Relevant Laws and Regulations

Definition of PTS

PTS is an acronym for Proprietary Trading System. It is defined as the “purchase and sale of securities or intermediation, brokerage, or agency for it, using an electronic data processing system, conducted through any of the following price formation methods* or other similar methods, with a large number of persons participating simultaneously as parties on one side of the transaction or as parties on both sides of the transaction” in Article 2, paragraph (8), section x of the Financial Instruments and Exchange Act (“FIEA”).

*Price formation methods such as auctions, using the trading price of the securities at the exchanges, or the price decided by negotiation between the customers, etc.
Clearing and Settlement

All trades of listed securities on Japannext PTS are cleared through JSCC (Japan Securities Clearing Corporation) and settled through JASDEC (Japan Securities Depository Center).

  • Clearing is done through JSCC (Japan Securities Clearing Corportation).
  • Settlement is done through JASDEC (Japan Securities Depository Center).
Disclosure of Quotes and Sale Prices

In accordance with JSDA (Japan Securities Dealers Association) rules, quotes and execution prices of all listed securities traded at Japannext PTS are “made available for inspection*”.

*Meaning that the information is disclosed through PTS Information Network
Short selling restrictions

Same as the exchanges, the PTS that handles listed securities are subject to short selling price restrictions. Specifically the following restrictions regarding short selling are applicable to Japannext PTS:

Restriction Applicability to Japannext PTS
Naked short sale
Prohibition of short sale without guarantee of borrowed securities
Applicable
Same as a short sale at an exchange, naked short selling is not allowed at Japannext PTS except the legally exempted transaction.
Marking requirements for short selling
Obligation to clarify short-selling order
Applicable
Investors are required to clearly specify the type of short sale when placing sell orders at Japannext PTS (short sales that are subject to price restrictions or those exempted from the restrictions)
Short selling price restrictions
A short sale at a price lower than the last traded price is prohibited by the trigger rules(short selling price restrictions are applied once the trade price of each issue drops by 10% or more from the base price)
Applicable
The securities whose price has dropped by 10% or more from the base price at day-time session or night-time session are subject to the short selling price restrictions. Also, the securities whose price has dropped by 10% or more at day-time session are subject to short-selling price restrictions during the night-time session.

Apart from the securities whose price has dropped by 10% or more at a PTS indicated above, the securities whose price has dropped by 10% or more at primary exchanges are also subject to short-selling price restrictions at Japannext PTS both during day-time and night-time sessions for the following business day.

You can find the list of securities that triggered short-selling price restrictions at Japannext PTS at the following pages.
Short sale position reporting obligation Applicable
Short sale position at a PTS prescribed under the law is to be reported and disclosed at primary exchanges via trading participants of the exchanges (Investors are required to submit their short sale position to the brokers when their short positions exceed a threshold. The brokers are required to pass the short position reports to the primary exchange. The primary exchange aggregates the reports from trading participants and discloses the information regarding short sale positions at their website).
Short selling restrictions regarding public offering
Prohibition of covering short sales with stocks obtained through public offering in the case where short sales are conducted between the announcement of the offering and determination of the issue price
Applicable
Same as a short sale at an exchange, short selling at Japannext PTS is subject to the short selling restrictions regarding public offering.
10 % PTS Trade Volume Upper Limit Rules

In accordance with the provisions of Comprehensive Guidelines for Supervision of Financial Instruments Business Operators of FSA (hereinafter “FSA Guidelines”) IV-4-2-1, when the trading ratio (ratio of average payments of daily transactions) of a PTS (operator, including Japannext PTS) that handles listed securities and determines prices by a method other than auctions* exceeds 20% of any security and the trading volume of its entire PTS exceeds 10% of the total amount of payment of traded shares and bonds with share options at all domestic exchanges for the previous six months, that PTS is required to obtain a license to establish an exchange.

*The method of determining prices at Japannext is order driven and not auctions. If prices are determined by auctions, under FIEA regulations, the PTS (operator) is required to obtain a license to establish an exchange when the above figures exceed 10% of any security and 1% of the total amount of shares and bonds.
MARGIN TRADING

Margin trading is not allowed at Japannext PTS as required by the FSA Guidelines IV-4-2-1.

Market Operation

SBI Japannext Co. Ltd., (the "Company") is committed to the appropriate management of transactions conducted through its PTS venue ("Japannext PTS") from the perspective of "measures to suspend or limit transactions", "monitoring and prevention of unfair transactions" or "prevention of irregular order such as mistaken order", in order to enhance the fairness and transparency of such transactions, to ensure transaction security and to secure investor confidence.

