Japan Securities Finance Co., Ltd.
Integrated Report 2022

Corporate Philosophy

As an institution specializing in securities finance, JSF has a mission to contribute to the

All for the
securities
market.

development of the securities market by proactively meeting the diverse needs of the
securities and financial sectors and to enhance the long-term interests of users, while
always maintaining a keen awareness of its public role.

Management Principles

1. To practice sound business management by thoroughly implementing compliance,
corporate governance, and risk management under a new governance structure, thereby
establishing solid credibility, while always maintaining a keen awareness of our social
responsibilities as a securities finance company.
2. To enhance corporate value while maintaining solid equity capital in order to ensure stability
in management and the financial soundness required of a company that is a key player insecurities market infrastructure, to give comprehensive consideration to the earnings
environment, investment plans, etc., and to ensure profits are returned to shareholders.
3. To further enhance JSF’s core loans for margin transactions business while also striving to
expand the finance- and securities-related services provided by JSF and Group companies,
develop new business, and to further grow and solidify our base.
4. T o build a quick and efficient business management structure and strengthen our competitive
base in order to address changes in the business environment in a flexible manner.

Japan Securities Finance Co., Ltd. Integrated Report 2022

1

Toward the Developmentof the Securities Market
Established in 1950, Japan Securities Finance (“JSF”) is Japan’s only
securities finance company, specializing in lending funds and securities
needed for the securities market.
As such, our mission is to contribute to the development of the
securities market by proactively meeting the diverse needsof the securities and financial sectors and to enhance
the long-term interests of users.

Contents
About the JSF Group
Corporate Philosophy/
Management Principles
Interview with the President
History of the GroupAt a Glance
Value Creation Process
Business Model

1
4
10
12
14
16

Our Vision
Medium-Term Management Policy 18
The Sixth Mid-Term
Management Plan
21

2

Message from the Executive Officer
in Charge of Corporate Planning 22
Financial and Non-Financial
Highlights
26

Officers

42

Editorial Policy

Report Coverage

Cautionary Note Regarding

ESG Initiatives

44

Japan Securities Finance has issued thisForward-looking Statements

Risk Appetite Framework

52

integrated report so that investors andJapan Securities Finance Co., Ltd. andits consolidated subsidiaries

Risk Management

54

other stakeholders may gain an

Reporting Period

performance forecasts in this report are

Strategy by Business

Compliance56

understanding of our efforts to create

April 1, 2021 to March 31, 2022

sustainable value.

(Some sections include information regarding mattersoccurring before or after the reporting period.)

Securities Finance Business
Trust Banking Business
Real Estate Leasing Business

28
32
33

Management Foundation
Supporting Corporate Value
Message from an Outside Director 34
Corporate Governance
36

Japan Securities Finance Co., Ltd. Integrated Report 2022

We hope that this report deepens

Corporate Data
11-Year Highlights (Consolidated)

58

Financial Section

60

Shareholder andInvestor Information

124

Company Information

125

forecasts made by the Company basedon information available at the time ofcreation and include risks, uncertainties
and other factors. Therefore, actual results

understanding of the JSF Group, whose

Reference Guidelines

mission is to contribute to the∙ IFRS Foundation, International
Integrated Reporting Framework∙ Ministry of Economy, Trade andIndustry, Guidance for Collaborative
Value Creation

development of the securities market.

Forward-looking statements such as

may differ significantly from forecasts
due to changes in various factors.

Japan Securities Finance Co., Ltd. Integrated Report 2022

3

About the JSF GroupInterview with the President

Japan Securities Finance,
growing in step with thesecurities industry andsupporting its future
development

Q. Please tell us about JSF’s history from its inception to the present.
The Company launched operations as an institution

margin transactions, we proactively meet the

specializing in securities finance in 1950 after

diverse needs of the securities and financial sectors

considering what kind of mechanism would beby providing a variety of services that leverage ournecessary to increase the liquidity of the securities

expertise in handling securities and funds.

market in Japan as it resumed activities following

Specifically, we have expanded the scope of ourWorld War II. Looking back on the situation in thebusiness to include repurchase (repo) and gensaki

securities market at that time, the ability oftransactions for the purchase and resale ofsecurities companies to raise funds was poor, andJapanese government bonds and other bonds,

the stock lending market was not as developed as

equity repo transactions, general stock lending, andJapan Securities Finance (“JSF”) aims to maintainin Europe or the United States. In order to resolve

retail loans secured by securities companies.

