Number of markets at TSE may be trimmed

TOKYO: The Financial Services Agency yesterday called for cutting the number of markets at the Tokyo Stock Exchange to three from the current four to streamline its structure and attract more investment.

In a reform plan drafted by a study group, the FSA also proposes slimming down the composition of the Topix index of all First Section issues on the TSE by excluding issues whose trading volumes remain sluggish.

The agency will urge the bourse to start implementing the proposals around the first half of 2022, according to the report.

Citing complaints from market participants about the overlapping of functions at some of the four markets, the FSA proposes integrating the Second Section and the Jasdaq to make clear the roles of each market.

At present, the TSE consists of four markets: the First Section for big companies, the Second Section for medium-sized firms, the Jasdaq comprised of a variety of companies, and the Mothers dedicated to startups.

Although the Jasdaq is characterised as an emerging market, it handles some big names, including McDonald’s Holdings Co (Japan).

According to the plan, the TSE will create a “prime” market, which would be equivalent to the First Section, a “standard” market for stocks listed in the Second Section and the Jasdaq, and a “growth” market for those in the Mothers.

The FSA proposes setting the minimum market capitalisation requirement for the prime market at 10 billion yen ($91 million), while taking transitional measures to retain the currently listed small-cap issues.

It is considering transforming the Topix into an index that would bring together leading companies because the index currently involves all names in the First Section, regardless of their performances.

Based on the report, the FSA will present a blueprint for reorganising the TSE around February before working out details.