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Overview of Japan Exchange Group and Recent Developments in Japanese Capital Market

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Overview of Japan Exchange Group and recent developments in Japanese capital market

1 October 2015

Japan Exchange Group, Inc.

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

Establishment of JPX

 The January 2013 merger combined the complementary strengths of TSE and OSE in the cash equity and derivatives markets.

 JPX aims at market expansion and improved efficiency to improve user convenience and raise competitiveness.

【Tokyo Stock Exchange Group】

• A global leader boasting a comprehensive exchange centered on the TSE 1st Section, TOPIX futures and JGB futures
• Vertically integrated group offering listing, trading, and clearing & settlement services

【Osaka Securities Exchange】

• Largest derivatives market in Japan with leading Nikkei 225 futures and options
• Operates the JASDAQ venture market

• Japan’s only listed exchange

• Dominant domestic stock market with strong brand image

Japan Exchange Group

Akira Kiyota, Group CEO

  • Derivatives Trading
  • Clearing
  • Cash Equities Trading
  • Self-Regulation

  • Japan Exchange
  • Japan Securities Clearing

Tokyo Stock Exchange

Koichiro Miyahara,

Osaka Exchange

Hiromi Yamaji

Regulation

Takafumi Sato
President

Corporation

Hironaga Miyama President & CEO

  • President & CEO
  • President & CEO

Change in trade/corporate names : Osaka Securities Exchange → Osaka Exchange (March 24, 2014),
Tokyo Stock Exchange Regulation → Japan Exchange Regulation (April 1, 2014)

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

2

Markets and Products on JPX

 Listing examination and
Self-Regulation

Japan Exchange Group Regulation

administration

Listing

 Listing rules, corporate code

Cash Equity

Trading
(Venture Market)
Cash Equity Trading
Derivatives Trading
Pro Markets

 Market operator  Timely disclosure  Data, index calculation

 Market surveillance,

participant monitoring

Trading

Tokyo Stock Exchange, Osaka Exchange

 Clearing cash equity/derivatives trades, and OTC derivatives
Clearing (Cash Equity, Derivatives, OTC)

Clearing

Japan Securities Clearing Corporation

Settlement (Cash Equity)

Settlement

 Securities settlement

Japan Securities Depository Center

  • Subsidiary
  • Affiliate

Derivatives Market
(Osaka Exchange)
Cash Equity Market
(Tokyo Stock Exchange)

More than
3,400 Issues
ETF/ETNs 217 Issues

  • Equity Derivatives
  • Fixed-Income Derivatives

 TOPIX Futures / mini  Nikkei 225 Futures / mini  Nikkei/Dividend Futures

 JPX-Nikkei 400 Futures

 TOPIX Options
 JGB Futures (5/10/20yr)  Mini-JGB Futures (10yr)
 1st Section (blue chips)  2nd Section

REITs
53 Issues

 Options on 10-yr. JGB
 Markets for Emerging

Futures

companies

Listed
Infrastructure Funds
(planned)

etc.
 Market for Professionals
 Nikkei 225 Options

  •  Equity Options
  • etc.

As of the end of Aug. 2015

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

3

Securities Markets in Japan (2014)

 There are 4 exchanges and 2 PTSs in Japan.  JPX occupies more than 90% of market share.

Others, 0.02%

OTC, 4.08%

PTS, 5.24%

Sapporo Securities Exchange

JPX, 90.66%

Trading Value: JPY 11 bn.

Fukuoka Stock Exchange

Trading Value: JPY 27 bn.

Japan Exchange Group, Inc.

Trading Value ：322,867 bil. JPY

Japan Exchange Group, Inc.

TSE: 310,887 bil. JPY

Trading Value: JPY 643,106 bn.

OSE: 11,981 bil. JPY

Nagoya Stock Exchange, Inc.

Trading Value: JPY 131 bn.

Source : JSDA and JPX

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

4

JPX’s Position in Relation to Major Exchanges (Cash Equity)

Value of Share Trading

(USD tn.)

35

  • 2005
  • 2006
  • 2007
  • 2008
  • 2009
  • 2010
  • 2011
  • 2012
  • 2013
  • 2014

30 25 20 15 10
5
15.9
12.2

6.1
5.9

5.4

2.0
Euronext Hong Kong

  • 1.5
  • 1.5
  • 1.5

Germany
1.4
0.7
0.2

0

  • NYSE
  • NASDAQ
  • Shanghai
  • Shenzhen
  • JPX
  • London
  • Korea
  • ASX
  • SGX

JPX

Market Capitalization (End of Years)

(USD tn.)

