Tokyo Stock Exchange: Introduction Of Margin Trading With Respect To Stocks Issued By Foreign Corporations

On Tuesday, November 28, Tokyo Stock Exchange, Inc. (TSE) announced the introduction of margin trading with respect to stocks issued by foreign corporations (including foreign stock depositary receipts) in order to strengthen the market functions and provide diverse investment methods. (scheduled to be effective on April 2007, under the condition of the approval by the Financial Services Agency regarding the amendment of TSE's related rules).

This amendment was made in tandem with the Improvements to the Listing System for Foreign Stocks Listed on the TSE (i.e. introduction of new segmentation for foreign stocks listed on Mothers as "Mothers Global").

The introduction of margin trading for foreign stocks is applicable to both standardized margin trading and negotiable margin trading. The standardized margin trading should be settled within 6 months while the negotiable margin trading should be effected in accordance with the contents agreed upon with customers.

The treatment of rights pertaining to standardized margin trading is based on that of domestic stocks. Rights are subject to conversion into cash by bids from bidders on Japan Securities Finance Co., Ltd.

The criteria for selecting standardized margin trading (loan) issues are based on those of domestic issues as below.

1. Number of listed shares:10 (20) thousands trading units or more,
2. Number of shareholders in Japan:1,100(1,700) or more,
3. Average monthly trading volume (for recent 6 months): 100 trading units or more & transactions were executed on 80% or more of the trading days (if the issue is also listed on another market and has sufficient liquidity on the other market: 50 units or more & 40%),
4. a) Net income should be plus, and
   b) Retained earnings is not negative or the amount of net assets is JPY 2 billion or more

The TSE believes that the introduction of margin trading for foreign stocks could contribute to reenergize and enhance turnover especially for foreign stocks listed solely on the TSE as there is an opportunity to expand new shareholders who have not been interested in investment for foreign stocks.