London, Tokyo bourses to form start-up market

LONDON (Reuters) - London Stock Exchange Group (LSE.L) and Tokyo Stock Exchange Group TSE.UL on Tuesday announced a joint venture to introduce the UK's junior market model in Asia by the end of 2008.

The TSE is poised to become Asia's first exchange to adopt the LSE's light-touch Alternative Investment Market's (AIM) approach before the Japan bourse's planned flotation by 2009.

"This will make Tokyo the centre of a new community of Japanese and international investors and intermediaries," said Atsushi Saito, chief executive officer of Tokyo Stock Exchange.

TSE's move comes as Asian exchanges step up their efforts to attract new listings to drive growth.

The TSE already operates a junior board, the Mothers market, where ventures and smaller companies can list under looser standards.

The new start-up market will be even less regulated.

Other Asian exchanges such as the Hong Kong Exchanges and Clearing Ltd. (0388.HK) and Singapore Exchange (SGXL.SI) have not adopted the AIM model as they fear it brings reputational risks.

U.S. Securities and Exchange Commissioner Roel Campos has compared AIM to a casino.

"AIM is already established as the world's leading growth market, providing smaller companies with long-term institutional investment capital to grow their business within an appropriate regulatory framework," said Clara Furse, chief executive of the LSE.

London's principle-based junior market has attracted over 1,600 companies with a combined market capitalization of over 100 billion pounds ($206 billion) since its foundation in 1995, thanks to the nominated advisers (nomads) system.

Instead of vetting which company can float on the AIM, the London Stock Exchange leaves it to the underwriters, known as nomads, to act as gatekeepers.

The numbers of nomads, however, has fallen from 85 to 74 this year as the LSE tightened its requirements.