Osaka's equities market has been transferred to Tokyo as part of the new Japan Exchange Group

Osaka’s equities market has been transferred to Tokyo as part of the new Japan Exchange Group

Japan Exchange Group has migrated the Osaka Securities Exchange cash equities market and integrated it into the Tokyo Stock Exchange, marking an important stage in the unification of the two exchanges.

Created by the merger of the equities-dominated Tokyo Stock Exchange and the derivatives-focused Osaka Securities exchange on 1 January 2013, the new exchange group has been promoted partly for political reasons in Japan, as the country’s political leadership sought back in 2011 to revitalise trading volumes by creating a combined derivatives and equities market that would allow for cost synergies and more cross-asset trading opportunities, as well as attract international investors.

At the same time, it is also seeking to fend off competition from rival alternative trading systems such as SBI Japannext and Chi-X Japan, both of which have gradually eaten away at its market share in recent years. Market reforms in Japan, such as the abolition of the takeover bid rule late last year, have also helped competing markets gain share. The takeover bid rule meant that any investor that held more than 5% of a company’s shares had to make a bid for the company if those shares were traded away from the primary exchange.

The cash equity market will be carried out on the TSE’s trading system arrowhead, which was installed in January 2010. The Jasdaq Index was transferred from the OSE to the TSE, and renamed TSE Jasdaq.

Japan Exchange Group also includes a clearing facility, which is currently preparing for the clearing of OTC derivatives later this year, including FX interest rate swaps, as part of the G20 nations’ commitment to reduce systemic risk in financial markets.