Suspension or Limitation of Sales Transactions

The Company is entitled to suspend or limit transactions conducted through our PTS to ensure transaction security and fair dealing, or when it is found necessary by the Company that such measures are required from the risk management point of view.

1. [During hours of daytime session and part of nighttime session: 08:20 - 17:30]

Suspension of transactions in the case where the primary exchange or Japan Securities Dealers Association suspended transaction of a security:

In the case where the primary exchange on which the target security is listed halted a transaction of such security or in the case where Japan Securities Dealers Association ("JSDA") halted a transaction of such security outside a Financial Instruments Exchange Market, the Company will suspend transaction of such security.

As regards the resuming of transactions after the suspension during the trading hours of 1. of the day, our PTS venue will resume the transactions of such security if the relevant Financial Instruments Exchange or JSDA resumed the transactions (Provided, however, that transactions will be kept suspended during the trading hours of 2. if the transactions of the relevant security is suspended for all day. In addition, when JSDA suspended transaction of a security with its own decision independent from the primary exchange, the Company shall suspend transactions on the hours designated by JSDA notwithstanding the hours of 1. and 2.).

If the suspension of a security (including not only the transactions of a security but also the transactions of the whole Financial Instruments Exchange) is triggered by the system disruption of primary exchange, the Company may not suspend the transactions with its own discretion.

2. [During hours of nighttime session other than those above 1.: 17:30 - 23:59]

Suspension of transactions of the concerned security due to the occurrence of material information:

When the following information is publicized after 17:30, the Company will suspend transactions of such security:

a) Information disclosed by an issuer via Timely Disclosure Network ("TDnet") operated by Tokyo Stock Exchange Inc.; b) information regarding the designation of securities under supervision or securities to be put on delisting by the primary exchange; or c) information among those regarding a security that is reported or publicized by the media or through other avenues which is considered "Material Information" by the Company.

Transactions suspended during the nighttime session due to the publication of material information will not be resumed within the same day.

The major contents of "Material information" are the "information regarding a company's business, operations or performance which will have a material effect on the judgment of securities investment" as follows (examples):

  • Acts of organizational restructuring such as mergers and acquisitions, TOB (tender offer to buy);
  • Equity financing such as third party allocation
  • Bankruptcy, petition of corporate reorganization procedure or civil rehabilitation procedure, dissolution; or
  • Information regarding the designation of securities under supervision or securities to be put on delisting by Financial Instruments Exchange etc.
3. Suspension of transactions common to both 1. and 2. trading hours

The Company may suspend or limit all or the part of a transaction if any of the following events arises, irrespective of whether it is during daytime session or nighttime session hours (trading hours of 1 and 2). After the transaction is suspended due to the event, in principle, the Company will promptly resume transaction or abolish limitation once it is confirmed that such event has become immaterial. Provided, however, that in the case where the Company finds it better to continue the suspension or limitation, the Company may continue the measures of suspension or limitation.

  • The Company finds it inappropriate to allow the continuation of transaction activities due to an abnormality in our PTS operation.
  • Delay or inability to place order or execute an order, or to give money or securities due to the occurrence of a force majeure event such as natural disasters, political turmoil, strike, sudden change in foreign currency circumstances, closure of foreign exchange market etc.
  • Other events in which the Company finds it necessary to suspend or limit transactions to ensure fair dealing.

In addition to notifying all participating securities firms, information regarding suspension of transactions of certain securities at our PTS venue will be circulated to the information vendors (QUICK Corp. and Thomson Reuters Markets KK) and be disclosed on the Company's website.

Surveillance to Detect and Prevent Suspicious Transactions

In order to maintain a fair-trade environment, and to prevent market manipulation and insider trading, the trade surveillance team monitors real time market prices and transactions as well as conducts detailed analysis after market close.

During market hours, our surveillance department may ask trading participants for transaction details, end-client information, and other intelligence needed for the detailed analysis of trades. When a trade is determined as unfair after the investigation, the SBI Japannext market surveillance department will notify trading participants to pay close attention to the identified issue. If there are no improvements after the notification, the SBI Japannext market surveillance department will consider introducing certain limitations or suspension of business with the participants in question.

Furthermore, the Japannext PTS compliance department may provide detailed information of those suspicious transactions to institutions such as SESC (Securities and Exchange Surveillance Commission), JSDA, and exchange markets.

Termination of Connectivity

Japannext PTS reserves the right to forcibly terminate a member's connectivity in the following circumstances:

  • A member is endangering the system by generating malicious traffic which affects other members or may result in service degradation.
  • A member attempts to get unauthorized access to any part of the infrastructure.
  • A member commits any other act that disrupts or may disrupt PTS operations.