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| Shift from an Approval System to a Notification System Promotes Market Entry |
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The four-company oligopolistic framework crumbled with the failure of Yamaichi Securities. At the same time, the promotion of new entry into the securities industry also greatly changed the map of the industry.
In 1989, the procedures for establishing a securities company changed from a licensing system to a notification system, making it easy for companies from other industries to make market entry. Before then, the securities industry had been shielded from competition by new market entrants and been able to enjoy vested interests. However, they were now forced to make a drastic review of their operations upon the change of the system. |
The former stock trading floor of Tokyo Stock Exchange with many stockbrokers |
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Examples of entry from outside industries include Sony Corporation's investment in MONEX, Inc.; the acquisition of majority stakes in DLJdirect SFG Securities Inc. (name changed to Rakuten Securities, Inc. in July 2004) by Rakuten, Inc., an e-commerce company; and the establishment of Softbank Frontier Securities Co., Ltd. by Softbank Corp. (Softbank Frontier Securities merged with World Nichiei Securities Co., Ltd. and became World Nichiei Frontier Securities Co., Ltd. in 2004). The characteristic of such new securities companies is that many are Internet-based. Profitability is low through the conventional method of setting up branches and injecting a large number of sales staff. |
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| Armed with low brokerage fees, these companies are establishing a unique operational base by expanding online transactions. The largest of these online securities companies is Matsui Securities Co., Ltd., and its share of the volume of Internet-based trading among online securities companies is expanding rapidly. |
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| Three Securities Companies Establish Holding Companies |
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Furthermore, banks, which had been prohibited until then to involve themselves in securities operations, began establishing holding companies and setting up securities companies under the holding company. The fact that the advance of banks into securities operations through such methods was approved was another factor that greatly changed the securities industry. Bank-affiliated securities companies have a very close relationship with companies, and they are able to get an edge over other securities companies in the issuance of stocks and corporate bonds. Furthermore, it became possible for them to sell investment trusts - an investment package for the masses - at bank counters, thereby snatching what had been a source of revenues for securities companies that had been in existence before them. Bank-affiliated securities companies include Mitsubishi Securities, UFJ Tsubasa Securities Co., Ltd. and Mizuho Investors Securities Co., Ltd.
Meanwhile, hitherto known securities companies have also established holding companies in order to respond to competition from new securities companies. The holding companies established, at present, by securities companies are Nomura Holdings, Daiwa Securities Group and Nikko Cordial Corporation. It is notable that their strategies differ. While the Nomura Group is following a path as an independent, Daiwa Securities is strengthening its alliance with Sumitomo Mitsui Banking Corporation, and Nikko Cordial Corporation is striving to survive through an alliance with Citigroup, an international capital company. |
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