Update : Apr. 18, 2007
The board of directors of Tokyo Stock Exchange, Inc. (TSE) has decided that its shareholders will vote on the nomination of the following two people as new members of the board at the annual general shareholders meeting to be held on June 22, 2007: the first is Mr. Atsushi Saito, who achieved great success at Nomura Securities Co. for many years, and has served as President of the Industrial Revitalization Corporation of Japan until recently. The second is Mr. Yoshinari Hara, who serves as Chairman of Daiwa Securities Group Inc.
Should the nomination be approved at the general shareholders meeting, Mr. Saito will be appointed as President and CEO at the board of directors meeting to be held subsequently. At that time, President Taizo Nishimuro will resign from his current position and be installed as Chairman and Representative Director. Mr. Hara will become an outside director of the TSE board, and with this, Mr. Junichi Ujie, the current outside director, will resign at the general shareholders meeting.
In the future, a holding company, which will be a committee-based company, is scheduled to be established on either August 1st or September 1st, 2007. The TSE plans to nominate Mr. Saito as Member of the Board and Representative Executive Officer & President of the holding company - the TSE Group - in addition to President & CEO of the TSE, the market operation company. Mr. Nishimuro will become Chairman of the Board & Representative Executive Officer of the holding company, and at the same time, Chairman of the Board of the TSE (the market operation company).
The TSE has adopted a new medium term management plan for the next three years beginning April, 2007. The basic policies of the new medium term management plan were already publicized last January. The TSE has finalized a more specific action plan in line with the basic policies.
For the content of the plan, please access the following URL:
Medium Term Management Plan (For FY2007 to FY2009)
With regard to "Management Objectives", the TSE expects to post JPY 75.3 billion or more in operating revenue and JPY 54.9 billion or less in operating expenses on a consolidated basis. As a result, the TSE plans to record operating profits of JPY 20.5 billion or more. As the launch of the next-generation trading system and establishment of the secondary site for TSE systems will be conducted in full-swing over the next three years, the TSE expects to use JPY 46.4 billion for capital investment.
Five specific business strategies are outlined in the new medium term management plan.
The first is "Improving the convenience / efficiency of market infrastructure". The TSE is determined to make every effort to get the next-generation trading system – which will have the world"s highest level of performance and functionality - up and running smoothly.
The second is "Enhancing confidence by reinforcing self-regulatory functions". Based on the "Comprehensive Listing System Development Plan", the TSE will work to enhance its quality control functions by further improving the listing system. The TSE will also convert to a holding company structure in order to further strengthen the independence of self-regulatory operations.
The third is "Enhancing convenience by providing a variety of listed products, etc." The TSE will actively work to introduce more attractive listed products in tandem with the enactment of the "Financial Instruments and Exchange Law," while promoting the listing of foreign companies, particularly those in Asia.
The fourth is "Strengthening competitiveness by promoting partnerships and business alliances with overseas exchanges, etc." The TSE will further flesh out the various business alliances, etc. that the it has been forging with overseas exchanges since last year.
And finally, the fifth is "Spreading securities literacy and broadening the individual investor base". A new paradigm, "shifting from a savings focus to an investment focus", is now taking root in Japan. In order to help make this a major trend in the everyday lives of the general public, the TSE will work to expand the base of self-reliant investors by diffusing knowledge and understanding on the market and securities investment.
The TSE will realize its own listing by 2009 in order to steadily carry out this medium term management plan over the next three years. The TSE is now ready to make a fresh start, designating the next three years as "a period for making a new leap forward".
The TSE is currently devoting itself to the introduction of a new derivatives trading system by October 2007. In tandem with the activation of the new system, the TSE will partially revise the current trading rules to enhance the usability and efficiency of its derivatives market.
The TSE plans to introduce a "give-up system". The "give-up system" enables investors to settle a transaction through a securities company different from the one that they requested to execute said transaction. By using this system, investors will be able to place orders with two
or more securities companies and then settle the transactions executed by these securities companies through one specific securities company as a batch, enabling greater efficiency. Since this system is common at exchanges in Europe and U.S., many investors, foreign investors in particular, have
requested the TSE to introduce the "give-up system".
