The Japan Securities Dealers Association decided Wednesday to convert its Jasdaq over-the-counter stock market into a full-scale exchange as defined by the Securities and Exchange Law.
The JSDA expects the conversion to take place in the autumn of 2004, enabling Jasdaq to execute transactions that it cannot perform at present, such as futures and options as well as margin trading, JSDA officials said.
The JSDA made the decision at a board meeting on the grounds that the Jasdaq market for startup businesses should be reinforced to compete with rivals such as the Mothers market of the Tokyo Stock Exchange and the Hercules sector of the Osaka Securities Exchange, they said.
Investors tend to shun the Jasdaq market due to the absence of risk-hedging means, such as futures trading.
Listed companies mostly see the Jasdaq market as a stepping stone toward full-scale exchanges like the TSE. Late last month, for example, Yahoo Japan Corp., the nation's biggest Internet portal operator, moved to the first section of the TSE from the Jasdaq market.
Jasdaq Market Inc., operator of the OTC market, has been in the red since it was founded in February 2001.
While the conversion is expected to help Jasdaq Market increase revenues, the company will face cost increases because it will have to engage in new services, including screening listing applications, a role currently handled by securities houses.
The conversion may also lead to reorganization, as it will become easier for a merger between Jasdaq and another exchange.