25
19.4
20

15 10

5

7.0

4.4

3.9

  • 3.3
  • 3.2

2.8
2.1
1.7

  • 1.3
  • 1.2

0.8

0

  • NYSE
  • NASDAQ
  • JPX
  • Shanghai
  • Euronext Hong Kong
  • LSE
  • Shenzhen
  • DB
  • ASX
  • KRX
  • SGX

JPX

Source: World Federation of Exchanges

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

5

JPX’s Position in Relation to Major Exchanges (Derivatives)

Rank

1

  • Exchange
  • Region

North America NA / Europe Europe Asia

2014 Volume

  • CME Group
  • 3,442,766,942

  • 2
  • Intercontinental Exchange

Eurex
2,276,171,019 2,097,974,756 1,880,362,513 1,417,925,815 1,413,222,196 1,325,391,523 1,127,130,071
842,294,223 769,637,041

725,841,680

677,789,082 676,343,283 319,577,388

309,732,384

304,003,143 244,070,858 217,581,145 202,227,653 201,985,667
3

  • 4
  • National Stock Exchange of India

  • BM&FBovespa
  • 5
  • Latin America

Europe North America North America Asia

  • 6
  • Moscow Exchange

  • 7
  • CBOE Holdings

  • 8
  • Nasdaq OMX

  • 9
  • Shanghai Futures Exchange

Dalian Commodity Exchange

BSE

10

11

12 13 14

15

16 17 18 19 20
Asia

Asia

  • Korea Exchange
  • Asia

Zhengzhou Commodity Exchange Hong Kong Exchange & Clearing

Japan Exchange

Asia Asia

Asia

JSE Securities Exchange (South Africa) ASX Group
Other Asia
China Financial Futures Exchange Taiwan Futures Exchange BATS Exchange
Asia Asia North America

Source : FIA

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

6

Cash Market - Trading Volume -

 Average Daily Trading Value more than doubled in 2013- Aug.2015 vs. 2011-2012.  Overseas investors have had the highest participation in Japanese market but the retail participation ratio has

rebounded after ‘Abenomics’.

  • Daily Average Trading Value of Cash Equity Market
  • Trading Value by Investor type in 2014

  • (TSE 1st Section)
  • (Jan. 2011 – Aug. 2015)

(JPY tn.) 4.5
(JPY)

Mr. Abe
Integration of became

Others
5.4%

Cash equity
Prime

25,000

market

Japanese Institutional
6.8%

Minister

4
3.5
3
Nikkei 225 Index(Right Axis) Trading Value (Left Axis)
20,000

15,000

10,000 5,000 0

Broker Prop desk in Japan

2.5
2

Overseas

Investor
56.8%

13.5%

Daily Average

JPY 2.82 Trillion

(2013 – Aug. 2015)

Japanese

1.5

1

Retail 17.4%

Daily Average JPY 1.34 Trillion
(2011-2012)
0.5
0

Source: JPX

7

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

Derivative Market - Trading Volume -

 Consolidated derivatives markets under OSE (Mar. 24, 2014)

 Facilitated trading of a wide range of derivatives products on a single platform  Launched Nikkei 225 Weekly Options (May 2015)  Trading Participants in OSE: 84 securities firms, and 27 banks

(* Banks trade Government bond futures and Government bond futures options only.)

  • Daily Average Contract of Derivatives Market
  • Trading Value by Investor type in 2014

  • (Index Futures* in OSE Market)
  • (Jan. 2011 – Aug. 2015)

(thou. contract.)
2,500

Japanese
Others

Integration of

Derivatives Market

Institutional
2%

Broker Prop

desk in Japan
7%

1%

2,000 1,500 1,000
500

Japanese
Retail
17%

Overseas Investor

72%

Daily Average

1.41 Million contracts
(2013 - Aug. 2015)

Daily Average
916.8 Thousand contracts
(2011 - 2012)

0

*Nikkei225 Futures, Nikkei225 mini Futures, TOPIX Futures and mini-TOPIX Futures
Source: JPX

8

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

Increasing Trading Value of ETF/ETN products

Trading value of ETF/ETN market increased dramatically after 2013.