strong financial soundness, achieve the sustainable

these issues, margin transactions were establishedgrowth expected of a listed company, and increase

along with loans for margin transactions, whichcash segregated as deposits for customers, weconstitute the funds and stocks required byestablished JSF Trust and Banking, which, sincesecurities companies for such transactions. A

then has made custodial trusts the pillar of its

corporate value over the medium to long term, while
maintaining a keen awareness of the public role

In 1998, following the introduction of trusts forsecurities finance company is a company thatbusiness, and has expanded the scope of its

expected of it as a securities finance company

specializes in providing loans for margintransactions to include crypto assets and foreignfunctioning as infrastructure for the securities market.

transactions and is licensed by the Prime Minister of

exchange (forex) transactions.

Japan. The loans for margin transactions businessIn this way, the JSF Group responds to thehas been JSF’s core business since the Company’s

diverse needs of the securities and financial markets

founding and has served as infrastructure for thethrough a business portfolio including a security

country’s securities and financial markets.

financing business centered on loans for margin

Starting from the public business of loans fortransactions and a trust banking business.

Q. What are your thoughts on the role JSF should play as a securities financecompany, its corporate philosophy, and the Vision for JSF in the Future?
Based on the Company’s original foundation andinfrastructure for the securities and financial markets,

subsequent development, we set forth our corporate

it is necessary to maintain reliable businessphilosophy as follows: “As an institution specializing

management and a high level of financial soundness.

in securities finance, JSF has a mission to contribute

TOP INTERVIEW

4

Shigeki Kushida
Representative Executive Officer & President
Japan Securities Finance Co., Ltd.

Japan Securities Finance Co., Ltd. Integrated Report 2022

The second is that as a company listed on theto the development of the securities market by

Prime Market (a new market classification) of theproactively meeting the diverse needs of the securities

Tokyo Stock Exchange, we must aim to achieve

and financial sectors and to enhance the long-termsustainable growth and increase corporate valueinterests of users, while always maintaining a keenover the medium to long term based on a strong

awareness of its public role.”

governance system.

I believe there are two points to be madeWe are in a unique position as a listed company

regarding the Vision for JSF in the Future that wethat plays a public role, but we will strive to bothare aiming for based on this corporate philosophy.

maintain sound management and increase

The first is that in order to play a public role ascorporate value over the medium to long term.

Japan Securities Finance Co., Ltd. Integrated Report 2022

5About the JSF GroupInterview with the President

Q. Please tell us about the thinking behind the medium-term management policy formulated
and announced in November 2021, and future initiatives based on this policy.
In November 2021, we formulated and announced

margin transactions, in areas that use bonds andthe new medium-term management policy based

stocks. Here, our strategy is to become the mainon our corporate philosophy and Vision for JSF in

player in niche market areas by leveraging JSF’s

the Future. The policy sets forth the medium-term

strengths, such as its high credit rating, neutrality

management goals of attaining an ROE of 4%

that comes from not belonging to any corporate

during the term of the current mid-term
management plan (FY2020–FY2022), and of 5%group, and the agility of a relatively small enterprise.

during the term of the next plan (FY2023–FY2025).

management of the Group. JSF’s subsidiary, JSF

To formulate the ROE target, we estimated theTrust and Banking, has adopted a strategy similar toCompany’s cost of equity capital to be around 4.5%

that of the Company’s security finance business.

using objective data and multiple calculation

Responding flexibly to customer needs in uniquemethods. Accordingly, we set a target of 5% for theand niche areas has enabled it to acquire a large

term of the next plan to exceed this figure. The

share of the custodial trust market, including

initiatives under the current mid-term management

preservation trusts for cash segregated as deposits

plan are steadily starting to show in earnings andfor customers. As a result, JSF Trust and Banking’s

ROE trends, so we intend to accelerate andprofits are trending upward. We are working tostrengthen them. We have established the following

improve the profitability of the entire Group,

three pillars as specific measures to achieve our

including Nihon Building, another JSF subsidiary.

medium-term management goals.

The second is reinforcing consolidated

The third is improving operational efficiency. We

The first is strengthening the securities financewill further improve operational efficiency bybusiness centered on loans for margin transactions.

reviewing business processes such as system

In addition to striving to improve the stable

operation and RPA.*

operation and convenience of this business, we will
effectively utilize the Company’s expertise in
securities and fund transactions to proactively meet
diverse security financing needs other than loans for

Through the above measures, we aim to achieve
our ROE targets while steadily accumulating earnings.
* RPA (Robotic process automation): Automation of routine tasks byusing software robots.

