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1 Americas markets
In the United States, exchange-traded foreign exchange options were introduced in 1982. Options on foreign currencies presently are traded on the Philadelphia Stock Exchange (PHLX) and the Chicago Mercantile Exchange (CME). Options on a U.S. dollar index and on the ECU are traded on Finex, the financial division of the New York Cotton Exchange.
The New York Clearing Corporation
(NYCC) – the clearinghouse for all trades in the NYBOT markets – guarantees contract performance to its members by establishing, with the exchange, minimum margin levels for each market and periodically adjusting them to reflect current price volatility. The clearinghouse is made up primarily of brokerage firms who serve as clearing members and must meet certain financial requirements and responsibilities including a guaranty deposit at the clearinghouse. The NYCC serves as counterparty to every trade and guarantees the integrity of each contract in the NYBOT markets. The clearinghouse also oversees the transfer of money among members. At the close of each trading day, each trader’s account equity is adjusted (marked to the market) to reflect price movements. If the market has moved against the trader’s position, variation margin payments may be required to restore the trader’s equity to the required minimum level.
In the traditional exchange, the actual transaction takes place in designated trading rings (pits) where members meet to make bids and offers to each other by voice and hand signals (open outcry). Trades are acknowledged by the participants and confirmed in writing or through an electronic order routing system (EOR). Since only exchange members can trade on the floor, customer orders are delivered to floor brokers who execute them according to the customer’s instructions. Among the common orders that are filled in the pit are market orders (executed immediately at the prevailing price in the pit); limit orders (to be executed at the stated price or better); and stop orders (instructs broker to execute an order at the market if a certain price is reached). Once the transaction has taken place, it is entered manually or electronically into NYBOT’s Trade Input Processing System (TIPS®) where it is matched, and assigned to a clearing member. Only clearing members can submit trades for clearing. When the trade is matched and submitted, the clearinghouse then becomes the buyer to every seller and seller to every buyer. From the moment the order enters the market, its path is marked clearly in terms of time stamps that record its progress. This path is called an audit trail that helps to protect the interests of all parties involved in the trade. The audit trail is one of the key tools of regulation that govern the futures market and protect the integrity of each trade. The Transaction Futures trades begin with one basic step: buyers and sellers deposit funds – called margin – as a performance bond or good faith deposit with a brokerage firm to ensure that market participants will meet their contractual obligations. The margin commitment is the same for both buyers and sellers. There is often a difference, however, between the margins required of hedgers and the commitments for speculators. This system of initial (or original) margin deposits (usually a small percentage of the total value of the underlying contract) helps to maintain the financial integrity of the futures market and provides participants with the leverage that is a major feature of futures trading. Since a futures contract is not intended for use as a merchandising contract for transfer of title from seller to buyer, there is no need for the full contract value to change hands. 1
Investors. on the other hand.S.Agricultural (In U. Dollars#. SCENARIO: A candy manufacturer has profit margins that are extremely sensitive to the cost of sugar.000 pounds each) to make the candy.I.400 per contract. 11sm futures contracts of 112. or better.000 pounds of raw sugar (equal to 2 Sugar No. Regardless of the market direction. It is important to understand the basic difference in the business goals of hedgers and investors when examining the trading scenarios that follow. 2sm Contract was $1. Hedgers use the futures market to protect cash market transactions and thereby reduce the effect of price volatility in the cash market on their bottom line. Hedgers assume a position in the futures market roughly equal to and opposite the cash market position they wish to hedge.An illustration: On September 10.20). the initial margin for a hedger in the Cotton No. 2 . may enter the market on either side depending on their individual strategy. Even for the speculator that represents less than 5% of the total value of the contract.70 cents/lb. A Sugar Long Futures Hedge Example Commercial firms use the futures market to protect cash market commitments that arise in their day-to-day operations. the manufacturer can lock in raw material costs and protect his/her profit margin.20 cents/lb.350 (price = 60. The manufacturer will need 224. he/she contracts to sell candy for delivery in November at a fixed price.). In August. By purchasing the futures (currently trading at 7. Trading Futures Futures markets serve the objectives of both hedgers and investors. the candy maker needs to buy sugar for October delivery at a price of 7. they seek to anticipate and profit from the price changes that may occur over the short or long term. In order to maximize profits.000 on a contract valued on that day at $30. 2003. The initial margin for a speculator was $1.
