Softbank and NASD said they will create Nasdaq Japan Planning Co this month. The objective of Japan Planning will be to set up Nasdaq-Japan, is expected to start operations by the end of next year.

The joint venture, which will be capitalized at 600 million yen ($5 million), will be owned equally by Softbank and Washington-based NASD.

The announcement is the latest move by major stock markets to win more market share globally.

Most details of the deal remain sketchy, but the new electronic market will trade both Japanese and international securities, ultimately including Nasdaq's largest US issues. A spokesman for NASD, Nasdaq's parent, declined to comment ahead of news conferences scheduled for Tuesday morning in Tokyo and New York. News of the deal appeared in the Japanese daily Nihon Keizai ShimbunMonday.

Rather than compete directly with the Tokyo Stock Exchange for listings of large Japanese companies, it appears that the new Nasdaq venture will focus primarily on small-capitalization stocks.

The new market would make Nasdaq the first foreign market to try to set up shop in Japan, which has moved to liberalize its financial industry over the past few years through a deregulation effort dubbed Big Bang. In December, the government passed rules allowing brokers to trade shares off exchange for the first time.

It would also mark Nasdaq's first real investment in Japan, though it isn't a stranger to Asia. Last year it signed a deal with the Stock Exchange of Hong Kong to cross-list shares and form a joint Web site. Nasdaq also is in talks with the Shanghai Stock Exchange; details of those talks haven't been disclosed.

In a letter in the NASD's 1998 annual report, Chairman Frank Zarb said Nasdaq plans ``to create Nasdaq-type markets'' throughout the world, with the goal of dual listings ofcompanies on Nasdaq and overseas markets and, ultimately, ``a transparent, seamless, electronic, well-regulated global marketplace.''

But Nasdaq won't be the first to try to make it easier for smaller companies to be listed and traded in Japan. The Japan Securities Dealers Association's Jasdaq, an electronic forum for small-company stocks, has been up and running since the early 1990s. Nasdaq played a limited advisory role when Jasdaq was founded. But Nasdaq has no financial or technological involvement in Jasdaq, according to the NASD spokesman.

In addition, Japanese investors may soon find it easier to access trading in large-company shares. Optimark, a trading system that uses `black-box' technology to match big institutional orders anonymously, has teamed up with several partners, including the Osaka Securities Exchange, to create an electronic forum for Japanese securities.

Optimark's venture and Nasdaq's won' compete directly because Nasdaq's goal is to dual-list stocks from an array of countries,including its own large issues, according to people close to the situation. Nasdaq has a minority stake in Optimark and expects to integrate Optimark's matching system into its larger market this summer. Dow Jones & Co., publisher of The Wall Street Journal and the Interactive Journal, also has a financial interest in Optimark, as do a number of financial-services firms.

Some industry officials in Japan say there may be an opening for an exchange that requires strong disclosure and is serious about resolving other problems holding back small-capitalization exchanges.

Nasdaq has been working lately to improve its operations. Recently, for example, the exchange has allowed market makers to handle trading of some issues. But that initiative, like many attempts to expand small-stock markets in Japan, has seen mixed results. A focus on foreign companies might help Nasdaq gain the foothold that other exchanges lack, since many of these firms are pulling out of a special foreign-listing section of the TokyoStock Exchange, the country's main securities market and a potential competitor to Nasdaq's new venture.

``It's a tall mountain to climb,'' says Christopher Wells, a lawyer who heads the American Chamber of Commerce's Financial Services Committee in Tokyo. ``It's a good litmus test for the Big Bang.''

For Softbank, the investment continues a series of investments the company has made in the financial-services business in Japan. The company owns a controlling stake in the Japan operations of E*Trade Group Inc. and runs the Japan joint ventures of several other US Internet-based financial services companies.