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Nyse CEO John Thain and TSE president and CEO Taizo Nishimuro both signed the letter of intent, which is non-exclusive but sets the stage for a potential capital alliance between the two exchanges.
Thain told reporters that cross-shareholdings were a possible form of 'capital alliance', which are expected to be in place when the Tokyo exchange goes public in 2009.
In a statement, Nishimuro says: 'I strongly believe that this agreement will be a good starting point for a much stronger tie-up with the Nyse and will contribute to the benefit of various market participants of our respective markets.'
Under the terms of the agreement, Nyse and the TSE will establish working groups that will work together to explore opportunities in information and market infrastructure technology, trading services, market data products, issuer and investor services, cross-marketing and promotional activities and listed company regulation and governance.
The move comes as the US market operator focuses on increasing its presence in Asia amid intensifying competition among exchanges. Earlier this month Nyse led a team of investors to buy a 20% stake in India's largest financial market, the Mumbai-based National Stock Exchange.
Meanwhile the TSE has also been forming alliances with other markets and signed agreements last year with a number of exchanges in Asia including the Singapore Exchange, the Taiwan Stock Exchange, the Shenzhen Stock Exchange and the Korea Exchange.
The Japanese exchange was also rumoured to be holding talks to set up an operational alliance with the London Stock Exchange that could see the two market operators share trading systems.