The Japanese securities firms
Besides insurance, another form of collusion arose in the securities industry. Here, four firms dominated the broking and underwriting businesses. For example, the so-called "Big Four" firms of Nomura, Nikko, Daiwa and Yamaichi have consistently controlled about 40 percent of the total turnover of the Tokyo Stock Exchange. Additionally, the Big Four account for 33 percent of over-the-counter bond dealing, 74 percent of equity underwriting, 78 percent of funds in investment trusts and 99 percent of all Eurodollar warrant-bond issues by Japanese companies.
Japanese securities firms also enjoy the luxury of fixed commissions on stock trades. Although fixed broking commissions disappeared in the US in 1975, and in the UK in 1986, they are alive and well in Japan in 1993. Also, Japanese securities companies were given plenty of time to adjust to foreign competition. Merrill Lynch, the first western securities firm to obtain a license from the MoF, was kept out of the market until 1961. Further, western securities firms were not allowed to become members of the Tokyo Stock Exchange until 1986. Unfortunately, all this protection made the Japanese securities firms too flabby to be profitable in a market downturn. In the bear market following the crash of 1990, only foreign firms toughened by unregulated western markets were profitable.