May 30, 2023
To whom it may concern
Company Name:Japan Securities Finance Co., Ltd.

Name of Representative:

Shigeki Kushida, Representative Executive
Officer & President:(Securities code: 8511, TSE Prime)

Inquiries:

Kentaro Hibi, General Manager, Corporate
Governance Office(E-mail : info@jsf.co.jp)

JSF and The University of Tokyo Release Report on Empirical Researchon Securities Finance Transactions using Distributed Ledger Technology
TOKYO, May 30, 2023 --- Japan Securities Finance Co., Ltd. (“JSF”) and the Graduate
School of Engineering of The University of Tokyo (“The University of Tokyo”) have been
conducting empirical research since April 2021 to explore the feasibility of using distributed
ledger technology to facilitate transactions involving tokenized securities or collateral in repo
transactions and securities lending and borrowing transactions (“Securities FinanceTransactions”). This research concluded in March 2023 and today the two parties released
a report compiling the results (*).
JSF was responsible for conceptualization and scheme planning, research of related market
practices, and compilation of the final report, while The University of Tokyo was in charge ofdata analysis as well as review of basic technologies and systems concerning distributed
ledger technology.
We expect that the findings of this research will be utilized for social implementation in a
number of fields in the future, including the securities industry. In addition, we recognize that
this research, through industry-academia collaboration, provided positive outcomes that
address important sustainability issues recognized by JSF, especially contributions to thepromotion of academic research activities and the infrastructure of securities and financialmarkets.
＜Related SDGs＞

(*) English version of the report can be accessed from the following link:“Empirical Research on Securities Finance Transactions using Distributed Ledger
Technology”
https://www.jsf.co.jp/english/media/report_dlt_en.pdf
For an outline of this research, please see the following document:“Outline of Empirical Research on Securities Finance Transactions using Distributed Ledger
Technology”
https://www.jsf.co.jp/english/media/outline_dlt_en.pdf
The empirical research evaluated the following three points and found five implications.

Details of Evaluation
・Feasibility of Securities Finance Transactions execution (individual bilateral transactions)・System performance when processing transactions in market-wide scale
・Impacts of collateralized securities diversification and threshold setting for margin call on
net credit amount and necessary liquidity, including the evaluation upon market turmoil
Conceptual Diagram of Individual Bilateral Transaction

Implications(1) Transaction feasibility
Various types of Securities Finance Transactions, including those involving the exchange ofassets denominated in different currencies and securities tokens to securities tokens, can besmoothly implemented from the start of transactions through margin calls to the end of thetransaction period.
(2) Reduction of settlement risks and especially simultaneous execution of transactions
denominated in different currencies
Token-to-token exchanges can be automatically conducted simultaneously without timedifference, even if the underlying assets are denominated in different currencies. In addition,
margin calls can be automatically implemented without the need for operations by transaction

parties.
(3) Reduced credit risk and economized liquidity
Automation of margin calls reduces operational burden, making it easier to make margin calls,
and credit risk may be reduced. In addition, the appropriate combination of collateralized
securities diversification effect and margin call threshold setting can reduce credit risk andeconomize liquidity, especially during market turmoil.
(4) Streamlining of operation
Automation of settlement and margin call administration makes it possible for straight throughprocessing (STP) and improving the efficiency of Securities Finance Transactions
administration and managing operational risk. In particular, this has the potential tosignificantly reduce the operation and its time required to exchange transaction informationand check status with counterparties located in foreign countries, thereby improving theefficiency of transactions.
(5) Utilization of assets with low liquidity
Since it will become easier to transfer rights of low-liquidity assets by tokenization, there is
the potential to not only hold these assets, but also utilize them as collateral for Securities
Finance Transactions (the valuation of the underlying asset itself may improve as theutilization value increases).
Through this research, we found that as noted above there are various possibilities forutilizing blockchain in Securities Finance Transactions. Going forward, we will continue toconduct further research while keeping close watch on the trends in technological innovationsin Japan and abroad.

----- end -----<About JSF>
Japan Securities Finance Co., Ltd. (JSF), incorporate in 1950, is the sole securities financecompany in Japan with a license under the Financial Instruments and Exchange Act. Its main
business is the provision of funds and securities to securities companies for settlement ofstandardized margin transactions pursuant to the above law, and also provision of securities
lending and financing. As an institution specializing in the securities finance business, JSF,
with a keen awareness of this public role, has a mission of contributing to the developmentof the securities market by proactively meeting the diverse needs of securities and financial

circles and boosting the long-term interests of securities market participants. JSF’s credit
rating is AA- under both Rating and Investment Information, Inc. and Japan Credit Rating
Agency, Ltd., and A under S&P Global Ratings. JSF’s stock is listed on the Tokyo Stock
Exchange.
For more information, visit https://www.jsf.co.jp/english/Inquiries
Business Development Department, Japan Securities Finance Co., Ltd.
Email: bddept@jsf.co.jp
Kenji Tanaka, Associate Professor,
Department of Technology Management for Innovation,
Graduate School of Engineering, The University of Tokyo
Email: info@ioe.t.u-tokyo.ac.jp