"If the TSE wants a listing first then we can't merge," OSE President Michio Yoneda told Reuters in an interview. The OSE wants to conclude talks, which started at the end of May, this month, Yoneda added.
Yoneda's remarks could add pressure on the Tokyo exchange to move quickly on a merger deal that the TSE's president, Atsushi Saito, has said would make sense amid growing competition with overseas bourses.
But the Tokyo bourse has so far insisted that any merger must come after it has offered its shares to the public. To merge beforehand, Saito has said, would amount to a backdoor listing that would circumvent its rules on initial public offerings.
The Tokyo exchange's stance is unchanged, said TSE spokesman Kazuhiko Yoshimatsu. Its main business priority is to list "as soon as possible," he said, declining to discuss the bourse's talks with the Osaka Exchange.
The timing of an offering, however, has not been set, with the TSE waiting for an improvement in the stock market before setting a date, Yoshimatsu added.
The TSE has scrapped plans to list several times already. It abandoned plans for an IPO in 2005 after a system failure forced it to suspend trading for almost a full day, and pushed back a subsequent 2009 deadline amid a slide in the stock market.
Talks between the two Japanese exchanges started amid a flurry of mergers and alliances among global exchanges, with Deutsche Boerse unveiling a deal to acquire NYSE Euronext and create an industry giant.
Singapore Exchange proposed a marriage with Australia's ASX, while the London Stock Exchange mulled combining operations with and Canada's TMX Group.
The Singapore Exchange's $8.3 billion bid floundered after regulators in Australia killed the deal while the LSE's bid, if approved by shareholders, may face months of scrutiny before it can win government approval.
While a merger with an overseas exchange would also be difficult for the TSE, joining with the Osaka exchange would be subject to far less stringent oversight by regulators. The TSE controls more than 90 percent of cash-equity trading volume in Japan, while the OSE is the top player in Nikkei futures and other derivatives.
With average daily traded value of shares at around 1.5 trillion yen ($19 billion), the TSE, founded in 1878, remains among the world's biggest bourses. Stocks traded on the exchange have a combined market value of more than 300 trillion yen.
Copyright Reuters, 2011