The Retail ratio for TSE ETF market is higher than the ratio for the TSE 1st section.

Daily Average Trading Value of ETF/ETN Market (on auction)
(Jan. 2012 - Aug. 2015)
Trading Value by Investor type in 2014
(ETF/ETN market)

(JPY bn.)
250

Mr. Abe became Prime
Integration of Cash Equity

Others
3%

Japanese

Institutional
6%

  • Minister
  • Market

200 150 100

50

Broker

Prop desk

in Japan
8%

Daily Average JPY 133.6 Billion
(2013 – Aug. 2015)

Overseas Investor
48%
Japanese Retail
34%

Daily Average JPY 10.5 Billion
(2012)

0

Source: JPX

9

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

Increasing Trading Value of REIT products

The improving real estate market has contributed to a 280% jump in average daily trading value since Jan, 2013.

AUM has also increased rapidly, making the JPX J-REIT market the third largest REIT market in the world.

Daily Average Trading Value of REIT Market
Market Cap (as of Dec, 2014)
(Jan. 2012 - Aug. 2015)

(pt)
(JPY bn.)

  • 60,000
  • 2,000

J-REIT Index(Right Axis)
Trading Value (Left Axis)
50,000

40,000 30,000 20,000 10,000
0
1,500 1,000 500 0

Others, 16.6

SGP, 6.2
CAN, 6.2
FRA, 7.9

UK, 8.0
US, 98.5

Daily Average JPY 36.4 Billion
(2013 – Aug. 2015)

JPN, 10.6

AUS, 10.8

Daily Average JPY 13.0 Billion
(2012)

Source: Bloomberg
Source: JPX

10

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

These materials are prepared solely for the purpose of providing information regarding Japan Exchange Group

Inc., and as such, they are not intended as any offer or sale of securities or other similar action whether inside or outside Japan. Our securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

These materials contain forward-looking statements. These statements are based on our assumptions and beliefs in light of the information currently available to us and are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may vary materially from those we currently anticipate. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of these materials. We disclaim any obligation to update any of the forward-looking statements contained in these materials to reflect future actual events or developments.

© 2015 Japan Exchange Group, Inc. and/or its affiliates. All rights reserved

Listing Examination

Oct, 2015

Department of Listing Examination

Japan Exchange Regulation

Table of contents

  • 1. About the Market
  • 3-

  • 4-
  • ・ Outline of domestic and overseas securities exchanges

・ Market classification of JPX market

・ Number of newly listed companies in Japan

2. About Listing

7

8-

11 -

  • 12
  • ・ Meaning of listing

13-

15 -

16-
18
・ Interest parties of listing

3. About the Listing Examination

・ Significance of listing examination ・ Rules related to listing examination

・ Schedule of listing examination

・ Organization structure of Listing Examination Teams ・ Numerical Criteria

19

20
21-

  • 23-
  • ・ Substance Criteria (1st and 2nd Section)

28

2

・ Substance Criteria (Mothers)

(c)2015 Japan Exchange Regulation, All rights reserved.

1. About the Market

  • (c)2015 Japan Exchange Regulation, All rights reserved.
  • 3

Number of Listed Companies

Tokyo Stock Exchange exceeds NYSE and NASDAQ in terms of number of listed companies.

4,000 3,500 3,000 2,500 2,000

3,761
3,470

1,500

2,782
2,466
2,073

1,000
500
0

1,864
1,752

1,055
880
775

TMX Group
Tokyo Stock
NASDAQ OMX

  • NYSE
  • Australian

SE

  • Korea
  • Hong Kong Euronext
  • Taiwan

SE
Singapore

  • Exchange
  • Exchange Exchanges

Exchange

Source: WFE

Note: Number of listed companies as of the end of December 2014

  • (c)2015 Japan Exchange Regulation, All rights reserved.
  • 4

Market Capitalization

Tokyo Stock Exchange ranks No.3 globally and No. 1 in Asia by market capitalization.

