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The New York Stock Exchange has proposed a capital tieup with its counterpart in Tokyo, sources said Friday.

In response, the Tokyo Stock Exchange has been studying ways to strengthen ties between the world’s two largest bourses, including taking cross-shareholdings of up to 10 percent of each other’s stock by 2009, when the TSE is scheduled to go public, the sources said.

The Tokyo exchange is also considering cross-listing of financial products such as stocks and exchange-traded funds, they said.

Taizo Nishimuro, president of Tokyo Stock Exchange Inc., told a news conference following a meeting of the Fiscal System Council that he had held talks with NYSE Group Inc. CEO John Thain in New York on Oct. 19.

“It is a fact that we are holding talks with the NYSE at various levels, but I cannot comment further as both sides agreed not to disclose the negotiations,” Nishimuro said.

Nishimuro said both bourses were interested in a deal.

He added the TSE has also been talking to other bourses about possible tieups.

In New York, an NYSE Group spokesman declined comment on the matter.

The proposed NYSE-TSE tieup comes at a time of global consolidation among stock exchanges.

In June, NYSE Group and Euronext N.V., the operator of stock exchanges in Amsterdam, Brussels and Paris, agreed to merge.

The NYSE’s crosstown rival, Nasdaq Stock Market Inc., bought a major stake in London Stock Exchange PLC earlier this year.

At a news conference in New York on Oct. 3, Thain said the NYSE aims to complete a tieup with the TSE within the next five years.

Thain said the NYSE is discussing a range of topics with the TSE, adding the NYSE already has a good relationship with the Tokyo exchange.

He suggested that the NYSE will give priority to forming an alliance with the Tokyo bourse, rather than a Chinese or Indian exchange, because the TSE remains the leading Asian exchange and the world’s second-largest.

On Friday in Tokyo, Financial Services Minister Yuji Yamamoto said an NYSE-TSE capital alliance is likely.

The NYSE, known for its Dow Jones industrial average stock bellwether, was set up in 1792. As of the end of 2005, 2,767 companies were listed on the exchange, with a total market capitalization of $21 trillion, or about 2.49 quadrillion yen.

The TSE, established in 1949, had 2,378 listed firms as of Tuesday, with a total market capitalization of 540.80 trillion yen as of Thursday.

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