1. Japan Securities Clearing Corporation June 27 th -28 th, 2006 1 Presentation by Presentation by Japan Securities Clearing Corporation The 8 th ACG Cross Training Seminar June 27 th -28 th, 2006

2. Japan Securities Clearing Corporation June 27 th -28 th, 2006 2 TOPICS 1.Introduction of JSCC 2.Operations of JSCC 3.Direct and Indirect Structure

3. Japan Securities Clearing Corporation June 27 th -28 th, 2006 3  Stock exchanges in Japan had their own clearing functions before commencement of operations of JSCC.  This situation led to numerous inefficiencies, therefore it was essential to create a clearing organization and a CCP function that covered all of the nation’s markets and integrated all the clearing operations.  As a result, JSCC was established in July 2002 and has provided cross-market clearing operations for equity and fixed income products since January 2003.  The clearing operations for Tokyo Stock Exchange Derivatives has also been conducted by JSCC since February 2004. 1 ． (1) Establishment of JSCC Date of Incorporation July 1st, 2002 Commencement of Operations January 14th, 2003 Shareholders *1 (Shareholding ratio) *2 Tokyo Stock Exchange, Inc. (86.3%) Osaka Securities Exchange Co., Ltd. (9.5%) JASDAQ Securities Exchange,Inc. (3.4%) Nagoya Stock Exchange, Inc (0.7%) Fukuoka Stock Exchange (0.05%) Sapporo Securities Exchange (0.05%) *1 Shareholders of the JSCC are only market providers based on the idea that clearing functions are transferred from each market. *2 Shareholding ratio was determined on the basis of trading value of domestic stocks in each market. ◆ About JSCC 1 ． Introduction of JSCC

4. Japan Securities Clearing Corporation June 27 th -28 th, 2006 4 1 ． (2) Structure of Trading, Clearing, Settlement Tokyo Stock Exchange, Inc Settlement Organization 6 Stock Exchanges Market Clearing Settlement Clearing Organization Bank of Japan /Fund Settlement Bank Central Securities Depository(JASDEC) JSCCJSCC Securities Settlement Funds Settlement Transfer instructions Trading DVP settlement

5. Japan Securities Clearing Corporation June 27 th -28 th, 2006 5 JSCC JASDEC *2 JSSC *3 TSE *1 Other Stock Exchanges Other Stock Exchanges 100% 86.3% 22.0% 1 ． (3) Relationship among Infrastructures for Securities Markets in Japan in Japan － Share Ownership *1 TSE: Tokyo Stock Exchange *2 JASDEC: Japan Securities Depository Center *3 JSSC: Japan Securities Settlement & Custody Settlement Organization Clearing Organization ① Operations for physical deliveries and safe keeping (entrusted by JASDEC) ② Other settlement and custody services 13.7% Settlement Organization Stock Exchange

6. Japan Securities Clearing Corporation June 27 th -28 th, 2006 6 1. （ 4 ） Scope of JSCC’s Operation JSCC The unified cross-market clearing organization Trading ClearingSettlement JGB OTC TSE/OSE Foreign Stock Stock Exchange Domestic Stock JSSC/JASDEC OSE Derivatives OSE TSE Derivatives TSE 6 Stock ExchangesJASDEC Bank of Japan Non-Exchange Transaction Transfer JDCC *2 JGBCC *1 TSE / OSE JASDEC *1 JGBCC: Japan Government Bond Clearing Corporation *2 JDCC: JASDEC DVP Clearing Corporation

7. Japan Securities Clearing Corporation June 27 th -28 th, 2006 7 Eligible transactions ・ All exchange-traded cash products ・ TSE traded derivative transactions (JSCC has commenced TSE derivatives clearing since Feb.2004) Core services ・ Assumption of the obligation ・ Netting ・ Account Transfer Instruction ・ Settlement guarantee 1.(5) Outline of JSCC’s core business

8. Japan Securities Clearing Corporation June 27 th -28 th, 2006 8 1. （ 6 ） Outline of JSCC’s complementary business TSE JASDAQ Stock Exchange JSCC JGBCC JDCC Monitoring of the financial status of participants Management services concerning surety bond

9. Japan Securities Clearing Corporation June 27 th -28 th, 2006 9 2.(1) Cross-market Clearing Organization Central Securities Depository (JASDEC) Clearing Participant A/C Agency Clearing Participants Account Transfer Instructions DVP Settlement (Link between settlement of securities and funds) Assumption of the obligation Sapporo SE Transactions ↓ Matching Nagoya SE Transactions ↓ Matching OSE Transactions ↓ Matching TSE Transactions ↓ Matching Fukuoka SE Transactions ↓ Matching JASDAQ SE Transactions ↓ Matching ■ CCP Function ■ Settlement Guarantee Scheme JSCC Netting Principal Clearing Participants Non-clearing participants (Market participants other than clearing participants) Clearing Participant A/C JSCC’s A/C Bank of Japan/ Fund Settlement Banks Clearing Participant A/C JSCC’s A/C 2. Operations of JSCC

