(TRANSLATION)

Report of Compliance with the Principles for Financial
Benchmarks by the International Organization of Securities
Commissions

For the period from July 1, 2022 to June 30, 2023

Nikkei Inc.

(TRANSLATION)

Contents

Section 1.

IOSCO Principles and Nikkei Indexes

Section 2.

Management Statement

Section 3.

Independent Assurance Report

Section 4.

Nikkei’s Responses to Comply with IOSCO Principles

Disclaimers
1. This report (the “Report”) is prepared to provide information regarding
compliance of the indexes calculated and provided by Nikkei Inc. with the“Principles for Financial Benchmarks” by the International Organization of
Securities Commissions (IOSCO). The recipient of the Report is responsible
for the use of this Report and Nikkei assumes no responsibility.
2. The recipient of this Report shall not reproduce and/or reprint without priorconsent of Nikkei.
3. This Report is originally prepared in Japanese. The English version isprovided for reference purposes. When and if there is a discrepancy
between the Japanese and the English versions, the Japanese version should
be considered the definitive document.

(TRANSLATION)

Section 1.
IOSCO Principles and Nikkei Indexes

(TRANSLATION)

1. Introduction
In July 2013, the International Organization of Securities Commissions (IOSCO) released
the final report on “Principles for Financial Benchmarks” (“IOSCO Principles” or the“Principles”). IOSCO states in the report that the Principles are intended to promote thereliability of benchmark determinations and enhance benchmark governance, quality, andaccountability mechanisms. The Principles have been released backed by the needs tocontrol conflicts of interest and improve transparency of the operation of the wide rangeof financial benchmarks as triggered by the attempted manipulation of the interest ratebenchmarks based on submitted data.

The Principles also require benchmark

administrators to disclose the status of their compliance with the Principles annually.
Nikkei Inc. (Nikkei) has been declaring the status of its compliance with the Principles
regarding the indexes, such as the Nikkei Stock Average, which Nikkei calculates andpublishes since July 2014 through its Official Index Website.

Nikkei redefined andreconstructed the responses for compliance in a rigorous manner in 2019, and it has been
receiving assurance regarding the design, implementation and operating effectiveness of
its responses for compliance with the Principles from Deloitte Touche Tohmatsu LLC (DTTL)
and releasing the Report. The details of Nikkei’s responses to each item of the Principles
and examinations performed by DTTL are presented in Section 4.

2. History of the Nikkei Indexes
After World War II, the Tokyo Stock Exchange (TSE) started to calculate and publish the “TSE
Adjusted Average” in September 1950. This index was an average price of 225 stocks listed
in the TSE and the denominator (divisor) was adjusted to maintain the continuity upon thecorporate actions of the issuing parties and/or the changes in the constituents.
Nikkei’s involvement in the index business started when the TSE ceased to publish its
Adjusted Average in 1970 and succeeded its calculation and publication with its groupcompanies. The calculation method of the index was similar to that of the Dow Jones
Industrial Average in the United States.

Since the index was widely known as “Dow

Average” in Japan, Nikkei acquired the right to use the “Dow” brand from Dow Jones &Company, Inc. and officially named it as the “Nikkei Dow Average” in 1975. The index was
renamed to the Nikkei Stock Average (the “Nikkei Average” or “Nikkei 225”) in May 1985 tothe present time.
2

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The first use of the Nikkei 225 for financial instruments was in futures contracts. The first
futures contract was listed in the Singapore International Monetary Exchange (currently, theSingapore Exchange or SGX) in September 1986.

Then, the Osaka Securities Exchange(currently, the Osaka Exchange) and the Chicago Mercantile Exchange followed in 1988 and1990, respectively. Recently, B3 exchange of Brazil was added, and the Nikkei 225 futures
are actively traded in these 4 markets.
Since the late 1980’s, so-called passive investments have become popular, and theinvestment funds linked to the performance of the indexes (index funds) have increasingly
established.

In 2001, listed versions of passive funds which can be traded similar toordinary stocks, referred to as an Exchange Traded Fund (ETF), was introduced in Japan. In
the over-the-counter markets in Europe, a variety of non-listed products linked to the Nikkei
225 are actively developed and created.
The Databank Bureau, a division in Nikkei, which provided information services for financial
institutions and corporations, was initially responsible for the administration of the Nikkei
indexes such as the Nikkei 225. After the separation of the division as a new company,
Nikkei established the “Index Business Office,” which is an independent organization within
headquarters, in 2010, and it currently retains primary responsibility for all aspects of theindex administration.
The Index Business Office accelerated the development of new indexes. In the same yearof its establishment, the Nikkei Stock Average Dividend Point Index and Nikkei Stock
Average Volatility Index were launched.

The Dividend Point Index is an index whichaccumulates the dividends paid by the Nikkei 225 constituents. The Volatility Index is anindex to measure the estimated future fluctuation rate of the market as evaluated in theoptions market. In 2011, to measure the performance of specific investment strategies,
the “Nikkei Stock Average Strategy Index Series” was created. Under this new brand name,four new indexes, such as the “Nikkei 225 Leveraged Index,” were released.
In 2014, Nikkei, the Japan Exchange Group and the TSE (currently JPX Market Innovation &Research, Inc.) jointly developed a new index, the JPX-Nikkei Index 400, focusing on thehigh appeal for investors and corporate governance.

In 2017, the JPX-Nikkei Mid andSmall Cap Index, an index that has the same concept of the JPX-Nikkei Index 400 and iscomposed of companies with middle and small market capitalization, was added. In thesame year, Nikkei also launched the Nikkei High Divided Yield Stock 50 Index, which is an3

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index of the stocks with high dividend yield selected from the Nikkei 225 constituents.
In response to the development of the Asian economy, Nikkei’s editors selected 300 leading
Asian companies and grouped them as the “Asia 300”. At the end of 2017, Nikkei launched
the Nikkei Asia300 Investable Index, which employs numerical methodologies based on theconcept of the “Asia300” and is intended to be used for financial instruments.
To meet the market demand, Nikkei continued to develop new indexes. In 2020, Nikkei
released two indexes focusing on the REIT market. The Nikkei ESG-REIT Index isincorporating the ESG factors in the weight of the constituents and the Nikkei High Yield
REIT Index is composed of the REITs with high dividend yields. In 2022, in collaboration with
U.S. Wilshire, a global investment technology and advisory company, Nikkei developed the“Nikkei 225 Climate Change 1.5°C Target Index” which is compliant with the EU Parisaligned benchmarks standards.
Nikkei is a major index provider in Japan, and its indexes calculated and published are
disseminated globally by domestic and international information vendors and are widely
accepted by financial institutions as well as individuals.