Q. Please tell us more about strengthening the securities finance business centered on loans for
margin transactions, the first pillar for achieving the medium-term management goals.

6

The loans for margin transactions business is where

for stocks by improving the convenience of loans

the Company has its origins as infrastructure for thefor margin transactions and addressing transaction

securities and financial markets. It is one of our coreneeds in various ways.

businesses, accounting for about 30% of gross profit.

As for securities finance business other than loans

The Company has continuously worked to increase

for margin transactions, in recent years we have been

the number of loanable stock issues and strengthenincreasing our transaction balance by actively

the procurement of stock to be used for stock

responding to the rising demand for repo transactions

lending. In addition, for participants in loans for(with a focus on securities (property)) against themargin transactions we provide JSF Net as the

backdrop of collateral transactions and institutional

system infrastructure used for transactions, and weinvestors’ securities investment needs and the rising

are working to improve it. Going forward, we will

demand for multi-currency international

continue to support standardized margin transactionstransactions. We plan to accelerate and strengthen

Japan Securities Finance Co., Ltd. Integrated Report 2022

these efforts by increasing the number of businessmarket fluctuations and are relatively volatile, I

clients, including through further sophistication andbelieve that strengthening the securities financeinternationalization of trading methods.

business will lead to a stronger earnings base forSince earnings from the loans for margintransactions business are susceptible to stock

the Company, and is also important from theperspective of stable management of such loans.

Q. As a securities finance company, JSF is unique in Japan’s financial sector.
Please tell us about the Company’s characteristics and business portfolio.
As a securities finance company, JSF serves asusing actual objective data and multiple calculation

infrastructure for the securities and financial markets.

methods. As infrastructure for the securities market,

It has three specific characteristics.

we are subject to various restrictions in terms of

The first is being licensed as market infrastructure

financial soundness and business scope imposed byunder the Financial Instruments and Exchange Act

laws and regulations, standards for participation inof Japan, and being required to be financially soundsecurities and fund settlement systems, amongso as to enable it to supply securities companies withothers. Therefore, I believe that our cost of capitalthe funds and stock necessary for margin transactions.

is considerably lower than the general level due to

The second relates to the imposition of
restrictions on so-called concurrent business,meaning that, from a legal standpoint, its foremost

our characteristic low business strategy risk andhigh financial and earnings stability.
Based on these characteristics, our businessobligation is to fulfill market infrastructure functions

portfolio is centered on the securities financesuch as providing loans for margin transactions.

business with the loans for margin transaction

Other business is legally permitted only to thebusiness, a licensed business, at its core. However,extent that it does not hinder the stable execution

since this core business is greatly affected by marketof the loans for margin transactions business.

fluctuations, we will continue making efforts to

Finally, as a key player in the market infrastructure,

diversify our revenue sources. In addition, our basic

JSF uses clearing institutions for securities settlements,

policy is to work to achieve management goals

as well as the central bank system for fundwhile staying conscious of the importance of further

settlements, to ensure the reliability of settlements.

improving capital efficiency in each business. Based

The operators of these settlement systems expect

on this approach, the JSF Group’s business portfolio

the Company to be financially sound.

consists of the securities financing businessAs already mentioned, we estimated theCompany’s cost of equity capital to be around 4.5%

centered on loans for margin transactions, securities
investment, trust banking and real estate leasing.

Japan Securities Finance Co., Ltd. Integrated Report 2022

7

About the JSF GroupInterview with the President

Q. What is your approach to shareholder returns?
Our management goal is to achieve an ROE of 5%,

on a cumulative basis from FY2021 throughwhich exceeds the cost of equity capital, by FY2025.

FY2025 including dividend payments and flexible

However, we think that we do not need to accumulateshare repurchases. With regard to dividends,

any more capital for the time being in order toour aim is ambitious: to pay annual dividends

achieve this goal. Based on this view, for shareholder

of at least ¥30 per share from FY2021 throughreturns we are aiming for a total payout ratio of 100%

FY2025 (achieving the ROE target of 5%).