respectively.092.72 cents/lb. he/she would be speculating in the cash market and risk losses when cash prices rise. 11 futures) since 1936. When the futures gain is applied to the cash market shortfall (2. This means a futures gain of $6. futures gain minus 2. gain. Options on Futures In 1982. x $. . Strategies exist for buying options.20 cents/lb.92/cents/lb. from the lower cash market price of 5. would be off-set by the gain of 2. more than planned.80 shortfall on the manufacture of the candy. the CSCE introduced options on commodity futures to the U. the manufacturer has in effect purchased sugar for 7. 11 futures at the current price of 9. His/her profitability depends on purchasing sugar at no more than 7. Although complex option strategies are numerous and varied. Options add greater flexibility to investment planning. options trading may not be for everyone.20 cents/lb. A call option (American-style) confers the purchased right – but not the obligation – to buy a specific futures contract at a specific price (strike price) at any point within a specified period of 3 . At the time the manufacturer contracts to sell the candy. and may also include simultaneous trading of futures.092. Had the manufacturer remained unhedged. the manufacturer sells candy for November delivery with 224. the various components and trading strategies – before entering the market.10 cents/lb. RESULT: On September 15. paying 2. the futures market loss of 2. The seller of the contract is always under obligation to the buyer to fulfills the terms of the option. 11 futures at the current price of 7. On September 15. options have provided a widening array of risk management capabilities and trading opportunities for hedgers and investors.046. Hedging with options may establish a price floor or ceiling while retaining upside or downside potential. the candy maker purchases raw sugar in the cash market at 9. Strategies exist for rising.. While it may be tempting to view the long futures hedge in a declining market as a loss. the candy maker closes out the futures position by selling 2 October Sugar No. selling options. Option contracts grant the owner or buyer of the contract the right. The end re-sult would still be the target price of 7.000 lbs. – the target purchase price that had to be locked in to protect the profit margin. for a 2.72 cents/lb.80 (112. falling and flat markets.STRATEGY:On August 10. to buy (a call) or sell (a put) a futures contract on an underlying commodity at a predetermined price within a specified period of time. Some have limited risk and reward potential while others have unlimited risk and reward.10 cents/lb.20 cents/lb.92 cents/lb. but not the obligation. Protecting the bottom line is sound business management. Investors and hedgers are urged to undertake a careful study of options – their markets. it is important to remember the purpose of the hedge – to lock in a price.0272 = $3.S.72 cents/lb. The target price that represented a profit in August still represents a profit in September.10 cents/lb. American-style options – the type of option traded in the NYBOT markets – allow exercise at any point up to the expiration date. he/she buys 2 October Sugar No. meaning an unexpected $6. The multi-dimensional flexibility of options has contributed to the growth and success of the NYBOT options markets.. Option trading strategies are as diverse as the objectives of those who trade them. cash market loss).72 cents/lb. If sugar prices had fallen to 5. or combinations of the two. in a favorable cash market. – the first exchangetraded option on a commodity futures contract (Sugar No. The exercise style of the option falls into two categories.40/contract x 2). European-style options can be exercised only on expiration.10 cents/lb.20 cents/lb.000 pounds of raw sugar content. Since that time.
