1. ASIAN EQUITY MARKETS AND TRADING Chompunuch Bunsumpun

2. Quiz  What is the 1 st largest stock market in Asia by market capitalization? A. Bombay Stock Exchange B. Shanghai Stock Exchange C. Tokyo Stock Exchange D. Hong Kong Stock Exchange

3. Tokyo Stock Exchange (TSE) Tokyo  Other Stock Exchanges in Japan  Osaka  Nagoya  Fukuoka  Sapporo  JASNAQ

4. TSE – Brief History 1878 First-founded in May 15 1949 1943 Combined with other exchanges to become single Japanese Stock Exchange Shut down due to the war (after the bombing of Nagasaki) 1969 Reopened in May 16 TOPIX was introduced 1982 Introduced first computer-assisted system Trading floors was closed; Switched to electronic trading for all transactions 2001 1999 Restructured itself as a stock company In the 1880s In 1959 – Black Board with Chalk NOW

5. TSE – Current Snapshot  Largest of the 6 exchanges in Japan  Over US$4 billion market cap  Over 2,300 companies listed (both domestic and foreign)  TSE market segmentation:  Two main benchmark indexes – Nikkei 225 and the TOPIX First Section Second Section “Mothers” Section

6. TSE – Market Structure  A continuous order-driven market  No specialist  No official market making activities  Intermediaries known as “Saitori”; order clerks  Market hours:

7. Who can trade on the TSE market?  Only TSE member (“Trading Participant”) can trade securities directly in the market.  Individual investors  Foreigners Customer A Customer B Securities Company A (Trading Participant) Tokyo Stock Exchange Securities Companies B (Non-trading Participant) Placing orders via phones or Internet Placing orders through TSE trading system as brokerage orders

8. TSE Membership  Membership requires corporate license  Four types of license are available and may be combined  Capital requirements vary by license Trade securities as a dealer Trade as a broker Underwrite new securities Handle retail distribution of securities

9. TSE Members - Classified into two Groups  Trading clerks for customers accounts  Buy and sell for own accounts  Brokers among regular members  Maintain limit orders  Issue special quotes Regular Members Saitori Unlike the U.S. Specialists, Saitoris do not trade for their own account

10. How does trading work on TSE?  Order type: Market Order & Limit Order  During normal trading session, order priority is determined based on  Price Priority  Time Priority  Only day order  Trading Unit: Mostly 1000 shares

11. How does trading work on TSE?  “Itayose” Method – Opening, Closing, After trading halts  “Zaraba” Method – Regular trading session  Daily Price Limit  Special Quote  Latest IT: Arrowhead  Settlement: T+3 basis by Japan Securities Depository Center (JASDEC) Base Price (The closing price of the previous day) Base Price (The closing price of the previous day) Daily Price Limit For example; Maximum ¥600 Base Price ¥500 Minimum ¥400 ¥100 Tools for Market Volatility

12. Market Outlook GGlobal exchange consolidation trend TThe rational for exchange mergers are typically driven by ‒ A dditional access & cost savings ‒ I mprove liquidity and efficiency TTrading links trend – ASEAN WWith increased competition, TSE may force to seek alliances

13. Final Thought – Major Comparison to NYSE  Order-driven market  No specialist  Members only  Have break  Price daily limit & Special quote  Hybrid market  With specialists  Members only  No break  Circuit breaker

14. Final Quiz  What is the major difference between NYSE Specialist and TSE Saitori? A. Broker among members B. Do not trade for their own accounts

15. Thank you for listening Q&A

16. Sources  Wikipedia  Investopedia  Tokyo Stock Exchange Website  World Federation of Exchanges Website  ASEAN Exchange Website  J.P. Morgan Research  Video Link: http://www.youtube.com/user/radioerrols #p/u/23/92FQA6loopY http://www.youtube.com/user/radioerrols #p/u/23/92FQA6loopY