Q. What initiatives are you taking for corporate governance?
In 2019, JSF transitioned to a Company with a

After deliberation by the Nomination Committee,

Nominating Committee, etc. system, thus separating

the Board of Directors conducted a review of various

oversight and execution, with the Board of Directors

aspects of the board, including its composition, andresponsible for making management policy decisions

concluded that there was a need to structure aand overseeing execution, and executive officers

board with multiple layers of complementary skills

responsible for executing management plans. In

in light of matters including changes in the financial

addition, the chairpersons of the Board of Directors,

and economic environment, and recognized thethe Nomination Committee, the Remuneration

importance of balancing the number of supervisors

Committee and the Audit Committee are all outsideand executives, and diversifying board members indirectors. I believe that for corporate Japan this isterms of age and gender.

an advanced governance system.

Based on these thoughts, in June 2022 theFurthermore, with changes to JSF’s operating

number of directors was increased by two, bringing

environment in recent years, such as revisions to thethe total number of directors to seven, of whom five

Corporate Governance Code, the transition to new

are outside directors and two inside directors.

market segments by the Tokyo Stock Exchange, andWith regard to the appointment of executive

further progress in internationalization and digital

officers, after deliberation by the Nominationtransformation, and given that we are about toCommittee, the Board of Directors conducted a

begin formulating and implementing our next

review, identifying the qualities required of executive

mid-term management plan based on the medium-

officers and making specific appointments.

term management policy, we are implementing
various initiatives related to corporate governance.

Furthermore, we established the Corporate
Governance Office with improved functions as thesecretariat of the Board of Directors for more

I intend to continue expeditiously addressing

effective governance and stronger support for thediverse issues in order to achieve the level ofBoard of Directors.

governance expected of a listed company.

Q. What about initiatives for sustainability?
The development of infrastructure that forms theinformation related to climate change in line withfoundation of socio-economic activities is a key

the recommendations of the Task Force on Climate-element in realizing a sustainable society, and is also

related Financial Disclosures (TCFD).

one of the Sustainable Development Goals. The JSF

Regarding social (S) initiatives, we understandGroup provides a variety of services, including thethat enhancing our functions as infrastructure forloans for margin transactions business, as a part ofthe securities and financial markets is necessary forthe infrastructure of Japan’s securities and financial

the realization of a sustainable society, so we will

markets, and works to improve the liquidity of thosebuild a system for stable business operations undermarkets and improve convenience for market

any circumstances. Moreover, to respond to changes

participants. Through these activities, we aim toin the operating environment of the securities andplay a part in initiatives to realize a sustainablefinancial markets, we respect diverse viewpoints

society, including supporting market participantsand values and are striving to ensure the diversity of

who are engaged in similar initiatives.

our core human resources. In addition, we are engaged

Because it is responsible for the infrastructure of

in initiatives such as promoting financial and economic

the securities and financial markets, the Group believes

education and academic research, contributing to

it is important to build a system that provides stableoverseas securities and financial market infrastructure,operations regardless of circumstances. To this end,

and realizing diverse work styles for employees.

we must not only respond to disasters in a narrow

As for governance (G) initiatives, in order tosense, but also ensure the stability and high reliability

strengthen corporate governance we have adopted

of our business base. In addition, we believe thatthe system of a Company with a Nominating Committee,

there are issues in which the Group can also contributeetc., and have established a dedicated department

to sustainability by utilizing the know-how and otherto expeditiously address various corporate governanceresources that it has cultivated over the years.

issues. In addition, we are conducting initiatives for

As specific initiatives for the environment (E), we

risk management, BCP and compliance.

will promote reduction of environmental impact inWith constant awareness of our social responsibilities

ways such as improving Company equipment withas a securities finance company, we will work in various

energy savings and environmental impact in mind

ways to achieve sustainable growth and increase

and making various in-house operations paperless.

corporate value, including through sound businessWe are also working to enhance the disclosure ofpractices that establish unwavering social trust.

Q. To sum up, do you have a message for readers of this report and stakeholders?

8Japan Securities Finance Co., Ltd. Integrated Report 2022

We are now moving toward realization of the Visionbusiness and to develop efficient business operations,

for JSF in the Future described in our medium-term

I aim to push for results that will lead to achievement

management policy. FY2022 is the final year of theof our management target for ROE of 5% by FY2025.

Sixth Mid-term Management Plan. As we continue to

We will continue to increase corporate value as

accelerate the positive trend of existing initiatives

a distinctive and unique financial institution, therefore

to expand and strengthen the securities and financeI ask for your ongoing understanding and support.

