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January 2008

Update : Feb. 07, 2008

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1.3rd Quarter Financial Results for FY ending March 2008

The breakdown of the 3rd quarter financial results for the fiscal year ending March 2008 is as follows.

Due to factors such as a decrease in the number of listed stocks resulting from capital increase and conversion of convertible bonds, listing-related revenue was down 24.0% from the corresponding period of the previous year. However, trading participant fees were up 11.7% from the previous year due to a 17.0% increase in daily average trading value during auction trading on a year-on-year basis, etc., and information services-related revenue was up 9.7% from the same period of the previous year. As a result, operating revenue was up 3.7% to JPY 57.469 billion from the previous year.

On the other hand, operating expenses were up 8.7% to JPY 33.728 billion from the previous year due to an increase in consulting fees and system-related expenses including system maintenance/operating expenses and depreciation costs.
As a result, operating profit during the quarter was down 2.7% to JPY 23.741 billion from the previous year, but current profit adjusted by receipts of dividend income from the Singapore Exchange Limited was up 2.8% to JPY 25.985 billion from the corresponding period of the previous year. After deducting corporate taxes and others, net income for the quarter was up 2.6% to JPY 15.021 billion.

2.Development of Commodity ETF Listing System

As announced earlier, the Financial Services Agency publicized the "Plan for Strengthening the Competitiveness of Japan's Financial and Capital Markets" at the end of 2007. In the plan, financial instruments exchanges are required to make the adjustments necessary to diversify ETFs and other tradable financial products.

In response to the request proposed in the plan, Tokyo Stock Exchange, Inc. (TSE) has developed the listing system for "Commodity ETFs" whose trust assets are commodities including gold and crude oil and whose aim is to track the movement of such commodity prices.

Up until now, ETFs tracking the movement of commodity prices have been created in two stages. Taking gold ETFs as an example, the fund creator first created securities tracking the movement of gold prices, and then made these securities available for investment trusts. Using this process, however, creation costs went up, and the structure was inconvenient for investors.

The new listing system has been developed based on the amended Trust Law, not on the Investment Trust Law. Under this listing system, trust assets shall be invested into commodities directly, and securities based on the beneficiary rights to such will be issued and listed as commodity ETFs. Therefore, the fund creator will be able to lower creation costs and make actual receipt of commodities (exchange for commodities) possible, which will significantly increase convenience for investors.

The TSE will proceed with preparations to implement the new listing system revision in March 2008. Based on this system, a substantial number of ETFs can be offered to investors in the spring of 2008.

3.Development of Listing System in Tandem with Quarterly Reporting System under Financial Instruments and Exchange Law

The TSE will make the necessary adjustments to its listing system in tandem with the April 2008 introduction of the quarterly reporting system and internal control reporting system under the Financial Instruments and Exchange Law.

In developing this listing system, the concept of an "interim" will be replaced with a "quarter". For example, instead of a semi-annual securities report, a quarterly financial report will be included in the definitions of an annual securities report, etc.

4.Partial Revision of Tick Size Structure

In light of increasing user-friendliness for investors, the TSE will reduce tick sizes when trading participants make a bid or offer for stocks, etc. to conduct price formation at much smaller tick sizes.

Specifically, when the price per share is more than JPY 100,000, but less than or equal to JPY 300,000, the tick size will be JPY 100 instead of the current JPY 1,000. When the price per share is more than JPY 1 million, but less than or equal to 3 million, the tick size will be JPY 1,000 instead of the current JPY 10,000. The TSE will revise the tick sizes in the two price ranges in which one tick size is relatively large compared with those of other stock price ranges.
This revision is expected to stabilize price formation more than ever, thus facilitating order executions.
As simultaneous system adjustments are also required, the TSE will proceed with preparations to implement the listing system revision in the summer of 2008.

5.Survey on the Tokyo Stock Exchange

Tokyo Stock Exchange Group, Inc. (TSE Group) conducted the second "Survey on the Tokyo Stock Exchange". In the survey, the TSE Group asked the general public including individual investors, trading participants, listed companies and institutional investors about the image they have of the TSE, how user-friendly the TSE market is, their level of satisfaction, etc. This survey has been conducted since last year.

With regards to the question "Does the TSE live up to your expectations?", approximately 70% of trading participants and listed companies and over 50% of individual investors who actually invest in stocks answered "Yes", but only 30% of institutional investors gave the same answer.

As for the user-friendliness of the TSE market, more than 60% of trading participants, but only approximately 30% of institutional investors responded "Satisfied". The low level of satisfaction among institutional investors may be attributed to "TSE's narrow product range", however, the TSE received an encouraging response from a lot of respondents that the TSE market is getting more user-friendly.

When asked about "Commendable measures recently taken by the TSE", a majority of trading participants, listed companies, and institutional investors responded "The development of the next generation trading system", "The improvement of the listing system", and "The development of new financial instruments such as ETFs", respectively.

Lastly, regarding their image of the TSE and its employees, the TSE received favorable answers such as "faithful" and "trustworthy", but quite a lot of respondents answered "paper-pushing" and "bureaucratic". On the other hand, many respondents said that the image is getting better than before.

The TSE Group will continue to endeavor for the appreciation and support of market users, and will reflect the results of this survey in the medium-term management plan to be drafted in March 2008.

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