As the use of Nikkei indexes havebecome global, Nikkei was granted Recognition under the EU Benchmarks regulation in
May 2020, as the first Japanese index provider. Also from 2020, to ensure transparency andreliability of its indexes, Nikkei introduced “Consultation” to receive feedback from users on
proposed significant changes to the indexes. Based on the results of such consultations,
Nikkei introduced the Weight cap on the constituents of the Nikkei 225 and increased thenumber of periodic reviews from once to twice a year. Nikkei is committed to enhance index
reliability and improve the quality of the index as a benchmark used in the financial
community.
For more information regarding the Nikkei’s Index business and each index, please visit
the Official Index Website at the following URL. https://indexes.nikkei.co.jp/en/nkave

Chronology (selected items)
1950

⚫

1970

⚫

The TSE started calculation and publication of the TSE Adjusted Average,
now known as the Nikkei Stock Average. (September)Upon discontinuation of the TSE Adjusted Average, Nikkei with its groupcompanies succeeded the index. (July)

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1975

⚫

1985

⚫

⚫

1986

⚫

1988

⚫

1989

⚫

1990

⚫

1993

⚫

2000

⚫

2001

⚫

2006

⚫

2007

⚫

2010

⚫

⚫

⚫

⚫

⚫

Nikkei entered into an exclusive agreement with Dow Jones and Company
and named the index as Nikkei Dow-Jones Stock Price Average. (May)With an agreement of the Dow Jones and Company, Nikkei renamed theindex as the Nikkei Stock Average. (May)
Nikkei started the real time calculation (1 min. interval) of the Nikkei Stock
Average. (October)
Futures contracts on the Nikkei Stock Average started trading in the
Singapore International Monetary Exchange (currently known as SGX,
Singapore Exchange). (September)
Futures contracts on the Nikkei Stock Average started trading in the Osaka
Securities Exchange. (September)
Options contracts on the Nikkei Stock Average started trading in the Osaka
Securities Exchange. (June)
Futures and options on the futures contracts on the Nikkei Stock Average
started trading in the Chicago Mercantile Exchange. (September)
Nikkei started calculation and publication of the Nikkei Stock Index 300(Nikkei 300). (October)
Nikkei revised the constituents reshuffle rule and changed the constituents
accordingly. (April)
The Nikkei Stock Average Exchange Traded Funds (ETF) started trading in the
TSE and the Osaka Securities Exchange. (July)
First overseas ETF on the Nikkei Stock Average started trading in Germany.
(July)
Nikkei separated the Electronic Media Bureau to form Nikkei Digital Media
Inc. who succeeded the index operation. (January)
Nikkei newly established the Index Business Office” within Nikkei Inc. andsucceeded the index operation and management from Nikkei DigitalMedia. (January)
Calculation intervals of the Nikkei Stock Average shortened to 15 seconds.
(January)
Nikkei started calculation and publication of the Nikkei 225 Dividend Point
Index (April), and futures contracts on the index started trading. (June in SGX
and July in the TSE)
Nikkei started calculation and publication of the Nikkei Stock Average
Volatility Index. (November)
The Tokyo Financial Exchange (TFX) started Exchange Equity Index Margin

5

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Contracts trading, targeted to Nikkei Stock Average. (November)
2011

⚫

2012

⚫

⚫

⚫

2014

⚫

⚫

⚫

⚫

2016

⚫

2017

⚫

⚫

⚫

⚫

2019

⚫

⚫

⚫

Nikkei started calculation and publication of the Nikkei Stock Average
Strategy Index Series (Nikkei 225 Covered Call Index, Nikkei 225 Risk Control
Index, Nikkei 225 Leveraged Index, and Nikkei 225 Inverse Index). (June)
The Osaka Exchange started trading the futures contracts on the Nikkei
Stock Average Volatility Index (February).
Nikkei started calculation and publication of the Nikkei 225 Total Return
Index (December).
Nikkei started calculation and publication of the Nikkei 225 VI Futures Index
based on the futures prices of the Nikkei Stock Average Volatility Index(December).
Nikkei, Japan Exchange Group, Inc. (JPX), and the TSE started calculationand publication of the jointly developed JPX-Nikkei Index 400. (January)
Nikkei started calculation and publication of the Nikkei 225 Double Inverse
Index. (June)
The Osaka Exchange started trading the futures contracts on the JPX Nikkei
Index 400. (November)
Nikkei started calculation and publication of the Nikkei 225 Currency
Hedged Indexes (USD and EUR). (December)
Nikkei started calculation and publication of the Nikkei Asia300 Index (forreporting) based on the blue-chip companies chosen from 11 countries andregions in Asia. (December)
Nikkei started the calculation and publication of the Nikkei 225 HighDividend Yield Stock 50 Index. (January)
Nikkei and the TSE started the calculation and publication of the jointly
developed JPX-Nikkei Mid and Small Cap Index. (March)
Calculation intervals of the Nikkei Stock Average became every 5 seconds
from 15 seconds. (July)
Nikkei started the calculation and publication of the Nikkei Asia300
Investable Index (JPY and USD), which is comprised of 300 Asian listedcompanies and intended to be used for financial instruments, such as
investment trusts. (December)
Nikkei started the calculation and publication of the Nikkei 225 EstimatedDivided Point Index. (March)
Nikkei started the calculation and publication of the Nikkei 225 Domestic
Exposure 50 Index and the Nikkei 225 Global Exposure 50 Index. (April)Singapore Exchange started trading of the Nikkei 225 total return futures.
6

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⚫

2020

⚫

⚫
⚫

⚫

2021

⚫

⚫

⚫

2022

⚫

⚫

⚫

⚫

2023

⚫

B3 Brazil Stock Exchange started trading of the Nikkei 225 futures(November)
Nikkei was granted “Recognition” as the first Japanese index provider under
the EU Benchmarks Regulation (May)
Nikkei introduced Consultation for significant changes to its indexes (May)
Nikkei partially revised the constituent selection rules of the Nikkei 225(June)
Nikkei started calculation and publication of the Nikkei ESG-REIT Index and
the Nikkei High Yield REIT Index (July)
Index consultation regarding the changes to the presumed par value etc.
(May)
Cessation of calculation of the Nikkei China Related Stock 50, the Nikkei
Japan 1000, and the Nikkei All Stock Index (June)
Nikkei announced amendments to the methodologies of the Nikkei 225
based on the results of the consultation (July).
Cessation of calculation of the Nikkei JASDAQ Stock Average as a result of
the market reform of the Tokyo Stock Exchange (April).
Index consultation regarding introduction of “Weight Cap” to the Nikkei
225(May).
Nikkei started calculation and publication of the Nikkei 225 Climate Change
1.5°C Target Index (May).
Nikkei announced amendments to the methodologies and constituent
selection rules, such as introduction of Weight cap on the constituents of
the Nikkei 225 based on the results of the consultation (July).
Index consultation regarding the “stepwise addition” of the Nikkei average
constituents (May).