Japan Securities Finance Co., Ltd. Integrated Report 2022

9About the JSF Group

History of the Group
70 years of involvement in the development of Japan’s securities market
Established in 1950 as an institution specializing in securities finance, JSF has provided infrastructure functions forJapan’s securities market for more than 70 years through its core loans for margin transactions business. In addition,
we have developed various services related to securities finance by keeping abreast with the evolution in customer
needs resulting from changing conditions in the securities and financial markets.

1950–1965

1965–1980

1980–1995

1995–2013

2013–

History of Japan’s Securities Market
Postwar period of higheconomic growth

Economic turbulence with successive
booms and busts

1951∙ Margin transaction system established

1965–1970∙ Postwar boom continues

1954–1961∙ Postwar boom

1966
∙ Long-term government bonds issued for the firsttime after World War II, leading to significant
expansion of the public and corporate bond market
1968∙ Transition of securities companies tolicense system
1971∙“
 Nixon Shock” resulting from suspension of
the gold standard for foreign exchange
and implementation of surcharges on imports by
the United States
1973∙F irst oil crisis

Securities market progresses rapidly

Globalization of securities and financial markets

1985∙ Conclusion of the Plaza Accord aimed atdepreciating the strong U.S. dollar

1997∙Y amaichi Securities Co., Ltd. and Sanyo
Securities Co., Ltd. cease operations

1986–1991∙ Japanese asset price bubble

1998∙ Implementation of the revised Securities andExchange Act (current Financial Instruments andExchange Act)

1987
∙ Global decline in stock prices starting with
the Black Monday crash of the New York
Stock Exchange
1989∙ The Nikkei Stock Average hits a record high of¥38,915 at the peak of the bubble
1991∙ Decline in stock prices and the collapse of the
bubble triggered by tension in the Middle Eastcaused by the Iraqi invasion of Kuwait in 1990

∙ Implementation of the “Japanese Big Bang”
financial system reforms, including liberalizationof stock brokerage commissions and theapproval of negotiable margin transactions
2000∙D ot-com bubble bursts in the United States
2001∙B ank of Japan introduces quantitativeeasing policy

Toward the realization of a sustainable
society and economy

2008∙G lobal recession due to the collapse of
Lehman Brothers triggered by the subprime
mortgage crisis

2013∙E stablishment of the Japan Exchange Group, Inc. throughthe market and management integration of the Tokyo Stock
Exchange and Osaka Stock Exchange

2011∙T he Japanese economy suffers a slowdown due
to the power shortage caused by the Great East
Japan Earthquake and subsequent nuclear power
plant disaster2016∙B ank of Japan adopts negative interest-rate policy
2018∙ J apanese government bond settlement cycle is shortened to
T+1 (transaction date plus one day)2012∙T he Liberal Democratic Party wins a big victoryin the House of Representatives election, andthe economic policies of then-Prime Minister
Abe (“Abenomics”) cause the yen to depreciateand stock prices to rise

2019∙S
 tock settlement cycle is shortened to T+2 (transaction dateplus two days)
2020∙S tagnation of the global economy due to the
COVID-19 pandemic∙T he Dow Jones Industrial Average of the New
York Stock Exchange plummets following the
9/11 terrorist attacks

1979∙S econd oil crisis due to the Iranian Revolution

2022∙R estructuring of the Tokyo Stock Exchange market segments

History of JSF

Launching JSF andestablishing its foundation

Supporting the securities market during
Japan’s period of high economic growthwith institutional financing

1950∙ Launched operations as a specialized securities
finance institution

1968∙ L aunched bond financing business to facilitatebond underwriting and circulation

1951∙ Launched margin loan business with theestablishment of a margin transaction system

1977∙ L aunched general stock loan business forlending stock to securities companies to covershortfalls caused by delays in obtaining delivery
stock for trading, etc.

1955
∙ Established branch offices by acquiring entire
business operations of securities financecompanies in Hokkaido, Niigata, and Fukuoka∙C ompletion of head office building1956∙ Granted securities finance license under arevision of the Securities and Exchange Act

10Japan Securities Finance Co., Ltd. Integrated Report 2022

Playing a role as a stable source of funds and securities even during periods of market stagnation suchas the bursting of the economic bubble and global financial instability, and responding to the reform of
the securities and financial trading system
1985∙ Launched secured loans using a revolving credit
line format that accepts securities deposited bycustomers at securities companies as collateral

1996∙ L aunched bond repo transactions

1987∙ Launched trading via JSF Online System after
developing a network with securities companies

2003∙ L aunched securities-backed “COM-STOCK
LOANS” through the internet

1989∙ Launched bond borrowing and lendingtransaction brokerage business with securities
companies and financial institutions as customers∙ First commercial paper (CP) issued as afinancial institution

1998∙E stablished JSF Trust and Banking Co., Ltd.