Options on futures spreads are another example of the many customized options strategies that are available through the open outcry markets of the New York Board of Trade. If the option is exercised. Traders in traditional markets agree on premiums in an open outcry auction similar to that for futures contracts. Option holders are not required to post margin until they assume a futures position. Options are identified by the following elements: option contract month and year. the holder can simply let the option expire worthless. To obtain the option rights. For example. the buyer may assume a long position in the underlying futures contract at the strike price. The use of spread strategies has led to the introduction of options on futures spreads for NYBOT agricultural products. The markets of the New York Board of Trade present opportunities as well as risk. If the option is exercised. or simply letting the option expire worthless.and long-term swap rates: Swap futures offer institutional market participants – such as bank treasurers.time (up until the option expiration date). at any time up to the option expiration day. the holder will assume a short position in the underlying futures contract at the strike price. Chicago Board of Trade Chicago Board of Trade 5-Year and 10-Year Interest Rate Swap futures are designed to fill a vital need for exchange-traded derivative contracts that reference intermediate. Option buyers (holders) can exit a position in one of three ways: exercising the option and entering the futures market. Because an option buyer is under no obligation to enter the futures market. If the futures market moves favorably to an option position. in the coffee options market. The options on spreads are specifically tailored for each market. net potential gains beyond the strike price can be unlimited. beginning in the sugar market. selling the option back into the market. Futures offer more certainty while options offer more flexibility. the buyer (holder) makes a payment (premium) to the seller (writer) of the option. Options on Futures Spreads Traders in the NYBOT agricultural markets have utilized futures spreads to serve a number of hedging and investment strategies. 4 . buying a Sep 04 70 Put gives the option holder the right to take a short coffee futures position (sell a September 2004 Coffee “C”® futures contract) at a price of 70 cents/lb. If the underlying futures market moves against an option position. minus the premium paid. A put option (American-style) confers the right – but not the obligation – to the option buyer to sell a specific futures contract at a specific strike price at any point within a specified period of time. strike price and type (call or put). Futures and options offer different advantages and disadvantages for both hedgers and investors. A generic example of a call option on a spread would give the buyer the right to buy the nearby futures contract and sell the second (or “deferred”) futures contract at a differential equal to the option strike price. Option holders can exercise the option at any time up to the expiration date. losses are strictly limited to the premium paid. A put option on a spread gives the option buyer the right to sell the nearby futures and buy the deferred futures at a differential equal to the option strike price. Each option transaction involves two parties: a buyer (holder) and a seller (writer or grantor).
Swap futures permit the structuring of a variety of credit spread and bank credit yield curve trades. When used in conjunction with other CBOT interest rate futures. As with other exchange-traded futures contracts. users of Swap futures should enjoy substantial reductions in administrative costs versus over-the-counter (OTC) alternatives. explains the mechanics of contract pricing. discusses their hedge effectiveness. Swap futures enable creation of synthetic portfolios that more accurately track actual portfolio exposures. This reference guide reviews key benefits of CBOT Swap futures. Further. 5 . Because Swap futures carry the guarantee of the CBOT clearing services provider.mortgage backed securities traders. and fixed-income investment portfolio managers – convenient means for acquiring and laying off the credit and interest rate exposure in plain vanilla swap rates. allowing users to easily adjust swap rate exposure without tying up credit lines. they virtually eliminate counterparty credit risk. and summarizes the salient features of the contracts’ terms and conditions.
