Nasdaq May Expand in Japan - Analyst Blog

In order to expand its footprint globally, Nasdaq OMXGroup Inc. (NDAQ) may partner with the No.2 operator of Japan - Osaka Securities Exchange Co. (OSE) to re-enter the Japanese market as early as January 2012.

Earlier in 2000, Nasdaq and OSE had opened the Nasdaq Japan market for start-ups, but closed it after two years as its order-matching system failed to find favor with Japan's No. 1 broker Nomura Securities and other major players.

According to the sources, the new exchange set up by Nasdaq would offer night and small lot trading to facilitate participation by a broad variety of investors. Further, it will facilitate trading of stocks listed on the Tokyo Stock Exchange. Nasdaq expects to attract investors from emerging Asian economies through this new exchange.

Besides Nasdaq, Bank of America Corp (BAC) and Morgan Stanley (MS) had already spread out in foreign markets, rather than expanding organically. Bank of America owns an 11% stake in China Construction Bank.

Along with overseas investments, Nasdaq has also grown through acquisitions. Recently on December 15, Nasdaq agreed to acquire leading real-time risk management solutions provider, FTEN Inc., for an undisclosed amount. Besides, while other terms of the deal are yet to be revealed, it is expected to be closed by the end of this month.

Nasdaq had also acquired SMARTS Group, the world-leading technology provider of market surveillance solutions to exchanges, regulators and brokers, in July this year.

The FTEN and SMARTS Group acquisitions are part of Nasdaq's strategy to diversify its Market Technology business and enter the broker surveillance and compliance market. These acquisitions complement well with Nasdaq's extensive trading platform, where continuous monitoring and keeping a consolidated audit track is mandatory to avoid any erratic trading session.

Overall, we believe that Nasdaq will increasingly focus its growth efforts overseas, as its U.S. exchange business has slowed in recent months owing to sluggish trading volumes, with investors still rattled by the global financial crisis and recession.