2004
∙ Launched loans for margin transactions businessfor the JASDAQ market∙ Renewed JSF Online System and launchedtrading via JSFNET
2005∙ Launched loans to securities companies required
for negotiable margin transactions

Taking on new challenges for the
future of the securities market

2013∙M erged with Osaka Securities Finance Co., Ltd.
2019∙T ransitioned to a Company with a Nominating Committee, etc.
∙ L aunched loans for margin transactions business for
proprietary trading systems (PTS)2020∙ Investment in an Indonesian securities finance company∙S tart of the Sixth Mid-Term Management Plan
(FY2020–FY2022)
2022∙M oved from the Tokyo Stock Exchange First Section to thePrime Market∙ L aunched fund administration services

Japan Securities Finance Co., Ltd. Integrated Report 202211About the JSF GroupAt a Glance
JSF Group’s Business
The JSF Group is a corporate group that operates in sync with the securities and financial markets. The Group
comprises Japan Securities Finance, which responds to the diverse needs of financial institutions and investors as aprovider of securities market infrastructure, JSF Trust and Banking, which deploys highly distinctive trust services,and Nihon Building, which provides favorable office environments for Group companies and other companies.

Providing various trust services forthe development of the securities
finance market

Stable Credit Ratings

R&I, JCR

S&P

AA– A

Only one in Japan
JSF is the only securities finance company inOver the years, we have secured high credit

Japan that has been licensed to conduct a

ratings, including an AA rating from twoloans for margin transactions business underJapanese rating agencies and an A rating

the Financial Instruments and Exchange Act.

from foreign rating agencies.

Nihon Building Co., Ltd.

JSF Trust and Banking Co., Ltd.

Trust banking business

Loans for Margin
Transactions Business

Real estate leasing business2.8%¥0.8 billion

Providing favorable office environments forGroup companies and other companies

9.1%¥2.7 billion

Business Partners

Network with domestic
and overseas financial
institutions
We are building business relationships withdomestic and overseas financial institutions
and institutional investors such as securities
companies, banks and insurance companies.
We also provide financial services for generalbusinesses and individual investors.

FY2021

Shareholder Returns

97.6%(FY2021)

We are aiming for a total payout ratio of 100%on a cumulative basis from FY2021 throughFY2025 (achieving the ROE target of 5%)
through dividend payments and flexible
implementation of share buy-backs.

Consolidated operating
revenue

30.1billion

Characteristics of a Securities Finance Company¥• Role as an Administrator of Loans for Margin Transactions
A securities finance company serves in an institutional role of accepting loan applications from securities companies,

88.1%¥26.5 billion

and therefore must maintain a strong financial base and a high credit rating to ensure it has the fund-raisingcapabilities necessary for lending funds and securities.

• Restrictions as a Company Licensed under the Financial Instruments and Exchange Act
Aside from the loans for margin transactions business, a securities finance company is legally permitted to operate

Securities finance business
Lending funds and securities tofinancial institutions, mainly loans for
margin transactions

Japan Securities Finance Co., Ltd. (JSF)12Japan Securities Finance Co., Ltd. Integrated Report 2022

other businesses only to the extent that they do not impair the operation of the loans for margin transactions
business and the risk of such businesses is small. Other restrictions include those on M&A.

• Business Operation through Participation in Settlement Systems
Delivery of securities, including loans for margin transactions, is legally permitted at clearing houses, and settlementof funds is conducted through the central bank system. Therefore, in order to remain eligible to participate in these
settlement systems, it is necessary to maintain a shareholders’ equity ratio above a certain level.

Japan Securities Finance Co., Ltd. Integrated Report 202213

About the JSF Group

Value Creation Process
External environment/Business environment

Corporate Philosophy• Population decline/aging• Globalization• Progress of digitalization• Changes in the investment stanceAs an institution specializing in securities finance, JSF has aof institutional investors/Growing
number of individual investors• Restructuring of market segments/
Corporate Governance Code/
Stewardship Codemission to contribute to the development of the securities

Vision for JSF in the Future

market by proactively meeting the diverse needs of theMaintain strong financial soundness while functioning as
securities market infrastructure

securities and financial sectors and to enhance the long-term
interests of users, while always maintaining a keen awarenessof its public role.

