Update : Jan. 05, 2009
The revised Financial Instruments and Exchange Act, which went into force on December 12, 2008, created a legal framework that allows for the establishment of a new market designed for professional investors. Thus, on December 18, 2008, Tokyo Stock Exchange Group, Inc. (TSE Group) and London Stock Exchange Group, plc. (LSE) jointly set up a company that will be the basis for the new market. The company is capitalized at 200 million yen, and the TSE Group and LSE have 51% and 49% stakes, respectively.
The TSE is scheduled to publicize the outline and rules, etc., of the new market as soon as it has completed discussions with LSE. Following publication, the TSE will solicit comments and opinions from the public and apply for a license for the new market.
The TSE has drawn up an outline of the trading rules for the new options market, previously announced in April, 2008.
The new options market will utilize a trading platform, Tdex+, that was customized based on LIFFE CONNECT®. The LIFFE CONNECT® platform is utilized by one of the largest derivative exchanges in Europe, known as LIFFE.
The Tdex+ system will deliver high order processing performance in terms of latency and capacity as well as offer great flexibility. In addition, the system has been designed to accommodate a Market Making System which is vital for efficient options trading. The introduction of this Market Making System as part of the new trading rules will create an environment that will allow investors to trade options contracts much more readily. Thus, this will make it easier for a wide range of investors, from professional investors such as hedge funds and institutional investors, to individual investors, to participate in the TSE's options markets.
The TSE has also decided to set up a new Market Maker Committee to discuss the details of the trading rules, with the aim of adequately reflecting opinions from market participants who actually carry out options trading. The Committee consists of 18 companies from around the world. They include firms specializing in market making in major overseas markets such as Chicago, London and Amsterdam, as well as TSE trading participants. The Committee is scheduled to be held on an as-needed basis.
Aside from the Market Making System, the TSE has also created a framework that will allow complex options orders to enable options "strategy trading". Through this framework, the TSE anticipates that liquidity will increase in the options market.
In addition, the TSE has extensively reviewed rules that exist only in Japanese markets in an effort to conform to international standards as much as possible.
The TSE is scheduled to implement these new trading rules in conjunction with the activation of the new options system in July 2009.