Nasdaq Stock Market has been granted approval to open an office in Beijing, just weeks after the Chinese Securities Regulatory Commission (CSRC) gave the New York Stock Exchange the green light. The CSRC, in a statement, said that Nasdaq will be allowed to engage in “non-operational activities such as liaison, promotion and research.”
“We are very committed to China,” Eric Landheer, Nasdaq’s head of the Asia-Pacific region, said in an interview. “We expect it to be a major growth engine for Nasdaq in the foreseeable future.” Offices in China will allow Nasdaq to serve the country’s companies more effectively, he said, and “will deepen our already substantial dialogue with local bourses and regulators.”
Landheer called the approval “official recognition of Nasdaq’s historical and future role in China.” The exchange has had an informal presence in China for over a decade, he noted.
When NYSE’s Beijing office opens–in the next few weeks, according to the exchange–it will serve as a center of operations for delivering services to its listed companies in China–and promoting its brand. “This is an historic event for our company and the global capital marketplace, and reflects positively on the progress of the strategic economic dialogue between China and the United States,” said NYSE Euronext chief executive John Thain in a statement.
Currently, 28 companies from mainland China–with a total market capitalization of $790 billion–are listed on NYSE, in addition to seven from Hong Kong. The exchange has added eight Chinese companies so far this year, up from four in 2006. Nasdaq has 49 listings from the mainland, including 15 new companies in 2007.
It’s common for stock exchanges to have offices in other countries, said Sang Lee, founder and managing partner of Boston-based research firm Aite Group. “For example, the Tokyo Stock Exchange has had a local presence in New York for a long time,” he noted. Nasdaq has international offices in Bangalore, India and London.
“It is significant that both U.S. exchanges have created a local presence, and their existence will go a long way in both learning from and helping out China in terms of the overall evolution of the Chinese capital markets,” added Lee. “In the long term, I am sure these offices will also become active in educating and attracting Chinese companies to list on their respective exchanges.”
Previously, only the Hong Kong Stock Exchange was allowed a representative office on the mainland, under the Closer Economic Partnership Arrangement between the Hong Kong government and the People’s Republic of China in 2003.
In May, China issued regulations that allow in foreign exchanges. The rules, which took effect in July, require that exchanges limit the activities of the offices to marketing and research. Half of the staff must be Chinese and the exchanges must notify Chinese regulators of any large-scale promotional plans.
World Trade Organization guidelines require that China open up its financial sector to foreign competition, but progress on the securities industry front has its origins in the China-U.S. Strategic Economic Dialogue in December 2006. The plans to allow NYSE’s office came out of the talks, according to the CSRC.
The regulators said that “many other” exchanges have also submitted proposals to open Chinese offices, but did not release their names.
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This article originally appeared in Securities Industry News, which has since shut down.