⚫

Nikkei started calculation and publication of the Nikkei Consecutive
Dividend Growth Stock Index and Nikkei Progressive and High Dividend
Stock Index (June)

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3. Scope of the Indexes
Among the indexes calculated and provided by Nikkei, this Report of Compliance covers
the following indexes, mainly those used for financial instruments (“Nikkei Indexes”). The
list may be reviewed from time to time, and new indexes may be added.
Nikkei Stock

Nikkei Stock Average (Nikkei

It is a leading Japanese equity index

Average

Average, Nikkei 225)

widely used globally comprised of 225
stocks in the first section of the TSE andcalculated as a price-weight index.

Nikkei 225 Total Return Index

It measures the performance of the
Nikkei225

that

includesboth

movements in the index level andreinvestment of dividend income fromits component stocks.
ClimateNikkei 225 Climate Change

Developed in collaboration with U.S.

Change Index

1.5°C Target Index

Wilshire, the index is based on the
Nikkei 225 and comply with the EU
Paris Aligned Benchmark standards(PAB).

Nikkei Stock

Nikkei 225 Covered Call Index

It measures the performance of the

Average“Covered Call strategy” based on theStrategy

Nikkei 225.

Index Series

Nikkei 225 Risk Control Index

Volatility of the index based on the
Nikkei 225 is set lower than the Nikkei
225 and controlled within a limited
range.

Nikkei 225 Leveraged Index

It provides a doubled return of the
Nikkei 225. When the Nikkei 225 rises
by 1%, it rises by 2%.

Nikkei 225 Inverse Index

It provides the inverse return of the
Nikkei 225. When the Nikkei 225 rises
by 1%, it falls by 1%.

Nikkei 225 Double Inverse

It provides a doubled inverse of the

Index

return of the Nikkei 225.

When theNikkei 225 rises by 1%, it falls by 2%.

8

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Currency

Nikkei 225 USD Hedged Index

Hedged Index

They measure the return of the Nikkei
255, eliminating the effect of changes
in foreign currency rates when the
Nikkei 225 is held in foreign currencies.
They represent the mixed positions of
the Nikkei 255 investment in currencies
other than JPY and the relevant

Nikkei 225 EUR Hedged Index

currency hedged transactions.

The

indexes based on the Nikkei 255 Total
Return Index is also calculated andpublished.
Volatility

Nikkei Stock Average Volatility

It measures the future fluctuations of

Index

Index

the

Nikkei225

anticipatedbyinvestors. It is based on the prices of
the Nikkei 225 futures and Nikkei 225
options traded in the Osaka Exchange.
Nikkei 225 VI Futures Index

It is designed to reflect the daily pricefluctuation of a position that combines
the near-term and the next-term Nikkei
Stock Average Volatility Index Futures(traded in the Osaka Exchange) prices
at specified weights. The weights areadjusted daily to keep the maturity ofthecombined

futurecontracts

constant as the term exact one month.
Smart Beta

Nikkei 225 High Dividend Yield

It is comprised of 50 high dividend

Index

Stock 50 Index

yield stocks selected from the Nikkei
225 constituents.

The index is

calculated based on the dividend yieldweight method".
Dividend

Nikkei 225 Dividend Point

It

is

an

index

that

accumulates

Point Index

Index

dividends received from the companies
when investors are supposed to holdthe constituents of the Nikkei Stock
Average (Nikkei 225) on a calendar year
basis, i.e. January to December in a
year.

The index is calculated by
9(TRANSLATION)

substituting each actual dividend pershare into the formula of the Nikkei 225
every time each dividend value is fixed.
The index is expressed with a year since
the index is calculated by accumulating
the dividends every calendar year basis.
Nikkei REIT

Nikkei ESG-REIT Index

Index Series

It is a REIT index comprised of the REITs
listed on the Tokyo Stock Exchange
weighted by “Market Capitalization
adjusted by ESG Factor Methodology”.
The ESG factor is based on the ESG
evaluation rating by GRESB.

Nikkei High Yield REIT Index

It is a REIT index comprised of highyield REITs calculated by "Market Cap
multiplied

by

Yield

Weight

Methodology”.
Nikkei Asia

Nikkei Asia300 Investable Index

It is comprised of 300 Asian listed

Index

(JPY)

companies and intended to be used forfinancial instruments.

By convertingthe criteria for selecting the “Asia300”
companies for the editorial purposes
into numerical standards, 300 stocks
Nikkei Asia300 Investable Index(USD)

are chosen from 10 countries andregions in Asia: China (excluding ClassA stocks), Hong Kong, Taiwan, South
Korea, Indonesia, Malaysia, Philippines,
Singapore, Thailand, and India.

It iscalculated by the free float adjusted
market value method.

10

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4. Nikkei’s basic policy for compliance with the IOSCO Principles
Nikkei, with its corporate creed of “fair and impartial”, is a leading Japanese media
organization, which evolved as a newspaper publisher with a history of over 140 years.
Its basic values are also reflected in the indexes calculated and published by Nikkei, suchas the Nikkei Stock Average. As a media company, Nikkei excludes external influences
and provides reliable information to the public. These values constitute the basis ofcompliance with the IOSCO Principles.
Constituents selection and calculation of the Nikkei Indexes are administered based on
the methodologies made public, and their high transparency is a key characteristic.
These indexes are calculated automatically using quoted market prices and pre-defined
formulas by computers, and no subjective judgement is involved. Nikkei has establishedindex administration policies: “General Polices for Nikkei Index Administration,” “Policies
for Nikkei Index Cessation and Transition,” and “Policies for Nikkei Index Complaints
Procedures.”

11

(TRANSLATION)

Section 2.
Management Statement

(TRANSLATION)Management Statement

August 31, 2023

Nikkei Inc.
President and CEO
Tsuyoshi Hasebe

Nikkei Inc. is responsible for appropriately implementing and fairly describing the
responses to comply with the Principles for Financial Benchmarks published by theInternational Organization of Securities Commissions dated July 2013 (the "IOSCO
Principles").
In addition, Nikkei Inc. is responsible for appropriately designing and effectively operating
the responses to comply with the IOSCO Principles.
We express that:(a) The accompanying description in Section 4 fairly presents our policies and procedures
to comply with the IOSCO Principles during the period from July 1, 2022 to June 30,2023.
(b) The responses described in Section 4 to comply with the IOSCO Principles areappropriately designed and effectively operated regarding the indexes described in
Section 1 during the period from July 1, 2022 to June 30, 2023.