meats and grains. is the largest free market for hard red winter wheat. feeder cattle. The KCBT has become an international market force. Mid America Commodity Exchange (MIDAM) An exchange in Chicago. In July 1992 the KCBT launched options on the Value Line. A "grain call. It offers among others "mini" contracts in metals. On December 12. the KCBT began offering the Value Line futures and options contracts solely by electronic trading and began trading the wheat futures and options contracts electronically after hours. In October 1984 the exchange introduced options on its wheat contract.trades a huge range of futures and options on commodities. in February 1982. Over time. The KCBT has been in existence for nearly 150 years. pork bellies). It is also the leader in exchange-traded financial derivatives. The Mini Value Line stock index contract was introduced in July 1983 as a way for smaller firms and individual investors to participate in the market. Together with London a main world market in cocoa. the Value Line. Sugar & Cocoa Exchange (CSCE) The CSCE in New York is a major world commodity market dealing futures contracts and options on coffee. established near one of the world's most fertile growing regions. soya beans. was established at the KCBT in 1876. that deals in futures and options contracts in a variety of commodities. Chicago Mercantile Exchange (CME) The CME . Minneapolis Grain Exchange (MGE) A commodity market for grain. The innovative traders at the KCBT introduced the first stock index futures contract. drum wheat. Prices negotiated in the KCBT wheat futures trading pit are the benchmark for wheat prices around the world.the prime US futures and options market . and." similar to wheat futures trading as it is known today. rye. the KCBT served a function closer to a chamber of commerce. live hogs. 2004. on the cash market.The Kansas City Board of Trade The Kansas City Board of Trade. influencing wheat prices in Australia and Argentina as well as Kansas and Oklahoma. cocoa. spring . for barley. the Mini Value Line stock index contract became the Value Line stock index contract because of dominant interest in the smaller size. cheddar cheese and non-fat dry milk. The role of the KCBT has evolved since the exchange became a central market for wheat grown in the Great Plains nearly 130 years ago. Stock index futures are considered one of the most important financial market concepts of the 1980s. sugar. dealing in futures contracts for spring wheat and white wheat. maize. Coffee. For 20 years prior to that evolution. above all futures contracts in livestock (live cattle. and a number of its futures and options contracts are traded on the floor of the CBOT. flaxseed. The MIDAM is affiliated to the CBOT. oats.
propane and in rare metals. Looking at this numbers it seems that the birth of the Euro hasn't changed the demand for exchange-traded derivative contracts on this part of the yield curve. Demand for a long term derivative contract remains stable but is concentrated in one contract only. It also deals in gold and silver. such as crude oil. leaded regular gasoline. And it offers the world's only seafood futures contracts (White and Black Tiger shrimp). Together the represent one of the world's largest markets in energy and precious metals.6 millions contracts on a monthly basis. Matif. 1. We looked at front months volumes from 1998 to Q1-00 traded on the main European exchanges where a 10-year Future is listed. sharing with the London Metal Exchange a dominant role in the world metal trading.6 millions contracts. It deals in futures (and options) in oil products. By comparing 1998 data with the ones relative to the January 1999 period onwards. this amount goes back to 2. During the whole 1998.2 Europe markets After more than one year from the birth of the European Common Currency. natural gas. including the first quarter of 2000. heating oil. New York Mercantile Exchange (NYMEX) The NYMEX in its current form was created in 1994 by the merger of the former New York Mercantile Exchange and the Commodity Exchange of New York (COMEX). after adjusting for different denominations and exchange rates. Meff and Eurex averaged some 2. at least two facts can be pointed out: The first is the substantial stability of the monthly average turnover on the exchanges considered.wheat and sunflower seeds. aluminium and copper. such as platinum and palladium. . namely the Eurex Bund Future. the long term interest rates futures contracts traded at Liffe. This average lowers to 2. This situation can potentially magnify the effects on prices in case of fly to quality moves.4 millions lots during the 1999 but. the framework of the European long term interest rates futures markets is delivering some important facts. The trade of crack spread allows investors to construct their own spread combinations.
