Update : Aug. 30, 2006
While Tokyo Stock Exchange, Inc. (TSE) is deepening relationships with U.S. and European securities exchanges, it is a very important task for TSE to strengthen connections with exchanges in the North East Asian region as well.
As the first step, TSE signed Memorandums of Understanding (MOU) to commence business alliance discussions with Korea Exchange on July 7, 2006, Shenzhen Stock Exchange on August 7, and Shanghai Stock Exchange on August 22, 2006.
TSE and Shanghai Stock Exchange immediately held their first discussion at the offices of the latter on the same day the MOU was signed, and will in the future examine the possibility of cooperation in areas where both sides can benefit, such as in the development of new products and the sharing of IT information.
We believe that this MOU is the first step towards collaboration in the North East Asian region.
TSE has decided to conduct the above competition, calling on applicants both within Japan and around the world to compete to be selected as the developer for the next-generation trading system which forms the backbone the securities market - an essential element of public infrastructure.
The selection process is as follows:
First, document screening will be conducted, and TSE will select at most five applicants by mid-September from among those who meet the six requirements as shown in the selection procedure paper below, in order to conduct the selection process efficiently as well as to ensure high quality levels for technology, developing ability, etc.
Next, in early October, an RFP (Request For Proposal) will be submitted to applicants who have passed the document screening.
In the third step, after reviewing proposals from these applicants, TSE will narrow down the candidates to 2-3 applicants by late November, and will select the system developer by the end of this year.
Presently, TSE is conducting necessary reviews and studies according to the Comprehensive Improvement Program for Listing System published on June 22, 2006. These reviews and studies have been conducted with swiftness in mind, and have taken opinions from a variety of stakeholders into full consideration. Among such, discussion sessions with experts and influential individuals were to be set up for "Items to be considered for practical approaches" and "Items to be considered for deliberation," which were classified into Phase II.
Following this, TSE has now decided to set up the Roundtable on Listing System Improvement, the members of which include representatives from academia, listed companies, institutional investors, securities companies, etc. The Roundtable consists of around 15 members, whom TSE is in the process of selecting. The Chairperson will be Professor Hideki Kanda of Tokyo University.
The first roundtable is slated to be held on September 11, 2006, and subsequent roundtables will be held once a month, with the aim of compiling an interim report next spring. Discussion at the Roundtable will be made public on TSE's website.
Recently, the role of the securities market has been subject to much higher expectations, and further appropriate demonstration of our self-regulatory functions is demanded. Based on this recognition, TSE believes that in taking disciplinary actions against trading participants, TSE should improve transparency of the procedures and predictability of disciplinary actions.
Therefore, TSE has drafted a guideline for disciplinary actions. Up until now, the points which have been taken into consideration when actually taking disciplinary actions have been categorized and explicitly expressed as 17 items. For instance, we clarified our position towards things such as the degree of intent or negligence, the range of persons involved in the violation, disciplinary history, impact on the market, etc.
TSE aims to implement the guidelines in late September after soliciting public comments.
TSE will station a TSE corporate representative in the U.S. who is responsible for negotiations with and information gathering from stock exchanges and related institutions, including the NYSE.
With regards to negotiations with Mizuho Securities Co. Ltd. on bearing the loss in connection with the placement of an erroneous order for shares of J-COM Co. Ltd., we received from Mizuho Securities at the end of last week a letter of demand claiming compensation payment. The amount claimed is JPY 40.4 billion, with payment due on September 15, 2006. If no payment is made by the due date, Mizuho said in the letter that they have no recourse but to consider legal action, such as filing a lawsuit.
TSE has held more than ten discussions with Mizuho on both the working level and management level, but agreement has been extremely difficult to reach. As TSE has no intention to pay compensation in response to the claim, there is now a high possibility of the problem being resolved through the involvement of a third party such as the courts.
TSE regrets very much that the prospect for settlement through negotiations has grown dim, and that this kind of situation has arisen. Even if the problem progresses to the legal stage, however, TSE will endeavor to settle this issue in a sincere manner as we have done so far.