The above represents a translation, for convenience only, of the original report issued inJapaneseSection 3.
Independent Assurance Report(TRANSLATION)

Independent Assurance ReportAugust 31, 2023
To the President and CEO of Nikkei Inc.
Mr. Tsuyoshi Hasebe

Deloitte Touche Tohmatsu LLC

Designated Engagement Partner,
Certified Public Accountant:Nobuyuki Yamada
Scope
We have been engaged to report on Nikkei Inc. (the "Company")’s description in Section 4of description related to the design, implementation and operating effectiveness of the
responses to comply with the Principles for Financial Benchmarks published by theInternational Organization of Securities Commissions (the "IOSCO Principles") throughout
the period from July 1, 2022 to June 30, 2023 (the "Description") in the form of a reasonableassurance opinion.
Responsibilities of the Company
The Company is responsible for appropriately implementing the responses to comply with
the IOSCO Principles and preparing the Description in accordance with the criteria
documented in the Management Statement (the "Criteria"). In addition, the Company is
responsible for appropriately designing and effectively operating the responses to comply
with the IOSCO Principles.
Responsibilities of the Practitioner
Our responsibility is to independently express an opinion to the Description based on theprocedures we have performed.
We conducted a reasonable assurance engagement in accordance with International
Standard on Assurance Engagements 3000 "Assurance Engagements other than Audits or
Reviews of Historical Financial Information" issued by the International Auditing andAssurance Standards Board.
Our reasonable assurance engagement involves performing procedures to understand theCompany's responses to comply with the IOSCO Principles and obtain evidence about thesuitability of the design, implementation and operating effectiveness of the responses.
The procedures selected and performed depend on our judgement, including the
The above represents a translation, for convenience only, of the original report issued inJapanese.

(TRANSLATION)

assessment of the risks that the Description is not fairly presented, and that responses are
not suitably designed, implemented or operated effectively.
The procedures selected and performed by us are described in Section 4 of the Description
as "DTTL Procedures."Our procedures included testing the operating effectiveness of those responses that we
consider necessary to provide reasonable assurance that the Criteria were achieved. Our
assurance engagement also includes evaluating the suitability of the Criteria.
We believe that the evidence we have obtained is sufficient and appropriate to provide abasis for our opinion.
Our Professional Ethics, Independence and Quality Control
We performed procedures in accordance with the Code of Ethics for Professional
Accountants issued by the International Ethics Standards Board for Accountants, where thefundamental principles are established including Integrity, Objectivity and Professional
Competence and Due Care, Confidentiality and Professional behavior.
We complied with International Standard on Quality Control 1 "Quality Control for Firms
that Perform Audits and Reviews of Historical, Financial Information, and Other Assurance
and Related Services Engagement." Accordingly, we maintain a comprehensive system of
quality control.
Inherent Limitation
The Company's responses to comply with the IOSCO Principles are not necessarily operated
to achieve the Criteria because of their nature and inherent limitation.
Also, the projection of any evaluation of effectiveness to future periods is subject to the riskthat the Company's responses may become inadequate or fail.
OpinionOur opinion has been formed on the basis of the matters outlined in this report. The
Criteria we used in forming our opinion are those described in the Management Statement.
In our opinion, in all material respects:(a)The Description fairly presents the responses as designed and implemented to comply
with IOSCO Principles throughout the period from July 1, 2022 to June 30, 2023;(b)The responses stated in the Description were suitably designed throughout the period
from July 1, 2022 to June 30, 2023; andThe above represents a translation, for convenience only, of the original report issued inJapanese.

(TRANSLATION)(c)The responses stated in the Description were operated effectively throughout the period
from July 1, 2022 to June 30, 2023.

The above represents a translation, for convenience only, of the original report issued inJapanese.

Section 4.
Nikkei’s Responses to Comply with IOSCO Principles

(TRANSLATION)

Nikkei’s Responses to Comply with IOSCO Principles
For the period from July 1, 2022 to June 30, 2023, and in relation to in-scope Nikkei Indexes defined in Section 1 of this Report, Nikkei describes the arrangements
established and implemented to comply with the IOSCO Principles under the “Nikkei’s Response” in the table below.
The accompanying “DTTL Procedures” summarizes the procedures performed by DTTL to validate that the design, implementation, and operating effectiveness of the
responses summarized in the “Nikkei’s Response” to comply with the IOSCO Principles. This is the basis for the opinion as documented in Section 3 of this Report.
IOSCO Principles

Nikkei’s Response

DTTL Procedures

1. Overall Responsibility of the

Nikkei, as the administrator, retains primary

DTTL obtained “General Policies for Nikkei Indexes

Administrator

responsibility for all aspects of the determination

Administration” (“General Policy”), “Policies for Nikkei

process of the “Nikkei Indexes,” which are stipulated in

Indexes Cessation and Transition” (“Cessation Policy”),

Section 1, subsection 3 of this Report.

The Index

and “Policies for Nikkei Indexes Complaints Procedures”

Business Office, one of the departments of Nikkei,(“Complaints Policy”) and verified that these policies foradministers the Nikkei Indexes in accordance with thethe determination and administration of the indexes

policy documents* which set out the principles ofwere established. DTTL also confirmed that theseDevelopment: The definition of theadministration.

policies were disclosed on the “Official Index Website.”

Benchmark and Benchmark

the Nikkei’s “Official Index Website”.

Governance

The Administrator should retain primary
responsibility for all aspects of the
Benchmark determination process. For
example, this includes:a)Such policies are made public through

Methodology;b)

Determination and Dissemination:
Accurate and timely compilation andPlease see Principles 2 and below for further details.
Further details are available under the responses to the
Principle 2 and below.

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(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

publication and distribution of the
Benchmark;c)

Operation: Ensuring appropriate
transparency over significant decisions
affecting the compilation of the
Benchmark and any related
determination process, including
contingency measures in the event ofabsence of or insufficient inputs, market
stress or disruption, failure of critical*Policy documents- General Policies for Nikkei Indexes Administration(“General Policy”)- Policies for Nikkei Indexes Cessation and Transition(“Cessation Policy”)- Policies for Nikkei Indexes Complaints Procedures(“Complaints Policy”)

infrastructure, or other relevant factors;
andd)Governance: Establishing credible andtransparent governance, oversight andaccountability procedures for the
Benchmark determination process,including an identifiable oversightfunction accountable for thedevelopment, issuance and operation of
the Benchmark.

