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1.Agreement with London Stock Exchange Group, plc to Establish a New Growth Market
On October 30, 2007, London Stock Exchange plc (“LSE”) and Tokyo Stock Exchange Group, Inc. (“TSE Group”) agreed to jointly establish a new market for emerging companies.
LSE and the TSE Group agreed to promote partnership in several important areas last February, and have since held ongoing discussions to consider ways in which to cooperate. As one of these areas, both exchanges believe that this new market will greatly contribute to the economic development of both Japan and Asia as a central market where the world’s risk capital is invested as funds for the growth of Asia.
LSE operates the largest emerging market in the world – the AIM market – and the TSE Group believes that it is extremely significant for the future development of the Tokyo market and the TSE Group itself to establish a solid partnership with this exchange.
The outline of the agreement is as follows:
- Both Exchanges will establish a new joint venture company on an equal basis, and this company will operate a new market.
- The new market will target emerging companies with high growth potential in Japan and other Asian countries
- The new market will be operated under a flexible institutional framework by limiting participation to professional investors who are experienced in risk taking.
- The new market will be designed based on the structure and framework of the AIM market operated by LSE.
- Both Exchanges will proceed with preparations to launch the new market by the end of 2008.
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Tokyo Stock Exchange and London Stock Exchange to establish a new growth market(TSE News 2007/10/30)
2.Review of Corporate Structure in Tandem with the Beginning of Operations by Tokyo Stock Exchange Regulation
The TSE completed a series of organizational changes in the corporate structure with the beginning of operations by Tokyo Stock Exchange Regulation (TSE Regulation) on November 1, 2007. In the future, Tokyo Stock Exchange, Inc. (TSE), the market operating company, will focus on getting more people to participate in the market and increase its corporate value. TSE Regulation will strongly support the TSE in this endeavor in the area of operational quality.
In addition, the TSE Group has made the following two changes in its organizational structure in tandem with the beginning of operations by TSE Regulation.
One is the establishment of the new “Listing Promotion Office”. This office will take the initiative in promoting the listing of new financial products and marketing for newly listed companies even more aggressively than before.
The other is dividing up and spreading overseas-related work previously the responsibility of the International Planning Department over several different divisions in order to make these activities relevant to the entire company. The Corporate Planning Department will take charge of both overseas and domestic corporate strategy. These changes will be implemented on November 1, 2007.
3.Semiannual Financial Results ended in March 2008
For the first half of the fiscal year ended in March 2008, daily average trading value during auction trading was up 19.7% and trading participant fees were up 13.3% from the same period of the previous year. Information services-related revenue was up 9.5% on a year-on-year basis due to a continuous increase in the number of real-time information terminals. However, listing-related revenue was significantly down to 19.1% from the corresponding period of the previous year, attributed to a considerable decrease in the number of listed stocks resulting from capital increase through public offerings and conversion of convertible bonds.
As a result, operating revenue was up 4.4% to JPY 38.591 billion from the previous year.
On the other hand, operating expenses were up 7.9% to JPY 21.845 billion from the previous year due to an increase in consulting fees and system-related expenses including system maintenance/operating expenses and depreciation costs. As a result, operating profit was up 0.2% to JPY 16.746 billion, and current profit was up 1.0% to JPY 17.372 billion. After deducting taxes and others, semiannual net profit was up 2.1% to JPY 10.221 from the corresponding period of the previous year.
The TSE Group will draw up consolidated financial statements from the announcement of the semiannual financial results with the TSE Group, the holding company, as a main body. Consolidated information includes that of the following four subsidiaries: The TSE (100%), Japan Securities Settlement & Custody, Inc. (100%), Japan Securities Clearing Corporation (86.3%), and Tosho System Services Co., Ltd. (80%). The equity method will be applied to ICJ, Inc. (45%), Tosho Computer Systems Co., Ltd. (35%), and Japan Securities Depository Center, Inc. (21.8%). The scope of consolidation and equity method application is basically the same as the same period of the previous year.
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Consolidated Financial Results for six months ended September 30, 2007
4.System Capacity Augmentation
The TSE will augment the number of orders to be processed per day in its Stock/CB Trading System from the current 15 million to 23 million on November 26, 2007. The TSE initially planned to augment system capacity to 20 million, but taking into consideration that there were days when the number of orders exceeded 11 million per day last August, the TSE decided to augment system capacity further. In tandem with the Stock/CB Trading System, the TSE will also make necessary capacity augmentations to related systems such as the Market Information System.
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Regarding System Capacity Augmentation(TSE News 2007/10/30)
5.Constructing a Secondary Site
The TSE Group was looking into the construction of an alternative system center (secondary site) in case of emergency, such as natural disasters and terrorist attacks. Having selected a site, the TSE will work on constructing a back-up system for the Clearing System, and then develop a back-up system for the secondary site in tandem with the activation of the next-generation trading system.