The TSE will also make adjustments to the off-auction trading system, expand the daily price limit, and review trade matching rules, etc., which are all plans that were already announced in November 2006.
After setting forth a period for comments and suggestions by the public, these reviews are scheduled to be implemented in October 2007 in tandem with the activation of the new derivatives trading system.
Coinciding with the activation of the new derivatives trading system and the introduction of the "give-up system", the TSE will make a slight change to trading participant fees.
In the event that a trading participant uses the "give-up system", the TSE will collect 5 yen in "give-up fees" per trading unit. For example, when securities company A trades 10 units of TOPIX futures and gives up the settlement of the transaction to securities company B, securities company B pays 50 yen for the 10 units to the TSE. Securities company A pays trading participants fees for the TOPIX futures trades as in the past.
When the new derivatives trading system begins operation, the configuration of the current system will significantly change, and the TSE will revise the current system usage fees in order to reflect this change.
The revision is scheduled to be implemented in October 2007, in tandem with the activation of the new derivatives trading system.
In recent years, orders placed through computer systems, such as algorithmic trading and Direct Market Access (DMA), as well as on-line orders, have been dramatically increasing. In order to respond to this situation, the TSE has augmented system capacity several times to ensure
stable system operation.
Meanwhile, the TSE has been collecting information on how trading participants use the computer systems through individual interviews with these participants, and found that the frequency with which trading participants have augmented their own system capacity has also been gradually increasing. The period from the decision to increase system capacity to the actual system capacity augmentation has also been curtailed. Therefore, it is becoming nearly impossible for the TSE to get a clear understanding of each trading participant's system capacity augmentations comprehensively by asking them individually as done up until now.
The TSE considers it necessary to fill in the current information gap in order to enhance the accuracy of system processing capacity assessments and ensure stable system operation. From this point of view, the TSE will establish a reporting system by which trading participants report their current and future trading system, etc. use on a regular basis.
The specific contents of the report include the percentage of electronic trading such as algorithmic trading and DMA, the percentage of total trades that are made on-line, the predicted increase/decrease in these percentages, the number of orders that can currently be placed (extra system capacity that is not actually used at the moment) or future increase and decrease of the number of orders that can be placed after future system capacity augmentations.
This kind of reporting system has already been introduced in several European and U.S. exchanges. The TSE considers the reporting system necessary in order to augment system capacity in the future. The TSE will implement the reporting system in the autumn of 2007, after setting forth a period for comments and suggestions by the public and giving adequate notification to each trading participant.
The TSE is currently having its accounts audited by "Misuzu Audit Corporation" until officially appointing a candidate for a new auditor. As a result of thorough consideration after hearing presentations from major auditing companies, the TSE's board of directors has named Deloitte
Touche Tohmatsu as a candidate for the TSE's auditor for the next fiscal year.
By law, appointing the auditor is a matter to be resolved at the general shareholders meeting. The board of directors is scheduled to officially determine the candidate to be referred to the annual general shareholders meeting at the board of directors' meeting to be held next May.
The TSE will publicize the "2007 White Paper on Corporate Governance of TSE Listed Companies".
Since last June, the TSE has requested each listed company to draw up a "Report on Corporate Governance," which is also accessible on the TSE website. This is the TSE's first attempt to enable investors to compare the corporate governance of listed companies appropriately and precisely. In order to enable more convenient use of the data by investors, the TSE has compiled this white paper after analyzing efforts and progress by each listed company in enhancing corporate governance as objectively as possible based upon data found in the reports.
The TSE hopes that investors will be able to reconfirm the current status of corporate governance through this white paper, and expects these efforts will help contribute to reform in corporate governance in Japan.
The TSE will not only make information on the corporate governance of each listed company available on the website, but also add a function making it possible to search for information on corporate governance in the near future. This will be the first attempt among exchanges all over the world in terms of enabling convenient, side-by-side comparison of the corporate governance of each company. The function is scheduled to be operable in the beginning of April.