20

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

2. Oversight of Third Parties

Nikkei commissions third parties to collect input data

DTTL obtained the “General Policy” and verified that it

and calculate some of the Nikkei Indexes. Activities toincluded the selection and oversight of the third parties.

Where activities relating to the Benchmark
determination process are undertaken by
third parties - for example collection of

be undertaken by the third parties are stipulated in the“General Policy.”

inputs, publication or where a third party acts
as Calculation Agent - the Administrator
should maintain appropriate oversight ofsuch third parties. The Administrator (and its
oversight function) should consider adopting
policies and procedures that:a) Selection of the third parties is based on thea) During the period under review, DTTL obtained
samples of agreements with third parties who

assessment of reliability, experience, and possibility

participated in the Benchmark determinationof conflicts of interest as prescribed in the “General
Policy.”processes and confirmed that Nikkei had entered

Nikkei enters into written agreements with

into outsourcing agreements.

the third parties which stipulate their roles andobligations.

a)

Clearly define and substantiate throughappropriate written arrangements theroles and obligations of third parties
who participate in the Benchmark
determination process, as well as theb)b) Nikkei takes appropriate communication measures
to monitor the operations commissioned to thethird parties as follows.

standards the Administrator expects
these third parties to comply with;- Affiliates
During the period under review, DTTL obtained
samples of the minutes of the regular meetings andverified that Nikkei monitored proper operations- Affiliates

and significant changes in the systems and so on.

Nikkei holds regular meetings with the affiliates
and monitors proper operations and significant

21

(TRANSLATION)IOSCO Principlesb)

Monitor third parties’ compliance with

Nikkei’s Response

DTTL Procedureschanges in the systems, and so on.

the standards set out by the

During the period under review, DTTL obtained

Administrator;c)

Make Available to Stakeholders and any- Third parties other than affiliates

relevant Regulatory Authority the

During the “Index Administration Meeting” facilitatedidentity and roles of third parties whoby the Index Business Office, Nikkei assesses theparticipate in the Benchmark

governance of the third parties at least once a year.

determination process; andd)- Third parties other than affiliates

samples of the minutes of the Index Administration
Meeting and verified that Nikkei assessed thegovernance of the third parties.

During the period under review, DTTL also obtained
samples of evidence about monitoring activities

Take reasonable steps, including

performed and verified that the members of thecontingency plans, to avoid undue
operational risk related to theMembers of the Index Business Office monitor theparticipation of third parties in theindexes calculated by the third parties on a daily

Benchmark determination process.

basis.

The members of the Index Business Officecompare the current day indexes with the previous
day indexes to confirm whether there are no
This Principle does not apply in relation to aanomalous index values.

In addition, anotherthird party from whom an Administrator

member confirms that such monitoring is conductedsources data if that third party is a Regulated

on a daily basis.

Index Business Office compared the current day
indexes with the previous day indexes on a daily
basis to monitor the calculation of Nikkei Indexes.
Based on the above samples, DTTL also verified that
other members of the Index Business Officeconfirmed whether monitoring activities were
performed by the members of the Index Business
Office.

Market or Exchange.

22

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Proceduresc)c)Third parties and the indexes calculated are as
follows:

DTTL confirmed on the “Official Index Website” that
Nikkei disclosed the fact that it outsourced thecalculation of the indexes to QUICK Corp., Osaka
Securities Exchange, and S&P Dow Jones Indices.

- QUICK Corp. (a subsidiary of Nikkei)

DTTL also confirmed that the official website of the

Nikkei Stock Average, its leveraged, inverse, double

Nikkei Index has disclosed that it has received “Wilshire

inverse indexes, Nikkei ESG-REIT Index, Nikkei 225

Climate Contents” from Wilshire OpCo UK Ltd.

Climate Change 1.5°C Target Index- Osaka Securities Exchange (regulated futures
market)Nikkei Stock Average Volatility Index- S&P Dow Jones Indices (global index vendor)
Nikkei Asia300 Investable Index (JPY, USD)

These third parties are disclosed on the “Official

23

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Index Website”.

The Nikkei Asia300 Investable Index is administeredby the methodologies of S&P Dow Jones Indices.
Wilshire OpCo UK Ltd (U.K. index vendor and providerof climate change methodology known as “Wilshire
Climate Contents”)
Nikkei 225 Climate Change 1.5°C Target Indexd) DTTL obtained Nikkei’s manuals for contingency
plan for system failures and verified that Nikkei
designed measures to cope with the contingency.

Upon periodic review of the index above, Wilshire

During the period under review, DTTL obtained

provides constituents to be deleted and constituent

samples of the training results of system failure

weights in accordance with its Wilshire Climate

drills and verified that Nikkei conducted system

Contents. Based on such information, Nikkei conducts

failure drills.

periodic review and decides the changes to be made.

DTTL also confirmed that Nikkei had designed the

Nikkei commissions QUICK to calculate the index.

procedures to calculate Nikkei Indexes ind) For the indexes calculated by the affiliate, computer
centers which host the calculation system are

preparation for the case when severe system
failures occurred at the third parties.

duplicated and the transition procedures to follow
in case of problems are prescribed. The drills andtraining against system troubles are performed. In

24

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

addition, in case of the severe system failures at thethird parties’ sites, Nikkei has the procedures tocalculate the closing value of the indexes.
3. Conflicts of Interest for Administrators
To protect the integrity and independence ofBenchmark determinations, Administrators
should document, implement and enforce
policies and procedures for the identification,
disclosure, management, mitigation or
avoidance of conflicts of interest.
Administrators should review and update
their policies and procedures as appropriate.

Nikkei Indexes are determined using the prices formed

DTTL obtained Nikkei’s code of conduct and confirmedin the regulated exchanges and calculated by pre-that the compliance with the code of conduct including

defined programs on the computer systems, and so,

prohibition of conflicts of interests was required.

Nikkei judges that the risk of conflicts of interest is
extremely low.

Also, to protect the reliability as amedia company which upholds the motto of “Fair andImpartial,” Nikkei establishes a code of conduct which
prohibits conflicts of interest and other improper
actions.

Nikkei requires all of its employees, including

the Index Business Office members, to comply with thecode of conduct.

Administrators should disclose any material
conflicts of interest to their users and any
relevant Regulatory Authority, if any.

