London Stock Exchange Group announced on Tuesday an outline framework for its growth market joint venture with the Tokyo Stock Exchange (TSE) after the Japanese Parliament passed legislation that clears the way.
The move marks a key step in TSE’s efforts to attract new listings. The new Tokyo-based market, which will be based on the LSE’s Alternative Investment Market (AIM), is expected to address the funding gap faced by growing companies in Japan and Asian companies that have connections with Japan. “Creating a market for professionals is an important step forward in internationalizing Japan’s financial markets,” said TSE President and CEO Atsushi Saito.
The new professionals-only market will operate within the revised legislation of the Financial Instruments and Exchange Act, which will be in force by the end of the year. The TSE already operates a junior board, the Mothers market, where smaller companies can list under looser standards. But the junior market is subject to regulatory systems based on strong requirements for retail investor protection.
Japan hopes the professionals-only market will be more flexible, strengthening the competitiveness of the country’s capital markets. Instead of vetting which company can float on the AIM, the LSE leaves it to the underwriters, known as nominated advisers (Nomads), to act as gatekeepers. “Adopting the Nomad system will be an innovation in Japan. I firmly believe that it will serve as a major driver for the development of Japan’s securities markets as a whole,” Saito said.
In London, such a light-touch principles-based approach has attracted over 1,650 companies, with a combined market capitalization of over £91 billion ($180.8 billion). Under the framework for the new market in Tokyo, listed securities will only be distributed to institutional investors and approved companies. Financial advisers intending to become J-Nomads are required to have a track record in corporate finance advice in the past two years. (Reuters)