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August 2008

Update : Sep. 02, 2008

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1. Providing a Co-location Service

Tokyo Stock Exchange, Inc. (TSE) has announced that it will provide a new "Co-location Service" designed to benefit trading participants, etc. This service will provide space for trading participants' servers to place orders, receive market information, etc. on the site of the TSE's data center, where network access points and the Trading and Market Information Systems are installed.

This service will shorten the physical distance related to the exchange of data between the TSE and trading participants' systems. Thus it will enable trading participants to further increase the speed with which they send and receive order, order book data and other related information.

The TSE believes that this "Co-location Service" will be extremely beneficial to trading participants who frequently conduct algorithm trading, etc. in which speediness is considered as a key factor for the execution of transactions.

Along with this service, as of September 1, 2008 the TSE has decided to establish a Co-location Service Promotion Group within the IT Service Department in charge of soliciting trading participants to use the service and conduct service planning. In order to make the publication of detailed service guidelines possible by - at the earliest - late November, 2008 the TSE plans to continue to consider working on the details of the service.

The TSE will begin by launching this service for the new Option Trading System (Tdex+System) which is scheduled to be activated next summer, and will then sequentially expand the service to the Next Generation Trading System (Arrowhead) and the Derivatives Trading System.

2. Investor Opinion on Corporate Governance

The TSE has made "improving conditions to enhance the corporate governance of listed companies" its top priority for the Listing System Improvement FY2008. In order to clarify any problems related to this issue, the TSE solicited the opinions of a wide variety of investors on overall corporate governance. This was done through its website and other means for an approximately one month period starting from the end of June 2008.

As a result, the TSE received a total of 41 opinions from domestic and foreign investors (out of which 30 opinions were expressed by foreign institutional investors). Drawing upon these opinions, the TSE will proactively determine the direction it will take in making future adjustments to the listing system.

On the topic of M&A, there is a growing concern over the rapid increase in the number of companies, approximately 500 TSE listed companies, introducing takeover defense measures. In accordance with a review of a report on takeover defenses published by the Corporate Value Study Group established by the Ministry of Economy, Trade and Industry, and while taking into consideration the fact that these actions have the potential to affect future business operations, the TSE has decided that dealing with M&A issues must have priority over other concerns. Thus, it has consulted with investors directly through hearings, etc. and drawn up a separate report addressing the problem.

In the report, the TSE is outlining the following two directions to take in response to investors' opinions. The first states that investors need listed companies to recognize that they have an extremely negative opinion about companies introducing takeover defense measures. The second is that the TSE is aware that in order to protect shareholder and investor rights, it must take decisive steps against takeover defense measures that are against its policies.

The Advisory Group on Improvements to the TSE Listing System has also begun discussing these issues. The TSE will conduct active discussions on this topic in order to develop specific counter measures to handle the problem. This will include initiatives such as strengthening information disclosure in corporate codes of conduct, and sequentially implementing practical improvement measures by the end of the year at the earliest.

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