8,000 7,000 6,000 5,000

  • 17,397
  • 17,950

19,445

19,351

4,00017,950

6,979

3,000 2,000 1,000

4,378
3,319
3,233

2,094
1,289
1,213

851

753

0

  • NYSE
  • NASDAQ

OMX
Tokyo Stock
Euronext Hong Kong
Exchanges
TMX Group
Australian
SE
Korea Exchange
Taiwan
SE
Singapore Exchange
Exchange

Source: WFE Note: Domestic market capitalization as of the end of December 2014

  • (c)2015 Japan Exchange Regulation, All rights reserved.
  • 5

Value of Share Trading in the World

Tokyo Stock Exchange is about 3.6 times larger than Hong Kong Exchanges by value of share trading.

16,000 14,000 12,000 10,000
8,000 6,000 4,000 2,000
0

15,868
12,237

5,444

  • 808
  • 711

1,952
1,521

  • 1,408
  • 1,350

209

  • NYSE
  • NASDAQ

OMX
Tokyo Stock
Euronext Hong Kong
Exchanges
TMX Group
Korea Exchange
Australian
SE
Taiwan
SE
Singapore Exchange
Exchange

Source: WFE
Note: Value of share trading - Electronic order book trades from January 2014 to December 2014

  • (c)2015 Japan Exchange Regulation, All rights reserved.
  • 6

Structure of TSE Cash Equity Market

JPX offers several markets with different concepts to allow companies to make an optimal choice.

Other

Cash Products

Equity Market

(3,468 companies)

REIT

49 REITs

1st Section

- Large-sized companies -

1,866 Companies

JASDAQ Standard

799 Companies

ETF

168 ETFs

ETN

JASDAQ Growth

27 ETNs

2nd Section

45 Companies

Country Fund

Market Of

- Medium-sized companies -

- Various Sectors and

The High-growth and
EmeRging Stocks

208 Companies

1 Country Fund

Growth
Companies -

541 Companies

Venture Fund

2 Venture Funds

Available to both individual and professional investors

9 Companies

9

Programs

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  • Free Float Weight Calculation Methodology

    Free Float Weight Calculation Methodology

    (Reference Translation) Free Float Weight Calculation Methodology April 4, 2022 Tokyo Stock Exchange, Inc. Published June 30, 2021 DISCLAIMER: This translation may be used for reference purposes only. This English version is not an official translation of the original Japanese document. In cases where any differences occur between the English version and the original Japanese version, the Japanese version shall prevail. This translation is subject to change without notice. Tokyo Stock Exchange, Inc., Japan Exchange Group, Inc., Osaka Exchange, Inc., Japan Exchange Regulation and/or their affiliates shall individually or jointly accept no responsibility or liability for damage or loss caused by any error, inaccuracy, misunderstanding, or changes with regard to this translation. Copyright © 2006- by Tokyo Stock Exchange, Inc. All rights reserved 1 Record of Changes DATE Changes 2022/4/4 - Added information on the change of free float weight calculation methodology and the transition plan for the methodology change in line with the restructuring on April 4, 2022. - Clarified parts of (5) Estimation of non-free-float shares. These changes will become effective on June 30, 2021. Copyright © 2006- by Tokyo Stock Exchange, Inc. All rights reserved 2 (1) Outline Free-Float Weight (FFW) is the percentage of listed shares deemed to be available for trading in the market. TSE calculates a FFW for each listed company and uses this value in index calculation. The FFW of Company A may be different from that of Company B. A FFW is calculated by first estimating the number of non-free-float shares (listed shares deemed not to be available for trading in the market) using published materials such as securities reports, etc.
  • 2020 Market Highlights

    2020 Market Highlights

    2020 Market Highlights Summary 2020 was an extraordinary year for everyone, perhaps rather too eventful. The Covid-19 pandemic, the US presidential election, Brexit, the resignation of Japan’s prime minister Shinzo Abe and increased tension between the US and China created vast economic uncertainty and a flood of pessimistic forecasts. In March we saw market volatility levels comparable only to those of the Great Financial Crisis of 2008 and for months on end, normal working, travel, and leisure arrangements were severely disrupted. When we look at the data, the magnitude of the shock is evident, particularly in March. But what is remarkable is that despite the exceptional circumstances and even during the worst days of the crisis, markets remained open and functioning. In addition, after the peak in uncertainty observed in March, markets quickly recovered. By the end of July, most indicators registered a quick reversal to the activity levels seen before the pandemic, reflecting a strong confidence in the markets and in their role in supporting the economy. Towards the end of the year, the news of the development and approval of several Covid-19 vaccines, the final agreement between the UK and the EU, and the outcome of the US elections seemed to have boosted the confidence of investors and issuers, driving markets to end the year on a high note. Key Indicators Equities • After a sharp drop (20.7%) in Q1, domestic market capitalisation quickly recovered, reaching pre-pandemic levels by the end of Q2. • In November 2020, global market capitalisation passed the 100 USD trillion mark for the first time, ending the year at 109.21 USD trillion, up 19.7% when compared with the end of 2019.
  • Analysis of Differences in Trading Behavior at Day and Night Sessions for Nikkei 225 Futures