10. Japan Securities Clearing Corporation June 27 th -28 th, 2006 10 2. （ 2 ） Core Processing of Clearing Assumption of the obligation Assumption of the obligation Assuming the obligation simultaneously when transaction are executed on stock exchanges Receipt of transaction data from stock exchanges Notice of assumption of the obligation data to each participant Netting Calculation of net position of securities and funds Netting with respect to each participant, and each security Without distinction between house and client Account Transfer Instruction Account Transfer Instruction DVP Settlement (Settlement link between securities and funds) Instruction of transfer to JASDEC and Bank of Japan or Fund Settlement Banks Notice of settlement data to each participant

11. Japan Securities Clearing Corporation June 27 th -28 th, 2006 11 2. （ 3 ） Data processing (Trading-Clearing-Settlement) DateSettlement Procedures T T+1 T+2 T+3 Receipt of transaction data Settlement Instruction Book-entry transfer at the JASDEC Account transfer at BOJ or Fund Settlement banks Settlement Instruction Participant’s transaction data Participant Correction Netting Notification Participant Stock Exchange Notification Assumption of the obligation data Settlement data Notification Assumption of the obligation Notification

12. Japan Securities Clearing Corporation June 27 th -28 th, 2006 12 Account transfer Instruction 3. （ 1 ） Securities Accounts Central Securities Depository (JASDEC) Securities Co. B (JSCC participant) Securities Co. A (JSCC participant) client JSCC houseclienthouseclient house Securities Co. A houseclient Securities Co. B SONY +3,000 Customer A-1 Sony -2,000 Customer A-2 Toyota -3,000 Toyota +3,000 Customer B-1 Sony -4,000 Customer B-2 Sony +3,000 JSCC Toyota:3,000 Sony: 1,000 3. Direct and Indirect Structure

13. Japan Securities Clearing Corporation June 27 th -28 th, 2006 13 3. （ 2 ） Agency Clearing Participant Participant category Participant category Principal Clearing Participants/ Agency Clearing Participants Participant requirement Sound internal system for management Appropriate internal system for business operation Stable financial criteria for participation (Please refer to the below table.) 8% Capital Adequacy Ratio * \ 20 billion\ 2 billionShareholders’ Equity ・ Registered financial institution 200 % Net Capital Requirement Ratio \ 20 billion\ 2 billionNet Assets AgencyPrincipal \ 300 million Paid-in Capital ・ Securities company \ 300 million Agency \ 300 million Principal Paid-in Capital 400 % Solvency Margin Ratio * In case of a participant without overseas branches, 4% is applied.

14. Japan Securities Clearing Corporation June 27 th -28 th, 2006 14 JSCC Agency Clearing Participants Principal Clearing Participants houseclienthouseclient Clearing and Settlement Client Securities Co. A Securities Co. B Client houseclienthouseclient Client Non-Clearing participants Clearing Process by Agency Clearing Participants  Transactions conducted by Non-Clearing Participants on stock exchanges shall be cleared through Agency Clearing Participants.  Agency Clearing Participants have to make a contract with Non-Clearing Participants, and submit a copy of the contract to JSCC.  Agency Clearing Participants receive a notification for assumption of the obligation with each Non-Clearing Participant.  The position of Non-Clearing Participants are netted together with that of Agency Clearing Participants, and settled at JASDEC in accordance with the transfer instruction by JSCC. Image of Principal and Agency Clearing Participants

15. Japan Securities Clearing Corporation June 27 th -28 th, 2006 15 JSCC Account for Margin Deposit of Margin for derivatives  Participants have to deposit margin for derivative trading to JSCC Account for Margin.  Participants have to deposit margin for their own position and margin for their customer’s position separately.  Margin of Non-Clearing Participants is deposited through their Agency Clearing Participants. 3. （ 3 ） Account for Margin of Derivatives Trading houseclienthouseclient Agency Clearing Participant client house Principal Clearing Participant client house Agency Clearing Participant Non-Clearing participants Principal Clearing Participant

16. Japan Securities Clearing Corporation June 27 th -28 th, 2006 16 Thank you Japan Securities Clearing Corporation 2-1,Nihombashi-Kabuto-cho,Chuo-ku, Tokyo 103-0026 Japan Phone: +81-3-3665-1234 Fax : +81-3-3665-1235 URL :http://www.jscc.co.jp/english/index.html E-mail: t-oomori@jscc.co.jp y-sakamaki@jscc.co.jp