Tokyo Stock Exchange: Review To The ETF Listing System

Although ETFs were expected to be very popular among investors when first introduced into TSE's market, due to the fact that they are easy to understand in that they simply track the movement of a certain stock index, after nearly 2 years of trading they still have not gained a strong foothold in the market among the investing public. Of the 15 listed ETFs, 7 are now in danger of falling under delisting standards for not having 500 or more beneficiary shareholders. Barring a sudden change in this situation, the grace period for these ETFs will run out in July and August this year, forcing their delisting and the cancellation of their beneficiary shareholders.

The standards for number of shareholders for ETFs were based off of similar standards for listed stocks. However, ETFs have shown different characteristics than regular stocks, and some of the ETFs that haven't fulfilled the required number of beneficiary holders still have exhibited suitable liquidity in the market. Therefore TSE believes there is room to evaluate the standards for ETFs that were established before the products were introduced into TSE's market.

So that TSE does not lose this chance to firmly establish ETFs in its market and cultivate them among investors, it will examine the condition of shareholder numbers throughout this summer and will consider beneficiary shareholder number standards that are suitable for ETFs. While doing so, TSE will lengthen the grace period for ETFs by one year to allow them to stay listed.

Furthermore, due to the increasing use of ETFs in unwinding cross-held shares of stock, TSE will also examine ways to relax the yearly listing fees when net assets have increased above a certain level.

TSE plans to effect these changes in early July following a period of public comment.