Tokyo, London bourses to create Asia risk-capital market

Tokyo Stock Exchange Group Inc. and London Stock Exchange Group PLC announced plans Tuesday to form a new stock market for emerging innovative firms by the end of 2008 to help them raise venture capital in a less severe regulatory environment.

The market, which will be run by an equally owned joint venture based in Tokyo, will be for companies and investors from Japan and elsewhere in Asia, the bourses said in a joint press release.

"The market will be a new risk-capital market for companies and investors from Japan and elsewhere in Asia," the statement said. "It will create new investment opportunities for sophisticated investors, and provide a new funding option for smaller companies which are not yet sufficiently developed for existing public markets."

The announcement comes after the two exchanges announced in February plans for a business alliance aimed at expanding their global reach amid a race for consolidation among the world's major bourses.

"The new market will contribute to Japanese economic growth by providing a vibrant risk capital environment for issuers," TSE Chief Executive Atsushi Saito said.

Clara Furse, chief executive of the London bourse, said, "Bringing together the Tokyo Stock Exchange's knowledge of the region and our expertise in the development of growth markets creates a powerful partnership to deliver this exciting new venture."

The bourses will limit investors qualified to play the new market to investment professionals like institutional investors, because investing in the stocks on the new market will involve greater risks, TSE officials said.

The TSE and LSE will relax the listing requirements for would-be debutants on the market, the officials said. The relaxation would enable Asian companies and other capital-hungry companies to list their stocks.

Corporate startups deemed unqualified to list on existing stock bourses would be authorized to debut on the envisioned market, they said.

These companies will be allowed to disclose financial and other information in English and list their stocks in accordance with either Japanese or international disclosure standards, they said.

The market will build on the LSE's success in developing a market structure for smaller companies through the Alternative Investment Market, known as AIM, and the TSE's knowledge of Japanese financial markets, the two bourses said.

The TSE and LSE will devise listing rules for would-be debutants in light of a set of upcoming rules to govern financial markets for professionals, they said. The rules are now being crafted by the Financial System Council, an advisory council to the Financial Services Agency.

AIM, founded in 1995, is a submarket that allows emerging companies to float shares and raise capital under a more flexible regulatory system than that applied to companies on the main market.

There are more than 1,600 companies on AIM with a combined market capitalization exceeding £100 billion.

In a related move, the TSE has announced it will set up a new division Thursday to boost the number of foreign firms and financial products listed on the bourse.