The Tokyo Stock Exchange spent about $304 million to buy a 4.99 percent stake in the Singapore Exchange Ltd, the latest move in a scramble by global bourses to forge ties and consolidate.
Stock exchanges around the world have been joining forces through alliances and mergers to share the burden of investing in next-generation systems as well as to meet the demands of investors for a wider range of financial products.
"Global competition between exchanges is intensifying. Singapore is very important as an Asian financial centre, and if we didn't buy these shares we are sure someone else would look to buy in," TSE President Taizo Nishimuro told a news conference.
Just last month US stock market Nasdaq agreed to buy Nordic markets owner OMX for $3.7 billion, which came on the heels of the Deutsche Boerse's deal to buy US options market International Securities Exchange.
The TSE said the purchase would help cement an agreement forged in December to allow for the trade of derivatives and exchange-traded funds related to the TOPIX index, Japan's broadest stock index, on the Singapore bourse.
The TSE said it bought the stake secretly through an undisclosed third party over the past two weeks. SGX said it was happy even if the purchase were made without its prior consent. The TSE has recently formed alliances to share technology with both the London Stock Exchange and NYSE Group Inc, but the deal with Singapore marks the first time it has taken a stake in another exchange.
The TSE spent 37.4 billion yen to buy 53.051 million shares in SGX, or a little under 9 Singapore dollars ($5.84) per share. SGX stock closed Friday at 9.95 Singapore dollars, up a whopping 33 percent so far in June.
In addition to TOPIX-related products trading on SGX, the two bourses may create a trading and clearing link for both derivatives markets. The SGX may also look to have its futures traded on the Tokyo exchange. Closer ties with the TSE could help the SGX if the two bourses decide to promote cross-listing, one analyst said. "We could attract more Japanese companies to list in Singapore, which would make it more convenient for Singapore investors. A lot of funds are investing in Japan," said Loh Hoon Sun, managing director of Phillip Securities.