Achieve sustainable growth and medium- to long-term
enhancement of corporate value as expected of a listed company

Management CapitalBusiness Model

Mid-Term Management Plan/Material Issues

Financial Capital

Japan’s only company that handles loans for
margin transactions and securities financing tomeet the needs of investors

The Sixth
Mid-Term
Management
Plan• High degree of financial soundness
External credit ratings
R&I:AA – JCR:AA – S&P: A• Enhance the loans for margin transactions business as partof securities market infrastructure	Shareholders’ equity ratio (based on FIEA)
348% (March 31, 2022)

Securities Finance BusinessIntellectual Capital• Risk management expertise accumulated
over many years• Ability to build securities finance services• Stable and highly productive operational
systemLoans for Margin
Transactions
Licensedbusiness• Expand and enhance the securities finance business• Develop and realize new business iversify securities investment as an efficient use of capital•D• Strengthen the business management structure• S trengthen our competitive base through efficient business operation• Facilitate diverse work styles and make JSF more dynamic

Securities
Investment

Securities
Financing

Material Issues

E• T alent that can build risk management
and securities finance services
Number of employees: 264 (consolidated)

Trust Banking
Business

Real Estate Leasing
Business• Long track record of operating thefinancial institutions and institutional
investors such as securities
companies, banks andinsurance companies

S
G

Governance• S trive to enhance governance as a Company
with a Nominating Committee, etc.
• Implement the risk appetite framework (RAF)• S tably operate business that is not affectedby disasters, etc. (BCP) perate business based on a high awareness•Oof compliance• Business operations throughparticipation in the settlement
systems of central banks andclearing houses

14

Japan Securities Finance Co., Ltd. Integrated Report 2022

Management Foundation
Risk Appetite Framework (RAF)
Cyber Security

Business Continuity Plan (BCP)

Corporate Governance

Environmental• Reduce environmental impact
Social• P romote academic research activities andfinancial and economic education activities• P romote diversity and develop human resources• R espect human rights and prohibit discrimination• E nhance functions as infrastructure forJapan’s securities and financial markets
 ontribute to overseas securities and•Cfinancial market infrastructure

securities finance business• Network of domestic and overseas

Contributing tomarket liquidity

Other

Human CapitalSocial and Relationship Capital

Value Provided

Highly resilient, stablebusiness operations

Responding to clientneeds in response tochanges in the securities
and financial markets

Japan Securities Finance Co., Ltd. Integrated Report 202215

About the JSF Group

Business Model
Securities Finance BusinessSee page 28 for details.

Operating the loans for margin transactions business, which is one of
the infrastructure functions of the securities market, and developing
securities financing to meet customer needs

Securities Financing
Consisting of five business areas, securities financing is the generic term we use for the business of lending securities and thebusiness of lending of funds backed by securities. We are promoting securities financing as one of our growth engines, andare also working to expand our services by increasing the number of business partners we work with, including foreign financial
institutions, and by diversifying securities handled to include
Transactions in which
Transactions backed byforeign stocks and foreign government bonds.
securities are lentsecurities, etc.

Loans for Margin Transactions Business

Loans to Financial Instrument Companies

The loans for margin transactions business contributes to the smooth circulation of stocks and the formation of appropriate
prices. We lend securities companies the funds and stock certificates necessary for margin transactions.

We are responding to the diversification of financing
methods of securities companies through transactions suchas those in which stocks are used as collateral when lending
funds to securities companies (general loans), and those inwhich cash is deposited in exchange for borrowing stock
held by a securities company (equity repo transactions).

Margin Transactions

Loans for Margin Transactions

In margin transactions, an investor pledges a certain amountof security deposit (brokerage margin) to a securities
company as collateral (1), borrows the funds required forpurchase or the stock required for sale from the securities
company (2), and buys or sells shares. Under this system, it
is possible to buy stocks with an amount exceeding theamount of funds on hand and sell stock certificates thatare not held, adding depth to transactions and contributing
to the smooth circulation of stocks and the formation of
appropriate prices.
There are two types of margin transactions: standardized
margin transactions and negotiable margin transactions.
In standardized margin transactions, the premium charges
and repayment deferral deadline are stipulated by the stock
exchange, and the securities company can borrow thestocks to be sold and the funds to be purchased from asecurities finance company (loans for margin transactions).
In negotiable margin transactions, the term terms can be
freely determined between the customer and the securities
company, but the securities company cannot use loans for
margin transactions to settle negotiable margin transactions.

