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By Tim Kelly
TOKYO, Sept 9 (Reuters) - The Tokyo Stock Exchange and Osaka Securities Exchange may extend merger talks to find common ground on what form any combination might take, a source familiar with the talks told Reuters.
Talks aimed at concluding a basic merger agreement may carry on beyond the Tokyo bourse's self-imposed deadline next month to decide whether to list its shares this business year, the source said on condition he was not identified.
The TSE has proposed bidding for some or all of its rival's stock, while the Osaka exchange prefers a share swap to combine operations.
The two sides remain committed to finding a compromise, the source said.
Opting for a tender offer would allow the TSE to avoid any criticism it was trying to pull off a back-door listing and circumventing its own rules on public offerings. A share swap would allow the OSE to remain a traded company.
Although a TSE listing is not part of the merger discussion, a quick IPO near the end of the business year on March 31 may help push a merger agreement forward, because a union of two listed companies with transparent market values would be much simpler to achieve.
Spokesmen from the two bourse declined to comment on the possibility that talks will extend beyond autumn.
Talks between the bourses started in March amid a wave of proposed mergers and alliances among global exchanges, with Deutsche Boerse (DB1Gn.DE) revealing a deal to acquire NYSE Euronext and create an industry giant.
The two Japanese exchanges are eager to combine operations in a bid to better compete with other bourses around the world. While cross border deals between rivals overseas face stiff regulatory oversight, authorities in Japan are likely to welcome an agreement that would create a national champion.
The TSE controls more than 90 percent of cash-equity trading volume in Japan, with the combined market value of stocks traded on the exchange of around 300 trillion yen ($3.9 trillion). The OSE is the top player in Nikkei futures and other derivatives. (Additional reporting by Noriyuki Hirata and Yoshiyuki Osada; Editing by Chris Gallagher)
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