The framework should be appropriatelya) Nikkei Indexes are not prone to conflicts of interestin their nature and Nikkei sets out the followinga) See below DTTL’s work for the specific measures

measures to prevent inappropriate influence on theimplemented to prevent inappropriate influence on

index determinations.

the index determinations.

tailored to the level of existing or potential

25

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

conflicts of interest identified and the risksb) Personal interests do not influence the index

that the Benchmark poses and should seek toadministration because the holding and/or trading

ensure:of the individual stocks and financial instrumentsa)Existing or potential conflicts of interest

Office were restricted to hold and/or trade

Trading Policy and internal policies of the Index

individual stocks and other financial instruments

Business Office. Since Nikkei, as a company, is not

Personal interests and connections or

related to the creation, marketing, or clearing of thebusiness connections do notfinancial instruments, the potential risk of conflicts

compromise the Administrator’sof interest at the corporate level is deemed to be

performance of its functions;extremely low.

related to the Nikkei Indexes.

Segregation of reporting lines within the
Administrator, where appropriate, toclearly define responsibilities andprevent unnecessary or undisclosed
conflicts of interest or the perception ofsuch conflicts;d)verified that the members of the Index BusinessIndex Business Office are restricted by Insider

Benchmark determinations;c)internal policies of the Index Business Office andrelated to the Nikkei Indexes by the member of the

do not inappropriately influenceb)b) DTTL obtained the Insider Trading Policy and thec)Index administration is a sole business of the Index
Business Office in Nikkei.

By separating thereporting lines from other business of Nikkei,
responsibilities are clarified, and unnecessary
conflicts of interest are prevented.

c)

DTTL obtained the documents for segregation ofduties and verified that the index administration
was defined as responsibilities of the Index Business
Office and the internal reporting line was separately
established from other business divisions.

Adequate supervision and sign-off byauthorised or qualified employees prior
to releasing Benchmark determinations;d), e) There is no prior approval procedure before
releasing the Nikkei Indexes since the Nikkei Indexesd),e) As the preconditions for the determination of thefinancial indexes are different from those of the
IOSCO principles, Nikkei doesn’t need to design

26

(TRANSLATION)IOSCO Principles

Nikkei’s Responsee)

The confidentiality of data, information

are determined automatically by the computer systems.

and implement any applicable processes. DTTL

and other inputs submitted to, received

Since they are not based on the submitted data, there is

did not perform any procedures therewith.

by or produced by the Administrator,

no confidentiality in the input data. Therefore, Nikkei’s

subject to the disclosure obligations ofresponses to d) and e) are not necessary.

the Administrator;f)

DTTL Procedures

In regard to selections of stocks used in thecalculation of Nikkei Indexes and maintenance for

However, there are adequate check and approval

accuracy of information about these stocks,

Effective procedures to control theprocesses regarding the index constituent changes

please refer to “DTTL Procedures” to Principle 4.

exchange of information between staff

and/or maintenance of the constituent’s information

engaged in activities involving a risk of(such as reaction to corporate actions) prior to theirconflicts of interest or between staff andannouncements.

third parties, where that information
may reasonably affect any Benchmark
determinations; andg)Adequate remuneration policies that
ensure all staff who participate in the
Benchmark determination are notdirectly or indirectly rewarded orf)

Nikkei establishes the Information Control Policy,
and the access control system is in place where

DTTL obtained the Information Control Policy andinformation related to the index business cannot be

verified that the internal policy related toaccessed by those who are not the members of theinformation management was in place. DTTL

Index Business Office.

verified that the access control system was in place
where information related to the index businessincentivised by the levels of the
Benchmark.

f)

could not be accessed by those who were not theg) Nikkei’s remuneration policy is not linked to theindex determination process.

members of the Index Business Office.

Rewards and27

(TRANSLATION)IOSCO Principles

Nikkei’s Response

An Administrator’s conflict of interest

incentives are not given based on the performanceframework should seek to mitigate existingof the indexes.

or potential conflicts created by its ownershipg) DTTL obtained the internal policies on wage andrewards and verified that employees were not

structure or control, or due to other interests
the Administrator’s staff or wider group may

Since Nikkei does not have a parent company nor ahave in relation to Benchmark

shareholder who holds the majority of voting rights, its

determinations. To this end, the framework

index determination is not affected by the ownershipshould:structure or control.

a)

DTTL Procedures

remunerated based upon the determination
process of Nikkei Indexes and the policies did not
specify that employees were rewarded or
incentivized by the performance of the indexes.
DTTL inspected Nikkei’s Annual Report published

Include measures to avoid, mitigate or

during the period under review and verified that

disclose conflicts of interest that may

Nikkei did not have a parent company nor a

exist between its Benchmark

shareholder who holds the majority of voting rights.

determination business (including all

DTTL also inquired of the appropriate person in

staff who perform or otherwise

charge and confirmed that Nikkei did not have theparticipate in Benchmark production

above shareholders.

responsibilities), and any other businessof the Administrator or any of its
affiliates; andb)

Provide that an Administrator discloses
conflicts of interests arising from theownership structure or the control of the
Administrator to its Stakeholders and28

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

In accordance with the “General Policy,” Nikkei

DTTL obtained the “General Policy” and verified that it

establishes an “Index Administration Meeting” in the

stipulated that the Index Administration Meeting was

Index Business Office to carry out the index

established in the Index Business Office and managed

determination and related operations.

the determination and the related operations of Nikkei

any relevant Regulatory Authority in atimely manner.
4. Control Framework for Administrators
An Administrator should implement anappropriate control framework for theprocess of determining and distributing theBenchmark. The control framework should be

Indexes. In addition, during the period under review,a) Refer to Principle 3.

DTTL obtained samples of minutes of Index

appropriately tailored to the materiality of

Administration Meetings regarding this determination.

the potential or existing conflicts of interest
identified, the extent of the use of discretionin the Benchmark setting process and to thenature of Benchmark inputs and outputs. The
control framework should be documented
and available to relevant Regulatory
Authorities, if any. A summary of its mainfeatures should be Published or Made
Available to Stakeholders.

a) Refer to Principle 3.
b) Members of the Index Business Office monitor theindexes calculated on a daily basis.

Members ofb) During the period under review, DTTL obtained
samples of evidence about monitoring activities

the Index Business Office compare the current day

performed and verified that the members of thewith previous day indexes to confirm whether there

Index Business Office compared the calculated

are no anomalous index values.

indexes with the previous day indexes to monitor

In addition,

another member confirms that such monitoring is
conducted on a daily basis.

the calculation of Nikkei Indexes on a daily basis.
Based on the above samples, DTTL also verified that
another member of the Index Business OfficeThis control framework should be reviewed
periodically and updated as appropriate. The

For the quality and calculation methodology of theindexes, refer to Principle 6 through 15.

confirmed whether monitoring activities were

For

29

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

framework should address the following

accountability and complaints procedures, refer toperformed by the members of the Index Businessareas:

Principle 16 through 19.

