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).

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:

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.