Tokyo Exchange Admits Its First Foreign Members

TOKYO —  The Tokyo Stock Exchange, the biggest equity market outside the United States, admitted three American and three British investment firms as its first foreign members Friday.

The exchange also added four new Japanese firms as it expanded its membership to 93 from 83.

“The admittance of foreign securities companies to the Tokyo Stock Exchange is a remarkable event,” an exchange official quoted President Michio Takeuchi as saying at a news conference. “I hope that the Tokyo Stock Exchange will develop as an international capital market stimulated by the entrance of foreign securities companies,” Haruki Endo of the exchange quoted Takeuchi as saying.

The six foreign companies are Merrill Lynch Securities, Morgan Stanley International and Goldman, Sachs International of the United States and Vickers da Costa Ltd., Jardine Fleming (Securities) Ltd. and S. G. Warburg Rowe & Pitman, Akroyd of Britain, the official said. Vickers da Costa recently was acquired by Citicorp, the big U.S.bank holding company.

“We’re certainly very excited, very elated,” said Walter Burkett, chief administrative manager of Merrill Lynch, the only foreign company that had bid previously for a seat. It made an unsuccessful attempt last year. “Not only do (foreigners) have a base from which they can directly execute (transactions), but at least they have a one-93rd say-so in the future of the exchange.”

The rapidly growing Tokyo Stock Exchange amended its rules more than two years ago to permit non-Japanese securities houses to become members, but the limitation of seats to 83 hindered the entrance of foreigners.

The lack of representation became a sore point in U.S.-Japan talks on internationalizing the yen and liberalizing Japan’s financial markets, and, this September, the exchange said it would increase its membership by 10 seats.

Total trading on the Tokyo exchange in the last fiscal year was 7 trillion yen, or about $29 billion at exchange rates in effect then. That was six times more than on the British stock market.

The 10 new foreign and Japanese members, who beat out eight other competitors for the seats, each paid fixed prices of between 1 billion and 1.1 billion yen, or $5 million and $5.5 million, for the memberships, depending on the number of their branch offices, Endo said. They were chosen on the basis of their financial strength in a number of categories, and foreign firms were required to have a branch in Japan, he said.

Endo said the new members probably would not begin trading before January or early February because they must finish the application process and the exchange must physically make room for them.