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October 2008

Update : Nov. 05, 2008

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1. 2nd Quarter Financial Results for FY ending March 2009

The following is a breakdown of the 2nd quarter financial results for the fiscal year ending March 2009.

Due to an approximately 20% decrease in stock trading value during auction trading on a year-on-year basis, etc., trading participation fees were down 16% from the corresponding period of the previous year. Listing-related revenue was down 23% from the previous year due to a decrease in IPOs, etc. However, one of the TSE subsidiaries, TOSHO SYSTEM SERVICE CO., LTD. generated revenue through its contract with Japan Securities Depository Center, Inc. to dematerialize stock certificates. As a result, operating revenue was JPY38.4 billion, which was almost at the same level as the previous year.

On the other hand, operating expenses were up 29% to JPY28.2 billion from the previous year. This occurred as a result of an increase in personnel expenses, system maintenance/operating expenses, cost depreciation, as well as the fact that cost of system development related sales from dematerialization of stock certificates were recorded as "others".

As a result, operating profits during the quarter were down 38% to JPY10.2 billion from the previous year and ordinary profits were down 37% to JPY10.8 billion from the corresponding period of the previous year. After deducting corporate taxes and others, net profit for the quarter was down 44% to JPY5.6 billion.

2. Partial Revision of Trading Participation Fees in Conjunction with Introduction of New Systems

Tokyo Stock Exchange, Inc. (TSE) has decided to partially revise trading participation fees in conjunction with the activation of the new options trading system ("Tdex+ System") and the next generation trading system ("arrowhead").

Recently, system usage has changed dramatically due to a significant increase in the number of orders, etc., the services provided by the arrowhead, and system device configurations that differ from those of existing systems. In light of this situation, the TSE will make a partial revision to access fees and trading system facility usage fees. However, trading fees will not be subject to change.

On the other hand, the TSE has decided to change its derivatives fee structure in line with foreign exchanges where general fee structures are not based on contract values, but rather on the number of transactions and trading units.

The TSE anticipates that the revision will have a minor impact on revenue levels.

3. Introduction of Mini-JGB Futures

The TSE has conducted mini-trading for TOPIX futures since June 2008 and is now announcing that it will also introduce mini-trading for long-term JGB futures.

The trading rules for mini-trading will be basically the same as the existing rules for long-term JGB futures trading. However, there are three major differences: (1) the trading unit for mini-trading will be JPY10 million which is one-tenth of the trading unit for the present long-term JGB futures, (2) the tick size will be half of the long-term JGB futures (0.5/100 of one yen per face value of JPY100), and (3) final settlement will be net settlement, not delivery settlement.

The final settlement method will be the same as the SQ (Special Quotation) settlement method which is used in TOPIX futures trading, etc.

Mini-JGB futures trading is scheduled to begin on March 23, 2009.

4. Signing MOU with Markit Group Limited

Tokyo Stock Exchange Group, Inc. (TSE Group) and Markit Group Limited signed a Memorandum of Understanding (MOU) on October 28, 2008.

Against the backdrop of the recent financial crisis, there has been growing demand for a more transparent evaluation of portfolios, as well as more reliable and efficient post trade operations for financial instruments. Considering these circumstances, the TSE anticipates that this collaboration between the TSE Group, which plays a role in securities infrastructures, and Markit Group Limited, which has considerable experience in appraisal of OTC derivatives and electronic post trade operations, will allow us to enhance transparency and reliability as well as improve trading infrastructures in the financial market.

Under the terms of the MOU, the TSE Group and Markit Group Limited plan to examine the feasibilities of potential business alliances for the following areas (including consideration of establishment of a joint venture company if necessary):

1) Promotion/distribution of appraisal and valuation services for financial instruments
2) Developments of new indices and promotion of utilization of various indices for actual trading activities
3) Distribution of information contents owned by both companies
4) Promotion of the improvement of the infrastructure of post trade operations in the OTC derivatives market

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