Office.

a)that the integrity of the inputs stipulated in

Conflicts of interest in line with Principle

Principle 4. b) ii is not damaged since Nikkei

3 on conflicts of interests;b)

Indexes are determined using the prices formed in

Integrity and quality of Benchmark

the regulated exchanges.

determination:

The systems related to the calculation andi.

administration of indexes are appropriately

Arrangements to ensure that thecontrolled by assigning the access authority based

quality and integrity of Benchmarks

samples of the indexes, recalculated the indexes
selected in accordance with the calculation
methodology, and confirmed that these indexes
calculated by Nikkei matched DTTL’s recalculation
results.

6 to 15 on the quality of the

In regard to the quality and calculation of Nikkei

Benchmark and Methodology;

Indexes and the accountability and complaints
procedures, please refer to “DTTL Procedures” toArrangements to promote thePrinciples 6 through 15 and 16 through 19, respectively.

integrity of Benchmark inputs,iii.

During the period under review, DTTL also obtainedon the responsibilities of the employees.

is maintained, in line with principles

ii.

Nikkei has concluded

including adequate due diligence

Furthermore, with regard to access control of theon input sources;

system related to the calculation and administration of

Arrangements to ensureaccountability and complaints
mechanisms are effective, in linewith principles 16 to 19; andindexes, we confirmed the existence of the contentc)Nikkei has an internal whistleblowing mechanism

described in "Nikkei's Response."

where actions or suspected actions against its Codeof Conduct are reported.

30

(TRANSLATION)IOSCO Principles
iv.

DTTL obtained the whistleblowing policies andverified that the whistleblowing mechanism wasmanagement of risk, including

established. DTTL also observed that employees

Whistleblowing mechanism:
effective whistleblowing mechanism tofacilitate early awareness of any
potential misconduct or irregularities
that may arise. This mechanism should
allow for external reporting of suchcases where appropriate.
Expertise:i.

c)policies and procedures for the

Administrators should establish and)

DTTL Procedures

Providing robust infrastructure,operational risk.
c)Nikkei’s Response

Ensuring Benchmark
determinations are made bypersonnel who possess the relevant
levels of expertise, with a process
for periodic review of theircompetence; andd) Nikkei conducts in-house trainings on its

were able to report any incidents through theInformation Control Policy and Insider Trading
Policy for all the employees once a year.

intranet page of the Legal Division.

Nikkeistipulates in the “General Policy” that it holds
workshops, for example, by inviting the outsided) DTTL obtained the “General Policy” and verified thatprofessionals to improve the expertise of theit stipulated that in-house training should be held

members in the Index Business Office on an as-

once a year on internal policies, including theneeded basis and carries out such workshops.

In

Information Control Policy and the Insider Trading

addition, the members of the Index Business Office

Policy. DTTL obtained the training session noticehold study workshop where necessary.

log and verified that in-house trainings related toinsider training and information management had
been carried out. In addition, DTTL obtained thetraining participation log and verified that thetraining sessions led by external lecturers for themembers of the Index Business Office had been
held. DTTL also obtained the study workshop log
and verified that study workshop had been held in
the Index Business Office.

31

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Where a Benchmark is based on

Nikkei Indexes are determined by the security prices

As the preconditions for the determination of theSubmissions: Administrators shouldfrom regulated exchanges.

financial indexes are different from those of IOSCO

promote the integrity of inputs by:submissions.

ii.

Staff training, including ethics andconflicts of interest training, andcontinuity and succession planningfor personnel.

a)Ensuring as far as possible that theSubmitters comprise an appropriately

There is no index based onprinciples, Nikkei doesn’t need to design andimplement any applicable processes. DTTL did not
perform the procedures therewith.

representative group of participants
taking into consideration the underlying
Interest measured by the Benchmark;b)

Employing a system of appropriate
measures so that, to the extent possible,
Submitters comply with the Submission
guidelines, as defined in the Submitter
Code of Conduct and theAdministrators’ applicable quality andintegrity standards for Submission;

32

(TRANSLATION)IOSCO Principlesc)

Nikkei’s Response

DTTL Procedures

Nikkei stipulates in the “General Policy” that the “Index

DTTL obtained the “General Policy” and “Cessation

Administration Meeting” established in the Index

Policy” and verified that details of the “Nikkei’s

Business Office carries out the Nikkei Indexes

response” to this principle had been put into place.

Specifying how frequently Submissions
should be made and specifying that
inputs or Submissions should be madefor every Benchmark determination; andEstablishing and employing measures toeffectively monitor and scrutinise inputs or
Submissions. This should include precompilation or pre-publication monitoring to
identify and avoid errors in inputs or
Submissions, as well as ex-post analysis oftrends and outliers.
5. Internal Oversight
Administrators should establish an oversightfunction to review and challenge all aspectsof the Benchmark determination process.
This should include consideration of
intended, expected or known usage of the
Benchmark and the materiality of existing or
potential conflicts of interest identified.

determinations and the related operations, and the“Index Committee” is established to oversee the Index
Administration Meeting.

Based on the Nikkei’s internal

policies, members of the Index Committee areappointed by the CEO and include directors not incharge of the Index Business Office.

During the period under review, DTTL also obtained
samples of Index Committee minutes and verified thatIndex Committee meetings were held and that themembers of Index Committee had been internallyselected and that they included the members who were
not related to the indexes business.

33

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

The oversight function should be carried out

For the material changes in the calculation

either by a separate committee, or othermethodology and the permanent cessation of theappropriate governance arrangements. The

Nikkei Indexes, Nikkei stipulates in the “General Policy”

oversight function and its composition

and the “Cessation Policy” that they are proposed in theshould be appropriate to provide effective

Index Administration Meeting and are reviewed andscrutiny of the Administrator. Such oversightapproved by the Index Committee.

function could consider groups ofBenchmarks by type or asset class, provided
that it otherwise complies with this Principle.

The members of the Index Committee have profoundknowledge of the market and economy.

By including

those who are not related to the index administration,
An Administrator should develop andits independence from the index administration is

maintain robust procedures regarding its

secured.

oversight function, which should be

and as described in Principle 3, and as such, there is no

documented and available to relevant

concern for conflicts of interests.

All the members are chosen within Nikkei

Regulatory Authorities, if any. The mainfeatures of the procedures should be Made
Available to Stakeholders. These proceduresshould include:

34

(TRANSLATION)IOSCO Principlesa)Nikkei’s Response

DTTL Procedures

The terms of reference of the oversightfunction;b)

Criteria to select members of theoversight function;c)

The summary details of membership ofany committee or arrangement charged
with the oversight function, along withany declarations of conflicts of interest
and processes for election, nomination
or removal and replacement ofcommittee members.

