Trading Participants

Overview of Trading Qualifications

Update : Apr. 01, 2014

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1. What is a trading participant?

"Trading participant" refers to entities holding qualifications to directly participate in the TSE market for listed securities(trading qualification).
Only financial instruments business operators (a general term for securities companies and foreign securities companies), which are approved after TSE's qualification acquisition examination, are qualified to become trading participants.
Furthermore, acquisition of Japan Securities Clearing Corporation clearing qualifications or (in cases where clearing will not be conducted by such operator) designation of an agency clearing participant with which clearing is entrusted is generally required when acquiring TSE trading qualifications.

2. Remote trading participant system

The Remote Trading Participant system allows foreign financial instruments firms without business bases in Japan to directly participate in the TSE market as trading participants. It was introduced in February 2009.

Remote trading participants are able to acquire the same trading qualifications as those of regular trading participants. However, applicants are required to be authorized pursuant to the Financial Instruments and Exchange Act (FIEA) as a Transaction-at-Exchange Operator (Note) and then approved as a remote trading participant after TSE's qualification acquisition examination.

Furthermore, remote trading participants are able to conduct transactions in the same manner as regular trading participants. However, they are not allowed to accept orders entrusted by residents in Japan or provide clearing services at their companies (they are required to designate an agency clearing participant when acquiring TSE trading qualification(s)). In cases where remote trading participants accept orders entrusted from overseas, prior approval from TSE will be necessary.

(Note)

3. Acquisition of trading qualifications

Flow of trading qualification acquisition

  • For the acquisition of trading qualifications, please contact Trading Participants Relations Office (+81-3666-0141 (Switchboard)). TSE holds an interview to confirm whether the applicant's meets the qualification acquisition criteria (formal criteria).
  • In cases where the qualification acquisition criteria (formal criteria) are fulfilled, TSE explains the procedures and schedule related to the acquisition of trading qualification, and requests the applicant to prepare documents for submission.
  • Japan Exchange Regulation (the Participants Examination & Inspection department) conducts examinations based on the submitted documents. Examination methods include examinations and hearings based on the documents, visits to main and branch offices to confirm the status of control systems, and interviews with executive officers (e.g. presidents, CEOs). (Almost one to one and a half months are required for the examination period.)
  • In cases where TSE deems granting the trading qualification appropriate in the examination, it will approve such acquisition.
  • Following the approval, after completion of system connection tests and operational briefings held by TSE's related departments, the applicant shall acquire trading qualification on the designated date.

Outline of Trading Qualification Acquisition Criteria

The qualification acquisition examination criteria are comprised of quantitative formal criteria and qualitative substantive criteria. For details, please see the following table.

1. Formal criteria (Status of the most recent business year)

  • Financial position
Item Criteria
Capital stock JPY 300 million or more
Amount of net assets JPY 500 million or more and in excess of the capital amount
Capital-to-Risk Ratio (Non-consolidated) More than 200%
(In cases where the applicant is a Special Financial Instruments Business Operators, the consolidated Capital-to-Risk Ratio shall exceed 200 %.)
  • Criteria of Stable profitability
    The applicant shall have a favorable ratio (around 100%) of ordinary income to current expenses (whether operating expenses are covered with stable profits, such as commission income and finance income excluding earnings generated by proprietary trading) or the applicant shall have recorded ordinary profits and net profits in the most recent two business years and have positive earnings in such business years.
  • Operational experience
    Number of years of business operation: As a general rule, more than one year since the applicant was registered as a financial instruments business operator
    Securities trading experience

2. Substantive criteria (Current status and future prospect)

The following company structures shall be established from the viewpoint of executing fair and smooth exchange trading and preventing accidents, etc.

  • Sound management structure (the applicant shall not be controlled by parties deemed inappropriate in light of TSE market operation, etc.)
  • Order placement, execution, and delivery settlement systems for executing fair and smooth exchange trading, etc. (systems for preventing erroneous orders, managing clients, etc.)
  • Internal management system (related to risk management, compliance, the development of rules and regulations, etc.)

Costs related to Acquisition of Trading Qualifications, etc.

The following costs and deposits are required to acquire trading qualifications.

Expense Item Amount, etc.
Admission fee
(For a remote trading participant, the amount splited by one-tenth)
General Trading Qualification: JPY 100 million (tax-excluded)
Qualification Examination Fees JPY 1 million(tax-excluded)
Deposit Item Deposits, etc. (Securities can be deposited in lieu of cash; provided, however, this is not applicable for a remote trading participant)
Participant bond JPY 3 million
Trading participant security money In the first year, the total amount of "basic fees" + "trading system facility usage fees" and the amount equivalent to an average monthly amount for two months of "trading fees" + "access fees" paid by trading participants who has the same trading qualification

In addition to the above costs, fees for system interface and terminal setting related to the Trading System / Market Information System, etc. are also required. (These fees vary depending on the interface composition. TSE explains details in the qualification acquisition process.)
For the TSE rules related to trading participants, please refer to the following pages.

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