gas oil.The second fact is that the distribution of such a turnover across European derivative exchanges is appallingly not homogeneous.g. cocoa. as well as in options (Brent crude and gas oil). rubber. London Metal Exchange (LME) The LME is the London market for trade in metals and the world futures and cash market for trades in non-ferous metals. is the leading exchange in Europe for soft commodities (e. potatoes and grain). leaded and unleaded gasoline. aluminium alloy. copper. lead. The market is daily for cash and contracts up to three months. coffee. It offers the facilities for making an exchange of futures for physicals. available on all futures contracts apart from aluminium alloy. such as aluminium. tin and zinc. They provide the trading platforms used by broking firms around the world to buy and sell securities. the Exchange quickly grew to become the City’s most important financial institution. Futures and Options Exchange (London FOX) This exchange. sugar. naphtha and heavy fuel oil). . nickel. London Stock Exchange The London Stock Exchange is one of the world’s oldest stock exchanges and we can trace our history back more than 300 years. There are also exchange-traded options. Our systems provide fast and efficient access to trading. Starting life in the coffee houses of 17th century London. which includes the former London Commodity Exchange (LCE). The official prices of the LME are used by producers and consumers worldwide for their longterm contracts. allowing investors and institutions to tap quickly into equity. UNITED KINGDOM International Petroleum Exchange (IPE) A commodity market that deals in futures contracts (Brent and Dubai crude oil. and weekly for contracts up to 15 months.
We are also committed to creating London’s first over-the-counter (OTC) equity derivatives trade confirmation and clearing service. Finland The Stockholm Stock Exchange lists options and futures on the underlying stocks of 44 leading Finnish companies and futures on a further 9 Finnish companies. EDX London is our international equity derivatives exchange and our aim is to become the world’s most efficient and liquid market for equity derivatives. The UK covered warrants market is one of the world's fastest growing investment markets. Our Linked Exchanges Sweden Stockholm Stock Exchange lists options and futures on the OMX index (based on the top 30 Swedish shares) and on the underlying stocks of 36 leading Swedish companies. created in 2003 to bring the cash equity and derivatives markets closer together. More than 300 firms worldwide trade as members of the London Stock Exchange. Our Covered Warrants market is one of the world's fastest growing investment markets. making business easier and more cost effective. Members of EDX London trade futures and options on international exchanges through a common order book. and listing new equity derivatives contracts where our members demand them. Its derivatives business is a pioneering diversification beyond our core equity markets. Norway Oslo Børs lists options and futures on the OBX index (based on the top 25 Norwegian shares) and on the stocks of 13 leading companies. Denmark The Copenhagen Stock Exchange offer options and futures on the KFX index (based on the top 20 Danish shares) and on the underlying equity of 12 of Denmark's largest companies. It is our aim to become the most efficient and liquid derivatives exchange in the world. Internationally recognized standards of regulation and market practice make our markets some of the most attractive and liquid in the world.even on the UK housing market. There are five blue-chip issuers offering over 650 warrants and certificates on single stocks and indices in the UK and around the world. We host five blue-chip issuers offering over 800 warrants and certificates on single stocks and indices in the UK and around the world. silver and currency . gold. There are also warrants offered on baskets of stocks.bond and derivative markets. A major contributor to our derivatives business is EDX London. . commodities such as oil.
after the close of the daily market. Borsa Italiana also operates an After Hours Market. and the Electronic Share Market (MTF) where index open-end and closed-end Funds. IDEM . consolidation continues. Here the Frankfurt Stock Exchange floor trading looses. (MTA/MTAX and Expandi Market). The Frankfurt Stock Exchange The Frankfurt Stock Exchange is one of the biggest and most efficient exchange places in the world.Exchange-Traded Funds) are traded.00 to 20. where financial instruments trade from 18. The Clearing and Central Counterparty (CCP) interposes itself between buyer and seller in each contract at the time of its conclusion on the market. About 47% of the 300 market participants in Frankfurt come from abroad.Italian Derivatives Exchange Market is the equity derviatives market managed by Borsa Italiana. the Securitised Derivatives market (SeDeX). the Italian Derivatives market (IDEM). Market liquidity is guaranteed by Market Makers who respond to requests for quotes on a range of contracts on all expiries. (ETFs . develops and manages the italian equities markets. the electronic Fixed Income market (MOT).Borsa Italiana Borsa Italiana regulates. the Irish Stock Exchange in 2000 and the Budapest Stock Exchange in 2003). Mainly through Xetra.30. Products listed on the IDEM include: • • Futures. It is owned and operated by Deutsche Börse. Eurex . the German stock market was opened to foreign investors and market participants. which also owns the European futures exchange Eurex and clearing company Clearstream. minifutures and Options on the S&P/MIB Index Futures and Options on single stocks Contracts on the IDEM market are negotiated electronically by way of a new trading platform that guarantees a rapid execution of all orders. assuming and managing the counterparty risk. but in fast developing and expanding electronic trading (Xetra trading system) the FSE gains in European and international trade: partner-exchanges adopted the Xetra (trading system) (as the Vienna Stock Exchange in 1999. The Frankfurt Stock Exchange has over 90 percent of turnover in the German market and a big share in the European market.
