The merger allows traders from around the world to buy and sell Tallinn shares through the Helsinki exchange.
The most visible change in the Tallinn system in the first hours of trading under the new system was that stocks were quoted in euros rather than kroons.
The Helsinki Stock Exchange bought a 62 percent share in the Tallinn bourse last year. The Tallinn Stock Exchange had to revamp its trading systems before physically merging with the Helsinki exchange.
Officials from the Tallinn exchange predict the link up could liven up Tallinn's flagging stock market, where no more than 5,000 investors own shares in any single company.
Some traders predicted stock prices could rise by at least 20 percent by year's end as European investors find they have easier access to the exchange.
"We want to create an environment where all investors, whether they are Finnish, Swedish, London-based, private or institutional, will feel comfortable in and want to come to find new opportunities," said Gert Tiivas, chief executive of what will now be known as HEX Tallinn.
"We are offering direct, cheap, efficient and easy access to trading without being physically here and without having to learn specific Estonian rules or peculiarities."
Estonia's Prime Minister Siim Kallas also hailed the move.
"No doubt this will encourage investment flows and both stock exchanges will benefit from it," said Kallas.
"Estonia's stock exchange grew rapidly up until 1997, but this was followed by a decline and disappointment. So the idea of merging two stock exchanges looks very promising."
The new HEX Tallinn group consists of Tallinn Stock Exchange and the Estonian central securities depository Eesti Vaartpaberikeskus.
HEX Tallinn should also receive a boost as a result of ongoing pension reforms which will result in pension contributions increasingly being spent on shares.
The Helsinki exchange is also discussing cooperation with Latvia's and Lithuania's stock exchanges.
Helsinki Stocke Exchange CEO Jukka Ruuska said talks were continuing with the privately owned Riga Stock Exchange and a merger could be agreed on by next year.
A merger with the Lithuanian bourse could prove more complicated as it is state-owned.
Fully integrating the Helsinki and Tallinn trading systems will not be possible until Estonia adopts the euro. In the mean time Helsinki's traders have to register with the Tallinn exchange.
But Finland's recent adoption of the euro should itself give Tallinn a boost, said Mattias Mustonen, head of retail trading at Hansapank.
So far four of the 40 active HEX members have already expressed willingness to trade in Tallinn-listed securities. Mandatum Stockbrokers and Nordea Securities have already won approval to trade and Evli Bank and Credit Suisse First Boston Europe are expected to follow shortly.
About a third of HEX members are overseas firms with offices in Helsinki.
"We have a large number of clients who might be interested in buying Tallinn Stock Exchange shares," said Marko Kauppi, a broker at Mandatum Stockbrokers. "We saw it as natural that we should participate, and it was very easy to do because we have the same trading system."
Another five of Helsinki's members are likely to sign up with the Tallinn exchange by year's end, predicted Kauppi.
The Tallinn exchange experienced a 4.66 percent year-on-year growth in 2001 and a turnover of 4.1 billion kroons ($227.77 million). Helsinki's turnover is about 1,000 times bigger, reaching 200 billion euros last year.
The average daily trade turnover on the Helsinki Stock Exchange last year was 814 million euros.
Twenty-five securities were traded on the Tallinn exchange when it opened in 1996, a figure which rose to 38 in 1997 but has since fallen to 22 today.
Last year more than half of trading in Tallinn was in Hansapank shares, 27 percent in Eesti Telekom shares and 10 percent in Norma shares.
Hansapank took a 55 percent share of trading, followed by Uhispank with 18 percent, Suprema 16 percent and Trigon 7 percent.
Estonian capital accounts for just 23 percent of the holdings in listed securities while Swedes have a 45 percent share and British, U.S. and Finnish investors each account for about 7 percent of all holdings.