    Analysis of Differences in Trading Behavior at Day and Night Sessions for Nikkei 225 Futures

    株式会社日本取引所グループ ビジュアルアイデンティティ デ ザインシステム マニュアル Japan Exchange Group, Inc. Visual Identity Design System Manual A-06 略称社名（英文） ロ ゴ タ イ プ 本 項日 で示すのは、 本 取引所 グ ルー プ各社の略称 社名（英文） ロです ゴ タ 。 イ プ こ の略称社名（英文）は 可読性 ロ ゴ と タ ブ イ ラ プ ン ド マ ー ク と の調和性文 を 必要条件 と し て 開 発 さ れ 、 字組 は 最 適した な バ ラ ン ス で 構 成 さ れ て い ま す 。 がっ略称社名 て 、 を原則 英 文 で 表示 す る 場合 に は 、 最小使用 サ イ ズ としこ の略称社名 て 、 （英文）を使 用 ロ し ゴ て タ イ プ くだた さ だ い し 。 広報物 な ど の文章中 で 表示 す る 場 17 mm 合に は文章中 こ の 限 で り 使 で 用 は す な る く 書 、 体 で 表 記 する こ と を 原 則と し ま す 。 JPX 略称社名（英文）に はロ 再ゴ タ現 イ性を考 プ 慮 し た 最小使用 サ規 イ 定に従 ズが設定 い さ れ て い ま す 。 正 確に再社名 現 ロ し ゴ て タ く イ だ プの再現 さ い 。 に 2012.12.27 最小使用 サ イ ズ あた必ず「再生用 っ てを使 は、 用 デー し て タ く 」 だ さ い。 17 mm WORKING 最小使用PAPER サ イ ズ 25.5 mm Analysis最小使用 of Di サff イerences ズ in Trading Behavior at Day 20 andmm Night Sessions for Nikkei 225 Futures Yasuaki Miyazaki Japan Exchange Group Visual Identity Design System Basic Design Elements June 9, 2016 Vol.
  • Business Regulations

    Business Regulations

    (Reference Translation) Business Regulations Business Regulations (As of April 1, 2018) Osaka Exchange, Inc. Chapter 1 General Provisions Rule 1. Purpose 1. These Regulations shall prescribe necessary matters concerning market derivatives trading on financial instruments exchange markets established by OSE (hereinafter referred to as the "OSE markets") pursuant to the provisions of Article 44, Paragraph 1 of the Articles of Incorporation; provided, however, that matters concerning exchange foreign exchange margin transactions (meaning, among those enumerated in Rule 2, Paragraph 21, Item 2 of the Financial Instruments and Exchange Act (Act No. 25 of 1948; hereinafter referred to as the "Act"), transactions relating to the price of currency) shall be governed by these Regulations and the Special Rules for Business Regulations and Brokerage Agreement Standards Relating to Exchange Foreign Exchange Margin Trading. 2. Any amendments to these Regulations shall be made by resolution of the Board of Directors; provided, however, that this shall not apply in cases of minor amendments. Rule 2. Trading Participant Regulations, etc. 1. The obligations of Trading Participants and other matters concerning Trading Participants, including granting of a trading qualification, shall be prescribed in the Trading Participant Regulations. 2. Matters concerning the clearing and settlement of market derivatives contracts on the OSE markets shall be prescribed in the Clearing and Settlement Regulations. Rule 2-2. Entrustment of Self-Regulatory Operations 1. OSE may entrust Japan Exchange Regulation (hereinafter referred to as "JPX-R") with the operations concerning listing and delisting of securities options prescribed in Rule 3, Paragraph 1, Item 3 among self-regulatory operations prescribed in Article 84, Paragraph 2 of the Act.