What is an ETF?

Trading Method

Update : Oct. 29, 2012


Same Trading Method as Regular Stocks

There are no special rules for ETF/ETN trading which differ from those of regular stocks. Trading is conducted through securities companies, in the same way as regular stock investment.

Trading Rules

  • Limit and Market Orders are both capable of being used, as for stocks.
  • Tick sizes are also the same as those for stocks. For example, if TOPIX is at 900 points, investors may consider the ETF to be a JPY 900 stock, because a TOPIX-linked ETF is designed to track the index. Just as with stocks, order can be placed for "Bid at JPY 903" or "Offer at JPY 894".
  • Additionally, execution of transactions (the principle of price and time priority) and price limits are the same as those for regular stock transactions.

Trading Units

  • Just as stock trading units vary by issue, ETF/ETN trading units differ by product.
  • For example, if the trading unit for a TOPIX-linked ETF was 10 units, for JPY 1000 x 10 units, it would be possible to trade with the movements of the overall TSE stock market.

Market Information

  • As with stocks, market information is provided for price, trading volume, trading value, quote information, pre-open quote information, and special quote information.
  • Additionally, open, close, low, and high prices, as well as trading volume can be found in newspapers, etc. in the same way as stocks.

ToSTNeT Trading

  • As with stocks, ETF/ETN ToSTNeT trading is available.

Trading Method on Initial Listing Date

  • The base price on the initial listing date shall be calculated based on the closing price of the underlying stock price index, etc. on the day preceding the initial listing date.
  • Price limits will be applied according to this base price from the start of auction trading on the initial listing date.
  • ToSTNeT trading shall be possible from 8:20AM on the Initial listing Date using the base price of such date.

Settlement Date

  • Settlement is conducted on T+3 or same day settlement. In the case of T+3 settlement, the money for the sale and the purchased ETF/ETN are exchanged on the 4th day counting from the transaction date, in the same manner as regular stocks.


  • As with stock dividends, dividends are paid to investors which hold the ETF/ETN (beneficiaries) on the earnings date. (However, there are cases where dividends are zero.)

Exchange and Additional Creation

  • One distinct trait of ETFs is, in addition to being able to receive a basket of equities, etc. for a certain amount of ETF units (exchange), the ability to acquire the ETF from a certain basket of equities, etc. (additional setting). (*1, *2)
  • In this way, since it is possible for mutual exchange between the ETF and baskets of equities, etc., active arbitrage trading is conducted primarily by securities companies, etc., through which the interrelation between the underlying index and the ETF’s market price is greater ensured.
  • (*1)Foreign ETFs (overseas ETFs) differ from domestic ETFs in that there may be cases where setting and exchange are not possible within Japan.
  • (*2)For the "Nikkei 300 Stock Index Listed Fund", setting is conducted with cash, similar to regular investment trusts, and not with baskets of equities.

Revision of Short-Selling Restrictions

Because ETF prices have a high level of credibility, it is necessary to have a system by which smooth arbitrage and hedge trading may occur between the ETF and equities, and the ETF and index futures. In order to prepare trading rules which would facilitate such smooth transactions when an ETF is listed to the TSE market, the "Cabinet Office Ordinance on Short Selling of Securities" was revised in July 2001. Currently, restrictions are prescribed by the "Cabinet Office Ordinance on Restrictions on Securities Transactions, etc." (hereinafter, the "Ordinance").
In consideration of the marketability of ETFs and the nature of trading, the following transactions are exempt from the obligation of display/confirmation and price restrictions.

  • Short sales of ETFs which were allotted via division, etc. of beneficiary rights (Article 10, Item 12 of the Ordinance)
  • Short sales of stocks in cases where such stocks, etc. have been requested for exchange with a domestic ETF (Article 10, Item 16, Sub-item a of the Ordinance)
  • Short sales of domestic ETFs in cases where additional creation has been requested for such domestic ETFs (Article 10, Item 16, Sub-item b of the Ordinance)

Additionally, the following transactions shall be exempt from price restrictions only. (The display obligation applies.)

  • Short sales of ETFs in cases where such ETFs are purchased at the VWAP (Article 14, Item 3 of the Ordinance).
  • Arbitrage trading between ETFs tracking the same indicator (Article 14, Item 10 of the Ordinance)
  • Short sales of ETFs or stocks, etc. in cases of arbitrage/hedge trading of such ETFs or stocks, etc. (Article 14, Items 11 and 12 of the Ordinance)
  • Short sales of ETFs in cases of arbitrage/hedge trading of such ETFs and index futures (Article 14, Items 13 and 14 of the Ordinance)
  • Short sales of ETFs in cases of arbitrage/hedge trading of such ETFs and ETF options (Article 14, Items 15 and 16 of the Ordinance)
  • Short sales of ETFs conducted to standardize the price of such ETFs with the underlying stock price index, etc. (Article 14, Item 17 of the Ordinance)

ETFs are thought to have a price formation with strong interrelation with the underlying stock price index, etc. and index futures using such stock price index, etc.

Using such marketability, it is possible that holders of ETFs will conduct unfair transactions in both the ETFand equities markets or ETF and index futures markets, such as manipulating underlying stock price indices to change the price of an ETF for the purpose of generating unfair profits.
From the perspective of maintaining fairness of the TSE market, the following actions crossing the ETF, equities, and index markets are prohibited: 1) wash trading, 2) conspiracy trading, 3) market manipulation, 4) rumor spreading, and 5) customer front-running.

Additionally, currently listed ETNs are exempt from the display/confirmation obligation and price restrictions (Article 10, Item 3, Sub-item d of the Ordinance)

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