Tokyo Stock Exchange: organization, operating principles, owner, listing

2024 Author: Howard Calhoun | [email protected]. Last modified: 2024-01-17 18:37

The Tokyo Stock Exchange, or TFB, is one of the largest stock markets in all of Asia, with more than 3.3 billion shares exchanged every trading day. The exchange supports trading in bonds and derivatives in addition to stocks.

The economic situation in Japan

Japan is the second country in the world in terms of economic development, third in terms of nominal GDP and fourth in PPP (public-private partnership). In 2014, Japan's economy ranked 28th in the world in terms of GDP per capita. The country is one of the most innovative powers in the world, with the largest electronics industry and patent documentation. Japan is also the world's largest creditor with a leading measure of public debt. The country holds 13.7% of private financial assets, valued at $13.5 trillion and comprising 54 Fortune Global 500 companies. However, the Japanese economy is facing stiff competition from China and South Korea.

There are a number of problems in the Japanese economy that are not a secret. Among the largest: an aging workstrength, high levels of public debt and persistent deflation. But modest Japanese stock prices are already covering that, which means there's plenty of upside potential.

Historical foundation

The history of the Tokyo Stock Exchange dates back to the 1870s, when the Japanese securities system was established and the public discussion of bonds began. The stock exchange was founded on May 15, 1878, and trading on the exchange began in June of that year.

Between August 10, 1945 and April 1, 1949, official trading on the stock exchange was suspended due to the war. After several post-war reorganizations, the TFB became the largest of the five exchanges in Japan, including the Sapporo Securities Exchange, the Osaka Securities Exchange, the Nagoya Stock Exchange and Fukuoka.

On July 1, 1969, the TFB introduced TOPIX (Tokyo Stock Price Index), which is a composite index of all domestic stocks listed on the exchange. TOPIX is considered the best indicator of the financial he alth of the Japanese stock market.

The Tokyo Stock Exchange is owned by Japan Exchange Group, Inc., a holding company with subsidiaries that includes Osaka Securities Exchange Co., Ltd. (OSE), as well as Tokyo Stock Exchange and Japan Securities Bank.

Tokyo Stock Price Index

The Tokyo Stock Exchange Index, known as TOPIX and Nikkei 225, is an important stock index for the exchange in Japan, tracking all domestic companies in the first section of the exchange. There are 1669 companies registered in the first section of the TFB, and the market value of the index was197.4 trillion Japanese yen.

This metric comes from a system where a company's weighting is based on the total number of shares outstanding for the weighting based on the number of shares available for trading (called a free float). This transition took place in three phases starting in October 2005 and was completed in June 2006. While this change is technical, it has had a significant impact on the weight of companies in the index, as many companies in Japan have significant holdings of shares in their business partners in complex business alliances, and such shares are no longer included in the calculation of company weights in the index.

Japan Exchange group

The Japan Monetary Group (JPX) is a private holding corporation that facilitates the trading of financial securities in Japan. Authorized by the Financial Instruments and Exchanges Act 2008, JPX provides an exchange infrastructure that allows trading in futures, debt instruments, and derivatives. Based in Tokyo, it is among the elite exchanges in the world and has a market capitalization of $4.48 trillion. This makes JPX the leading corporation in Asia and the third largest corporation in the world.

JPX has three main subsidiaries, each focusing on a specific market function: Osaka Exchange, Tokyo Stock Exchange, and Japan Exchange Rate Management.

TFB functions as Japan's central securities market and provides the lion's share of total liquidityJPX.

Members of the Tokyo Stock Exchange

Membership on an exchange is a limited number of positions that allow the holder to transact on his own behalf or on behalf of a client. The main participants of the stock exchange:

• companies that conduct operations at their own expense or for the benefit of the client are regular members;
• intermediary companies between regular members - saytori;
• companies that link stock markets and perform special operations are special participants;
• non-bank securities companies (associated with banks).

Saitori are TFB members who act as intermediaries between brokers.

Organization and principles of the Tokyo Stock Exchange

In terms of market capitalization, only the New York Stock Exchange overtakes the TFB. Over eighty percent of the country's exchange turnover falls on Tokyo, the main participants are the owners of securities of the Tokyo Stock Exchange. The listing requirements are as follows - the project must be approved by the relevant bodies of the exchange and cover the following information: the offered securities and their data, assets and liabilities of the company, group management, investor rights, profit and loss, as well as financial forecasts. As soon as the project is approved, the company gets access to the exchange as its member.

Only twenty percent belong to individual owners on the exchange, the remaining eighty percent are distributed between financial and insurance companies. Shareholders in Tokyodo not count on dividends, but on increasing the price of shares and receiving income from the sale at the highest price.

Up to 80 percent of all stocks held in Japan are bought and sold on the stock exchange in Tokyo. The 1,517 registered firms account for over 25 percent of all goods and services.

Facts and Figures

This is interesting:

• The latest report (August 2018) of the TFB shows that there are about 3636 companies on the exchange.
• The same 3,636 listed companies have a total market capitalization of $6.05 trillion.
• About 800 million shares are exchanged annually on the TFB.
• August 2018 saw an average exchange of 3.3 billion shares worth $21.5 billion.
• The most important index traded on the TSE is TOPIX, which includes TOPIX, TOPIX 1000, TOPIX Small, TOPIX 500, TOPIX Mid, TOPIX Core 30 and TOPIX Large 70.
• In addition to TOPIX, the Nikkei 225 is recognized as one of the world's major stock indices today.