Loans for margin transactions are a financing scheme inwhich a securities finance company lends funds and stock
certificates necessary for standardized margin transactions
to securities companies that participate in trading on a stock
exchange. These margin loans are conducted through clearing
facilities such as a stock exchange.
This business may only be carried out by a securities
finance company licensed by the Prime Minister. JSF
conducts the loans for margin transactions business on eachstock exchange market (Tokyo, Nagoya, Sapporo, Fukuoka)
and on proprietary trading systems (PTS).
JSF receives a loan application (3) and collateral for themargin transaction (4) for each stock issue from the securities
companies. To execute the loan (5), JSF, in place of the
securities company, delivers the loaned funds or stocks tothe clearing facilities of the stock exchange (6) and in return,the stock purchased (collateral stock for loan) or proceedsfrom the sale (collateral money for stock loans) is received
by JSF (7) and then the collateral for each is appropriated.

Structure of Margin Transactions and Margin Loans
Standardized Margin Transaction

Loan for Margin Transaction

Receipt of loan application (3)Securities
company

Deposit of brokerage margin (1)Deposit of collateral for margin transaction (4)Lending of funds for purchasing stock or
lending of stock for selling of stock (5)Lending of funds for purchasing stock or
lending of stock for selling of stock (2)
(6)

(7)

Receipt of purchased stock orsales proceeds

Stock Exchange Clearing
Facilities (JSCC)

JSF

Customer

Placement of trade consignment order

Bond Lending
Bond lending is the business of matching (brokering) various
financial institutions’ lending needs and borrowing needs,
mainly for government bond repo and gensaki transactions(transactions in which bonds are exchanged for cash).

General Stock Lending
General stock lending is the business of procuring stockfrom institutional investors and others, and lending it tosecurities companies that mainly require it for trading, thus
contributing to the stability of the settlement system.

Trust Banking BusinessJapan Securities Finance Co., Ltd. Integrated Report 2022•

 Loans to financial
instrument companies• Loans for negotiable margin transactions Loans to retail••

Loans for Negotiable Margin Transactions
While margin loans provide funds and stocks necessary forthe settlement of standardized margin transactions, thebusiness of loans for negotiable margin transactions
involves lending funds to securities companies to enable
them to purchase stocks in negotiable margin transactions.

Loans to Retail
These are transactions that involve lending funds toindividual investors and others, using stock as collateral.
The main service in this business is COM-STOCK loans(securities-backed loans that can be transacted online). We
make effective use of our assets to help meet the financial
needs of our customers.

See page 32 for details.

Providing services such as segregated management of customer assets
required by securities companies, based on a management philosophy ofcontributing to the development of the securities market
Trusts for Cash Segregated as Deposits

Other Customer Asset Preservation Trusts

Under the Financial Instruments and Exchange Act,securities companies are obliged to manage customer
assets separately. Since its establishment, the trust banking
business has been a focus based on JSF Trust and Banking’s
management philosophy of contributing to the securities
market as a trust bank in the JSF Group closely connectedwith the securities industry. The number of customers isamong the highest in the industry in Japan, with many
securities companies using the service.

Segregated management of customer assets is required invarious fields outside the securities industry. Utilizing theexpertise cultivated in trusts for cash segregated as deposits
for customers, we offer a wide range of products which areavailable to customers across industries, such as foreignexchange margin trusts, contract for difference (CFD)/
overseas futures margin trusts, crypto asset-related trusts,
crowdfunding payment trusts, specified joint real estate
venture trusts and performance security deposit trusts.

ABL Trusts (Loans for Trust Accounts)

Securities Trusts

We function as a segregated portfolio company (SPC) fortrusts when an asset-backed loan (ABL) is arranged as aninvestment product for institutional investors by a securities
company acting as an arranger. Since we started handling
this service in 2009, a wide variety of investment products
have been created through arrangements by multiple
arrangers, and are used by many institutional investors.

We provide securities management trusts and investment
trusts to customers, mainly financial institutions and generalbusinesses that hold securities. These trusts are used to savelabor and reduce costs related to the management and custodyof customers’ stocks and other holdings, and to improve
investment performance through stock lending operations.

Real Estate Leasing Business16 General stock lending Bond lending•

See page 33 for details.

Japan Securities Finance Co., Ltd. Integrated Report 202217