which is a separate segment. by means of time spreads. profits from a short position can offset some of the losses in a portfolio in a market decline They are ideal asset allocation and cash equitization tools. is the electronic trading solution for repos (sale and repurchase agreements). at present.3 Asia markets Tokyo Stock Exchange The Tokyo Stock Price Index ('TOPIX') is a composite index of all common stocks listed on the First Section of Tokyo Stock Exchange (TSE). 2. The Exchange is the market place of choice for trading and clearing of derivatives. EXTF derivatives can be used to exploit price imbalances between the cash. Investors also can tap relative imbalances within individual derivatives products at Eurex. Investors can use them to gain or reduce exposure to a benchmark index or sector without having to buy or sell all the individual shares in the underlying. and it offers its customers open. some 700 locations worldwide are connected to Eurex. For relative value strategies. options and ETFs based on the Dow Jones EURO STOXX 50SM. 1968. an over-the-counter market for cash and basis trading in fixed income securities and treasury discount papers. Together with international trading houses. democratic. investors can use EXTF derivatives from different countries or regions to combine long and short strategies aimed at increasing returns. The base for the index is the aggregate market value of its component stocks as of the close on January 4. The trading participants are connected to the Eurex system via a communications network. The most common used strategies are as hedging. without disrupting the makeup of their share portfolio.Eurex is the world’s largest futures and options exchange and is jointly operated by Deutsche Börse AG and SWX Swiss Exchange. asset management. and cost-effective access from any point around the globe. Product Strategies There are many ways that institutional and private investors can use EXTF futures and options at Eurex. EXTF futures and options are an efficient way to help reduce the risk of a fall in equity prices. The aggregate market value is . Because EXTF futures and options can be used to go short. without disrupting the makeup of an equity portfolio. relative value and arbitrage tools. DAX® and SMI® indexes. The new derivatives on ETFs at Eurex (EXTF) can be used together with the current offering of index futures. Eurex has been a pioneer in electronic trading of derivative products for more than a decade. As hedging tools. for example. futures and options markets. Eurex offers futures and options on Exchange Traded Funds (ETFs) as complementary trading and risk management tools to the existing national and European equity index products. Eurex Repo. Eurex operates the electronic network (ECN) Eurex Bonds. simple. The index is basically a measure of the changes in aggregate market value of TSE common stocks.