Incidents

The work of the exchange stopped on August 10, 1945 due to the American atomic bombings, and after the exchange was placed, their troops occupied them. The TFB became the headquarters for the US military until January 1948, which also became the new government. Gradually, power returned to the Japanese government.

November 1, 2005, trading on the stock exchange stopped for almost the entire day due to a trading system failure.

In January 2006, the number of transactions made on the TFB exceeded 4,500,000, and trading stopped for 20 minutes. The exchange was forced to take steps to upgrade computer systems to prevent system failures in the future.

TFB opening hours

Standard trading hours for most exchange-traded products listed on the TSE are 09:00 to 11:00 and 12:30 to 15:00. Trading hours related to products include:

• Japanese government bonds (JGBs) 13:00 to 13:30 (09:30 to 10:00).
• Foreign bonds denominated in foreign currencies from 13:30 to 14:00 (10:00 to 10:30).
• Direct bonds from 10:00 to 11:00.
• Derivatives from 09:00 to 11:00 and from 12:30 to 15:10 (09:00 to 11:10).
• JGB derivatives from 09:00 to 11:00, from 12:30 to 15:00 and from 15:30 to 18:00.

Note: Hours of operation mentioned above are in Tokyo, Japan local time. The standard time zone for Tokyo is UTC / GMT +9 hours.

Weekends

Tokyo Stock Exchange is open Monday to Friday and observes the following holiday schedule for calendar year 2019:

• January 1-2;
• January 8;
• March 31;
• April 30;
• May 3-4;
• July 16;
• September 17;
• September 24th;
• October 8;
• November 23;
• December 24;
• December 31.

Important stock markets and exchanges

Stock markets are financial markets that connect individual and institutional investors with businesses in need of capital. These markets play an important role in the economycountries. Stock exchanges work with national and international regulators to ensure transparency and protect participants from unfair trading practices.

North America	Asia	Europe	Other Markets
The New York Stock Exchange and Nasdaq are leading in terms of value of traded shares. The New York Stock Exchange, as the world's largest stock market, is the preferred venue for thousands of stocks and securities of US and foreign companies. The Dow Jones Industrial Average, S&P 500 and Nasdaq-100 are closely related to the market indices that track baskets of stocks listed in these two major markets. These indices often serve as a proxy for the US economy, which has a significant impact on other major global economies	The next three largest stock markets by value of shares traded were the Tokyo Stock Exchange, followed by the two Chinese stock markets of Shanghai and Shenzhen. These markets reflect the growing importance of Asia in the new millennium. The Tokyo Stock Market is in a unique position as the market that starts trading when it's evening in New York	London and Frankfurt are home to two of Europe's largest stock exchanges. London is regarded as the financial capital of Europe, while Frankfurt is a major German financial center and home of the European Central Bank. The United Kingdom is one of the largest economies in Europe and London servesfinancial intermediary between Europe and North America. Paris, Milan and Madrid are home to other important European stock exchanges	An important role in the efficient distribution of capital is played by the stock exchanges of Sao Paulo and Johannesburg, which are the largest in their regions. Information technology has also facilitated the creation of electronic communication networks that allow mainly institutional investors to trade around the clock through secure servers

How is the Tokyo Stock Exchange different from others?

At first glance, Japan's leading stock market works like any other. But like so much else in Japan, what seems familiar on the surface can be very different on the inside. This stock market is one of the largest, most closely watched and influential in the world. But the exchange is still largely governed by Japanese rules, which is frustrating for Westerners who try to trade the Tokyo Stock Exchange using standard analytical measures.

"All the assumptions we have in the stock markets are out of line with the Tokyo Stock Exchange," said Peter Tasker, general manager of British securities firm Kleinwort Benson International. Despite the collapse in global stock markets, when prices on many of the leading exchanges fell by 30 percent, Tokyo cut prices by only 15 percent.

The hostile takeovers that have dominated Wall Street are unknown in Japan, where shareholder rights are considered less important thanrights of company employees.

The Tokyo market has long been dominated by exchanges in Japan. It accounts for more than 95% of all shares and equity in the country. But last year, partly because of the rise in the Japanese yen against the dollar and partly because of rising stock prices, the Tokyo market became worth more than any other stock market. At the end of October, the New York Stock Exchange was capitalized at $2.254 trillion and Tokyo at $2.677 trillion.

Investors abroad began to take a closer look at the Tokyo market, and many did not like what they saw. Some economists said the market is overvalued and heading for a crash. They pointed to wild fluctuations in stock prices, inflated P/E ratios and the amount of investment based on high land prices.

Some brokers believe that the market in Tokyo will resist the pressure of change, despite the presence of more foreign capital. Two years ago, the exchange allowed six foreign companies to list on the stock exchange.

"Foreigners are fooling themselves if they think their presence is enough to change the fundamental nature of this market," said Perry Gary, senior analyst at Chase Manhattan Securities. The market reflects the structure of this society.

Others argue that the Tokyo market will change with great impact on international trading practices. Many Japanese believe that the Japanese market is not yet mature.

Japan has been trading stocks since 1878, but it's only recently that the Tokyo market has gone global. Interest in stock trading has increased as the Japanese have become major investors in global stock and bond markets.

Prospects

The Tokyo Stock Exchange plays an important role in the modern Japanese economy. Evolutionarily, it comes from the securities market: buyers and sellers needed a place to conduct transactions, which the exchange became. The stock exchange is the center of the economic life of the state, which ensures the regular functioning of the organized securities market. A national stock exchange exists in every country with a market economy.

Japanese stock exchange group has become one of the world's strongest in the securities market and is developing dynamically. The stock exchange in Tokyo is the largest in the country, and it was at its expense that Japan entered the world market.