wish to trade Nasdaq-listed shares must first place an order with a domestic brokerage, which then transfers the order to U.S. securities firm. This system is not only time-consuming but also costly, as it requires the double payment of processing fees.
The new market will give investors access to the more than 5,000 Nasdaq-listed stocks during U.S. trading hours. Even after the market closes, around 50 to 100 most heavily traded issues may be bought or sold. Steps will be taken to facilitate trading for Japanese investors; all company names will be expressed in Japanese, for instance, and all stock prices denominated in yen. Companies that gain a listing on the new exchange will be encouraged to eventually list on the U.S. market as well, giving them a chance to grow into globally competitive ventures.
Stiffer Competition Among Markets
Softbank, meanwhile, has been aggressively involved in corporate investment for many years. One of its basic strategies has been to invest in emerging Internet-related companies in the United States, nurture them, and provide them with a listing on Nasdaq. It has "reimported" this formula and has been applying it domestically, helping U.S. companies establish Japanese subsidiaries and gain a listing on the over-the-counter market. The start of Nasdaq Japan would provide a significant boost for Internet-related ventures in Japan.
Under current laws, any group of six or more brokerages may set up an association of securities dealers to operate a new market. The NASD and Softbank have thus agreed to set up a planning company to invite securities companies to join their initiative and to negotiate with the Ministry of Finance. Whether the new exchange will inject new life into Japan's financial markets remains to be seen, though; the number of firms that are willing to register and able to meet the strict disclosure requirements for listing, which are in line with U.S. standards, is a big question mark. Success will hinge largely on the extent to which investors are offered attractive market services.
Edited by Japan Echo Inc. based on domestic Japanese news sources. Articles presented here are offered for reference purposes and do not necessarily represent the policy or views of the Japanese Government.