(2) Easier portfolio management By using TOPIX futures portfolio managers can adjust their portfolios without having a large impact on the underlying stock market. In addition to the 10-year JGB Futures. such as arbitrage and position trading.calculated by multiplying the number of listed shares of each component stock by its price and totaling the products derived there from. TSE launched Options on 5-year JGB Futures. 1988. On October 19. 1985. TOPIX futures provide a means of managing this risk with a view to reducing it. as they haven't been traded since April 1998. 1990 as an additional hedging tool to manage interest rate risk. in an attempt to expand medium term investment opportunities. TOPIX and TOPIX Sector Index Futures TO PIX futu res func tion (1) Providing a hedging tool Many stocks are affected by global events that may have either a positive or negative impact on the economic well-being of the entire market. (4) Enhanced liquidity of underlying stocks Hedging and arbitrage trading can enhance the liquidity of underlying stocks. This type of price variability is called systematic risk. In November 2000. and help keep prices in 'proper alignment'. TSE began trading 20-year JGB Futures contracts on July 8. The JGB Futures market has expanded rapidly and is now regarded as one of the largest futures markets in the world. Such events affect more than one stock.the first financial futures contracts in Japan. The implementation of these futures contracts was a response to market participants' growing needs for a tool to manage interest rate risk. (5) Price discovery .) On the basis of this success. (TSE has decided to halt trading on new contract months for 20-year JGB Futures beginning with the December 2002 contract. However. TSE has decided to halt trading on new contract months for Options on 5-year JGB Futures beginning with the September 2002 contract. as well as an effort to further internationalize the TSE markets amidst changing global demands. (3) New investment tools TOPIX futures provide new investment tools. TSE opened trading on 10-year JGB Futures contracts . the TSE started trading in options on JGB Futures on May 11. as they haven't been traded since December 2000.
000 yen x (1.700 points. (2) After the last trading day.625.000 yen Note: Brokerage commissions and tax are not included. (3) Customer A's short position was then settled in cash at the special settlement price . (4) Recognized loss = 10.Prices in both futures and underlying stock markets tend to settle at levels that best reflect current forecasts of supply and demand conditions.20 points.000 yen Note: Brokerage commissions and taxes are not included.625. (3) Customer A closed his long position by selling one TOPIX futures contract at 1.600 points through Trading Participant B. Thus. *Customer A deposited margin with Trading Participant B. the TOPIX special settlement price was 1. *Customer A deposited a margin with Trading Participant B .600 points through Trading Participant B. .700 points. (4) Recognized profit = 10. Example 1 : Settlement of Open Position by Offset Transaction (1) Customer A bought one (1) TOPIX futures contract at 1. Example 2 : Settlement of Open Position by Final Cash Delivery (1) Customer A sold one (1) TOPIX futures contract at 1.20) x 1 = 252.600-1. (2) The price of TOPIX futures rose to 1.000 yen x (1. prices in the futures market help predict future prices of underlying stocks.600) x 1 = 1.000.700-1.
Transaction prices are available to the public. Provision of a Market Place 2. 9. 5. and fair disclosure of corporate and security information. . Real-time trading on the computer trading systems as well as completed transactions are carefully monitored in order to keep trading in line with Exchange rules and properly determine prices. appropriate measures are taken. 3. The TSE also provides a filing system which facilitates investor access to disclosure documents. TSE maintains guidelines for the timely disclosure of important corporate information resulting from business activities. TSE requires the accurate. Upon discovery of any rule violation. a security if listing criteria are not met. Monitoring trading 4. Supervision of Trading Participants 10. Rules relating to the disclosure of corporate information are stated in the Securities and Exchange Law. Monitoring listed securities 8. in compliance with Exchange rules. they must maintain a high level of quality and a deep sense of confidence. TSE continuously monitors listed companies and securities in order to maintain high listing standards. Listing securities 6. improper conduct or unfair trading. swift. TSE can suspend the trading of. Securities which are traded on TSE adhere to listing criteria established and approved by the TSE. 1. 7.Major Functions TSE is a central institution in the secondary market and its major functions are as follows. In order to ensure investor protection and fair and transparent transactions. or delist. an examination system is being introduced at the Exchange whereby strict investigations are carried out to assess the state of prospective participants' businesses and assets at the time of their application for trading permission. In order to guarantee the safety of transactions and to fulfil to the utmost the public purpose of the TSE. Trading participants are those who conduct transactions on the TSE market. Trading which takes place on the Tokyo Stock Exchange progresses continuously throughout each trading session using computerised trading systems. In order to achieve this.