Update : Mar. 31, 2008
On March 10, 2008, a malfunction in the Stock and CB Trading System prevented normal trading in the stocks of Alps Electric and Nagoya Railroad during the morning session. In response, Tokyo Stock Exchange, Inc. (TSE) compiled a report on measures for preventing a recurrence of the malfunction and submitted this report to the Financial Services Agency.
The TSE would like to offer its sincerest apologies to investors and many other market users for the inconvenience caused by this malfunction occurring subsequent to the Derivatives Trading System malfunction last month. The TSE will make the utmost effort to restore confidence in the market, and would greatly appreciate your continued support in the future.
Tokyo Stock Exchange Group, Inc. has adopted a new medium-term management plan for the next three years beginning in April 2008.
In this medium-term management plan, the TSE group has for the first time set specific quantitative targets for derivatives trading volume, etc. The plan explicitly clarifies the executive team's commitment to achieving results for the next three years without changing the medium-term management goals and priority strategies for this period.
The TSE group also clearly identified making the TSE "a market that will protect the rights and interests of shareholders and investors" as fundamental to these priority strategies.
Specifically, the TSE group defined the targets for which it is striving. This can be thought of as the common ideal that all branches of the TSE group share and will use as a slogan in the future.
Also, while establishing the twin engine platform consisting of the cash market and the derivatives market, and taking advantage of synergies through strategic alliances with overseas exchanges, etc., the TSE group will evolve into a "universal exchange".
The "universal exchange" represents the goal of the TSE group to create a market which attracts investors and listed companies from around the world, provides market users with a value chain (from trading to settlement), and develops a wide variety of financial instruments spanning both cash and derivatives products.
It also represents the goal of creating a "trading venue accessible to everyone," able to support wealth building for as many investors as possible regardless of whether they are located in Japan or abroad.
In implementing its basic strategy for achieving future objectives and fulfilling its fundamental role, the TSE group recognizes that it needs to expand in quantitative terms by diversifying its trading product lines and providing top caliber trading systems. The exchange also plans to achieve qualitative enhancements by enhancing the corporate governance of listed companies and improving its self-regulatory functions.
The TSE Group has adopted the medium-term management plan with these strategies as the foundation, and has made strengthening the derivatives market a goal which the company will focus on in particular. This is because stock exchanges with a strong derivatives market tend to have a relatively higher market capitalization. Other reasons include the fact that exchanges can more easily use their ingenuity to create new derivatives when compared to cash products such as equities, most of the underlying assets are not restricted, and exchanges are able to maintain lower operating costs and a high profit margin. Therefore, the TSE group recognizes that the expansion of the derivatives market is key to the growth of the TSE market and the TSE group as a whole.
In light of the above, the TSE group hopes to aggressively list new derivative products and double derivatives trading volume from FY2007 by FY2010 through ceaseless efforts in reviewing systems, trading hours, etc. On the other hand, the TSE group also aims to increase the number of listed ETFs to 100 (3 times larger than FY2007 by FY2010).
Even though our policy is to "make the shift from a saving focus to an investment focus," the TSE group's financial product line has not sufficiently satisfied investors' needs. Therefore, taking advantage of a legislative amendment, the TSE group recognizes that it has a responsibility to develop a wide variety of financial instruments to adequately respond to the diverse risk tolerance of investors. The TSE group also expects that this will open up the way for investors to review how and where to invest more than JPY1, 500 trillion of individual financial assets.
In addition, the TSE group will steadily proceed with projects such as the establishment of a new market for professional market players, research into creating an emissions trading market, and the introduction of the next-generation trading system.
As far as qualitative enhancements are concerned, the TSE group will clarify the strategy that the market should protect the rights and interests of shareholders and investors. The TSE group will continue to seriously look into how the company can commit to respecting shareholders' rights, and will conduct more sophisticated market surveillance and listing examinations while actively utilizing its systems, etc.
The TSE group will continue to make efforts through the "TSE Academy" to improve financial literacy. The TSE group hopes that this will generate risk money for nurturing new industries.
Lastly, the TSE group has set numerical management and financial goals for FY 2010 including JPY 88 billion or more in operating revenue and JPY 37 billion or more in operating profit. The TSE group has set these goals in light of the current market environment, etc., however, actual figures may differ largely from these depending on future market conditions. Also, the TSE group has earmarked approximately JPY39 billion for capital investment over the next three years. Out of this amount, capital investment related to the next-generation trading system will be JPY 11.5 billion.
Some adverse effects of the US sub-prime mortgage crisis still remain and the current market environment is very turbulent, but with a sense of crisis and tension, the TSE group hopes to make a fresh start toward the leap to a "universal exchange".
Please click here for the Medium-Term Management Plan (for FY2008-FY2010).
Tokyo Stock Exchange Regulation (TSER) will establish a "Compliance WAN" that connects the systems of securities companies nationwide, stock exchanges, and regulatory authorities in order to electronically process all information necessary for market surveillance.
Securities companies currently send stock exchanges and the Securities and Exchange Surveillance Commission (SESC) documents containing trading details for use in conducting unfair trading examinations. However, as the methods for receiving such documents differ from one stock exchange to another, securities companies are required to invest a significant amount of time and clerical work. From the standpoint of personal information security, the securities industry has a strong need for establishing an integrated network system connected to the SESC.
The "Compliance WAN" system can be thought of as a common infrastructure for the securities industry as a whole. Responding to the needs of the securities industry, various stock exchanges and the SESC will work as one to send and receive market surveillance data through the Compliance WAN. Through this system, TSER will strive to increase clerical efficiency and bolster security, further enhancing market fairness by strengthening market surveillance functions.
The software to be used in this system will be developed by the TSE, and TSER will use a "common network for securities companies" to be established by the Japan Securities Dealers Association. TSER will immediately initiate the software development and activate the software in tandem with the completion of the "common network for securities companies" scheduled for May 2009.