Osaka Securities Exchange: Partial Amendment In Related Rules And Regulations With Revisions Of Futures And Options Trading Rules, Etc. At The Launch Of J-GATE

From the viewpoint of further improving the international competitiveness of the OSE markets, OSE will revise futures and options trading rules in order to increase liquidity of the OSE markets and improve the convenience for investors at the same time as the launch of a new derivatives trading system (J-GATE) on February 14, 2011, which is equipped with the standard trading functions and the highest level of order processing performance in the world. In addition, OSE will revise the fee schedule for futures and options trading, in order to avoid the fee level fluctuation risks, etc.

OSE sought the public comments on (i)"Revisions of Futures and Options Trading Rules with Introduction of New Derivatives Trading System (Draft)" ?(ii) "Additional Revisions of Futures and Options Trading Rules with Introduction of New Derivatives Trading System (Draft)" and (iii)"Revisions in Fee Schedule for Futures and Options Trading (Draft)" As for (i), the draft was partially amended as announced in "Summarized Results of Public Comments"on March 26, 2010. As for (ii) and (iii), the draft is implemented as proposed.

Summary of Rule Revisions
1. Revisions of Futures and Options Trading Rules
  - (1) Addition of Contract Months in Mini Transactions
    - ? The contract months for Mini transactions on the Nikkei Stock Average (Nikkei 225) will be expanded from the nearest 2 contract months of March, June, September and December contract months (hereinafter referred to as "specific contract months") to 5 contract months: the current 2 contract months plus the nearest 3 contract months other than the specific contract months.
  - (2) Change in Trading Hours
    - ? A morning session and an afternoon session will be integrated to a day session.
    - ? In a day session, an opening auction will be made at 9:00, a regular session from 9:00 to 15:10 and a closing auction at 15:15.
    - ? In an evening session, an opening auction will be made at 16:00, a regular session from 16:00 to 23:25 and a closing auction at 23:30.
  - (3)Revision of Methods for Executing Transactions
    - ? All bids and offers will be subject only to the principle of price and time priority, and what is called the "Douji-Yobine" rule (Simultaneous Bid/Offer Rule) will be abolished.
    - ? The rule to determine contract prices by the "Itayose" method will be revised.
  - (4)Change in Submission Method for Bids and Offers, etc.
    - ? When a bid or an offer is made, it must be attached with a condition for validity period or executed volume.
    - ? A Transaction Participant may attach a stop condition, etc. to a bid or an offer.
    - ? The tick size for the stock index options on Nikkei 225 will be narrowed from 5 yen to 1 yen, when a premium is 50 yen or less.
    - ?The tick size for Security Options will be determined in accordance with the level of premium.
  - (5) Introduction of Immediately Executable Price Range Rule
    - ? In cases where orders, if matched, which brings the contract price up or down beyond the Immediately Executable Price Range from the last contract price are submitted, trading in such issue will be halted temporarily (a kind of Dynamic Circuit Breaker) after the bids/offers which can be matched within the Immediately Executable Price Range (a kind of Dynamic Circuit Breaker Price Range) are executed.
    - ? With the introduction of this rule, Special Quotes (Tokubetu-Kehai) and Attention Quotes (Chui-Kehai) will not be indicated.
  - (6) Change in Price Limits, etc.
    - ? OSE will change the method for determining price limits per issue based on the table according to the level of a standard price for price limits to the way of applying the same price limits to the products on the same underlying.
    - ? A price limit range will be calculated multiplying the base price for calculating the range, which is calculated using the standard prices for price limits for a certain latest period, by the rate prescribed by OSE (futures contracts: 8%), and the price limit range will be recalculated on a quarterly basis.
    - ? In cases where the condition that a transaction is executed at the upper limit price or lower limit price in the leading contract month, etc. is met with respect to futures contracts, the trading in the said futures contracts (all contract months) and the options contracts on the same stock index (all issues) will be temporarily halted, and the price limits will be expanded for the said futures contracts (all contract months) and the said options contracts (all issues).
  - (7)Introduction of Strategy Trading Rules
    - ? OSE will introduce a strategy trading rule which enables transactions on several issues to be executed simultaneously.
    - ? OSE will introduce the implied function, which creates a bid or an offer for the issue(s) traded through the strategy trade from a certain strategy bid or an offer.
  - (8) Introduction of Market Maker Program for Futures Trading
    - ? OSE will introduce a market maker program for futures trading.
    - ? OSE will pay a reward to market makers in accordance with their performance for the roles.
  - (9) Change in J-NET Trading Rules
    - ? Transaction Participants may make a combo trade, with which trading in several issues could be executed at the same time.
    - ? The tick size for Security Options will be narrowed from 0.5 yen to 0.1 yen.
  - (10) Others
    - ? OSE will introduce the Request for Quote function through which Transaction Participants may indicate their intention to request the provision of quotes.
    - ? A settlement price for futures and options contracts will be a closing price in a day session. In cases where the closing price is not a contract price determined for 15 minutes before the end of the day session, it will be a theoretical price calculated from the closing price of underlying, etc.
    - ? OSE will amend the terms as necessary.
2. Revisions of Fee Schedule for Futures and Options Trading
  - OSE will change the base for calculating trading fees and clearing fees for futures contracts from trading value to trading volume.
  - OSE will abolish access fees for derivatives trading
  - Trading fee rates for futures and options contracts on Nikkei 225 will be calculated per Transaction Participant and type of transactions, etc. based on trading volume for the last 3 months, etc.
  - A trading fee per contract will be capped at 350 yen and a clearing fee per contract will be capped at 35 yen on the stock index options contracts on Nikkei 225.
Effective Date
The revised rules will be enforced on February 14, 2011; provided, however, they will be enforced on the day stipulated by OSE after February 14, 2011, in cases where OSE deems that it is, or is likely to be, impossible to conduct trading based on the revised rules due to some problems with the launch of the trading system.

* For the time being, only calendar spread for futures trading will be available in strategy trading and the implied function will not be used. When other strategy trading is available or the implied function is used, OSE will make the notification in advance.