There are a series of discussions going on over the debate on whether to separate the regulatory division and the market-operation division of the Tokyo Stock Exchange (TSE), according to the Bank of Tokyo-Mitsubishi (BTM).
Currently, TSE which seeks to list itself without any spin-off by the end of Fiscal 2005, and FSA which demands separation of the TSE’s regulatory division are working on this issue, without reaching any agreement.
“The gist of the debate was whether the listing of TSE may lead to conflict of interests, for its conflicting role of being a publicly traded company that has to make profits and the security regulator that has to screen companies for their listing and trading transactions etc. TSE, which originally planned to file a listing application this fall to go public by the end of Fiscal 2005, is questioned by FSA regarding the possible conflict of interests.
“As more than half of TSE’s profit comes from fees earned by securities companies and listed companies, there are concerns over whether TSE will really be able to regulate its customers when it is listed,” according to a spokesman at BTM. “Some worry that TSE might ease criteria for listing and other regulations for the sake of making profits. To which, TSE reiterates that it will reinforce the role of its Self-Regulation Committee, made up of outside experts, and emphasizes that its regulatory and screening operations are inseparable from the rest of the exchange.”
From July this year, TSE had a special committee, comprising 14 outside experts from academia, securities companies, and listed companies etc to have discussions on the role of TSE and its self-regulatory function. Though, there are criticisms that the member of the committee is mostly composed of people close to TSE.
The London Stock Exchange handed over its regulatory division to the Financial Services Authority before going public in 2000, and The New York Stock Exchange, which is preparing to go public, will split its regulatory functions.
TSE mentions that TSE’s listing is important for it to raise funds for system investment as well as to form alliance with foreign stock exchanges, and that it has no intention of changing the listing schedule.
Tokyo Stock Exchange was demutualized and became a stock company on November 1 2001. It controls more than 90 % of trading taking place in domestic stock exchanges.