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1. Financial Results for FY Ended March 2008
The breakdown of the financial results for the fiscal year ended March 2008 is as follows.
Due to factors such as a decrease in the number of newly listed companies and number of companies increasing capital, listing-related revenue was down 23.3% from the corresponding period of the previous year. However, trading participant fees were up 5.3% and information services-related revenue was up 8.4% from the same period of the previous year due to a 7.0% increase in daily average trading value during auction trading. As a result, operating profit was JPY 75.5 billion, which was almost at the same level as the previous year.
On the other hand, operating expenses were up 10.0% to JPY 46.7 billion on a year-on-year basis due to an increase in expenses related to trading system capacity augmentation and new derivatives trading system activation, among other things.
Consequently, operating profit during the fiscal year was down 12.8% to JPY 28.7 billion, and current profit adjusted by receipts of dividend income from the Singapore Exchange Limited, etc. was down 9.3% to JPY 31.0 billion from the corresponding period of the previous year. After deducting taxes and other expenses, net income for the said year was down 11.4% to JPY 17.7 billion.
Consolidated Financial Results for year ended Mar. 31, 2008
2. Selection of Candidates for New Director and Executive Officer
Tokyo Stock Exchange Group, Inc. (TSE Group) has selected the following two candidates for the positions of director and executive officer. The term for directors and executive officers of the TSE Group is one year. All members of the board are reselected at the annual general shareholders meeting to be held in June 2008, while all executive officers are reselected at the board of directors meeting held after said general shareholders meeting.
The number of candidates for director is 16 total, and the TSE Group has selected Mr. Ooki Matsumoto of Monex Inc. as a candidate for new director.
Out of the current directors, Mr. Masahiro Wakita will resign from his position at said general shareholders meeting to be held in June 2008.
As for executive officers, the number of candidates is 7 total, and the TSE Group has selected Mr. Moriyuki Iwanaga, who is currently the director of Corporate Strategy of the TSE Group, as a candidate for new executive officer.
In addition, directors of Tokyo Stock Exchange, Inc., a subsidiary of the TSE Group, are also reselected at said general shareholders meeting.
3. Adjustments to the Listing System based on Comprehensive Improvement Program for the Listing System 2007
Tokyo Stock Exchange, Inc. (TSE) will implement the second series of listing system adjustments following the first adjustments based on the Comprehensive Improvement Program for the Listing System 2007 in November 2007.
A summary of the adjustments is as follows.
(1) Introduction of a fine system for violations made by a listed company
In the event that a listed company commits a violation of timely disclosure duties and/or the code of corporate conduct which is deemed to result in a loss of confidence in shareholders and investors, the company will be required to pay a fine of JPY 10 million.
The system will be operated by Tokyo Stock Exchange Regulation (TSE Regulation). TSE Regulation plans to publicize specific cases, such as in which cases this fine will be applied, through guidelines and other methods.
(2) Improvement of the disclosure system relating to transactions with controlling shareholders
If a listed company conducts transactions with parties categorized as controlling shareholders, the transaction conditions are often skewed in favor of the controlling shareholders. As a result, minority shareholders have suffered losses in several cases. This problem has previously been pointed out at times such as when a subsidiary company is listed.
To deal with such problems, listed companies will be requested to disclose their policy on protecting minority shareholders' benefits when conducting transactions with controlling shareholders in their corporate governance reports. When actually making transactions with such shareholders, the listed companies will be requested to disclose annually the content and implementation status of the minority shareholder protection measures.
(3) Adjustments to Listing System for Classified Voting Right Shares
The TSE received a report on listing requirements, etc. for classified shares from a working-level panel (chaired by Professor Etsuo Kuronuma of Waseda University's Graduate School of Law) to discuss adjustments to the classified share listing system on January 16, 2008.
While a growing number of investors hope to use shares with classified voting rights, such shares may be misappropriated as a measure to maintain control of a company with a lower contribution ratio.
Under the policy that such a misappropriation of classified shares is undesirable, the TSE will open the path for the listing of such shares on the absolute condition that the scheme under which they are listed is one which respects shareholders' rights.
In general, classified shares to be listed are "non-voting right shares including preferred dividend stocks". If a newly listed company is issuing both classified shares with more voting rights and those with fewer voting rights than other listed shares, the TSE will only allow the shares with fewer voting rights to be listed (class shares with more voting rights will not be allowed to be listed at least for the time being).
The TSE will implement the above listing system adjustments in July 2008 after setting forth a period for comments and suggestions by the public.
4. Establishment of "TSE Carbon Market Study Group"
The TSE Group has set up a study group for the creation of a carbon market.
Setting a target for reducing greenhouse gases and achieving this goal has become a crucial policy issue to our country and to the global community as a whole as a global warming countermeasure. To cut the expense of reducing greenhouse gases, the Kyoto Protocol has introduced trading in carbon emissions rights, one of the economic instruments utilizing the market mechanism. In addition, the European Union launched a unique carbon emissions rights trading system, and the scale of the market has already expanded substantially. Similar efforts are being made worldwide, and are expected to develop even further in the future.
Under these circumstances, the TSE Group will strive to make as great a contribution to these efforts as possible from the perspective of a securities exchange, and will accordingly set up the "TSE Carbon Market Study Group". Through this study group, the TSE Group aims to gather advice from experts and other concerned parties towards the creation of a carbon market.
Rather than discussing how to design the caps to be allocated to each company, this study group will look into how to introduce carbon emissions rights trading already being conducted worldwide into a stock exchange.
The TSE will serve as the host and secretariat of the study group. Experts in fields related to emissions trading will be invited to serve as commission members and concerned government officials as observers
Starting in late May, the study group will generally be held once a month. By the end of 2008, the study group will look into details regarding the framework design of the exchange market including tradable products, trading methods, trading participants, and settlement and clearing methods. The study group will also make proposals and requests as required on the development of laws, rules, regulations, and the according framework.
5. Introduction of New Options Trading System
The TSE will introduce a new trading system exclusively for its options trading market.
The new trading system, LIFFE CONNECT®, is employed by Liffe, the largest derivatives exchange in Europe.
The selection of LIFFE CONNECT® follows the TSE's rigorous evaluation of several electronic trading systems highly rated by investors worldwide for their performance. As a result, the TSE has selected LIFFE CONNECT®, which has already been in operation in Japan.
This new options trading system will be add to the TSE's Derivatives Trading System, which was newly replaced in January 2008. With this, the TSE will make a concrete step forward to "strengthening the derivatives market", one of the fundamentals described in the medium-term management plan.
LIFFE CONNECT® is scheduled to start operation in the first half of 2009. In tandem with the activation of the system, the TSE will make a fundamental review of its options trading rules.