The responsibilities of the oversight function
include:a)Oversight of the Benchmark design:i.

Periodic review of the definition of
the Benchmark and its
Methodology;

35

(TRANSLATION)IOSCO Principles
ii.

Nikkei’s Response

DTTL Procedures

Taking measures to remain
informed about issues and risks to
the Benchmark, as well as
commissioning external reviews of
the Benchmark (as appropriate);iii.

Overseeing any changes to the
Benchmark Methodology,
including assessing whether the
Methodology continues toappropriately measure theunderlying Interest, reviewing
proposed and implementedchanges to the Methodology, andauthorising or requesting theAdministrator to undertake aconsultation with Stakeholders
where known or its Subscribers onsuch changes as per Principle 12;
and

iv.

Reviewing and approving
procedures for termination of the36

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Benchmark, including guidelinesthat set out how the Administrator
should consult with Stakeholders
about such cessation.
b)Oversight of the integrity of Benchmark
determination and control framework:i.

Overseeing the management andoperation of the Benchmark,including activities related to
Benchmark determination
undertaken by a third party;ii.

Considering the results of internaland external audits, and following
up on the implementation ofremedial actions highlighted in the
results of these audits; andiii.

Overseeing any exercise of Expert
Judgment by the Administrator andensuring Published Methodologies
have been followed.

37

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Where a Benchmark is based on

Nikkei Indexes are determined by the security prices

As the preconditions for the determination of theSubmissions: the oversight function shouldfrom regulated exchanges.

financial indexes are different from those of IOSCO

provide suitable oversight and challenge ofsubmissions.

Where conflicts of interests may arise in
the Administrator due to its ownership
structures or controlling interests, or due
to other activities conducted by any entity
owning or controlling the Administrator
or by the Administrator or any of its
affiliates: the Administrator should establish
an independent oversight function which
includes a balanced representation of arange of Stakeholders where known,
Subscribers and Submitters, which is chosen
to counterbalance the relevant conflict ofinterest.

the Submissions by:a)Overseeing and challenging the scrutiny

There is no index based onprinciples, Nikkei doesn’t need to design andimplement any applicable processes. DTTL did not
perform any procedures therewith.

and monitoring of inputs or Submissions
by the Administrator. This could include

38

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

regular discussions of inputs or
Submission patterns, defining
parameters against which inputs or
Submissions can be analysed, or
querying the role of the Administrator inchallenging or sampling unusual inputs
or Submissions;b)Overseeing the Code of Conduct for
Submitters;c)Establishing effective arrangements toaddress breaches of the Code of
Conduct for Submitters; andd) Establishing measures to detect potential
anomalous or suspicious Submissions and incase of suspicious activities, to report them,as well as any misconduct by Submitters ofwhich it becomes aware to the relevant
Regulatory Authorities, if any.
Quality of the Benchmark

39

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

6. Benchmark Design

Nikkei Indexes are designed based on the definitions of

DTTL obtained the index guidebook for a period subject

the value they measure and roles in the investment.

to DTTL work and verified that the above guidebook

The value and the roles are different for each index andincluded “Introduction” and/or “Concept.”

The design of the Benchmark should seek toachieve, and result in an accurate and reliable
representation of the economic realities of
the Interest it seeks to measure, anddescribed in the index guidebook under the sections
such as “Introduction” and/or “Concept.”

eliminate factors that might result in a
distortion of the price, rate, index or value ofthe Benchmark.

Constituents (samples) of the Nikkei Indexes are listed
and traded on the regulated exchanges and Nikkei has

DTTL obtained the index guidebook for a period subject

Benchmark design should take into accountconcluded that they sufficiently meet the adequacy

to DTTL work and verified that it stipulated when

the following generic non-exclusive features,standard.

selecting the stocks used in the calculation of Nikkei

and other factors should be considered, asvolume is part of the consideration in the determinationindexes, the liquidity of these stocks was required to beappropriate to the particular Interest:of stocks comprising the indexes.

considered.

a)Adequacy of the sample used torepresent the Interest;b)

Liquidity of the stocks such as trading

Refer to each index guidebook for more detail.

Size and liquidity of the relevant market(for example whether there is sufficient
trading to provide observable,transparent pricing);

40

(TRANSLATION)IOSCO Principlesc)

Nikkei’s Response

DTTL Procedures

Nikkei Indexes are determined by the prices from theAs the preconditions for the determination of theregulated exchanges and meet the data sufficiency

financial indexes are different from those of the IOSCO

requirements.

principles, Nikkei doesn’t need to design and

Relative size of the underlying market inrelation to the volume of trading in themarket that references the Benchmark;d)

The distribution of trading among
Market Participants (market
concentration);e)Market dynamics (e.g., to ensure thatthe Benchmark reflects changes to theassets underpinning a Benchmark).

7. Data Sufficiency
The data used to construct a Benchmark
determination should be sufficient toaccurately and reliably represent the Interest
measured by the Benchmark and should:a)

For this reason, Nikkei’s response tothis principle is not necessary.

implement any applicable processes. DTTL did not
perform any procedures therewith.

Be based on prices, rates, indices orvalues that have been formed by thecompetitive forces of supply anddemand in order to provide confidence

41

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Proceduresthat the price discovery system isreliable; andb)

Be anchored by observable transactions
entered into at arm’s length between
buyers and sellers in the market for theInterest the Benchmark measures inorder for it to function as a credible
indicator of prices, rates, indices orvalues.

This Principle requires that a Benchmark bebased upon (i.e., anchored in) an active
market having observable Bona Fide, ArmsLength Transactions. This does not mean thatevery individual Benchmark determinationmust be constructed solely of transaction
data. Provided that an active market exists,
conditions in the market on any given day
might require the Administrator to rely on
different forms of data tied to observable
market data as an adjunct or supplement to42

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedurestransactions. Depending upon the
Administrator’s Methodology, this could
result in an individual Benchmark
determination being based predominantly, or
exclusively, on bids and offers or
extrapolations from prior transactions. This isfurther clarified in Principle 8.
Provided that subparagraphs (a) and (b)above are met, Principle 7 does not preclude
Benchmark Administrators from using
executable bids or offers as a means toconstruct Benchmarks where anchored in an
observable market consisting of Bona Fide,Arms-Length transactions.
This Principle also recognizes that various
indices may be designed to measure orreflect the performance of a rule-based
investment strategy, the volatility or
behaviour of an index or market or otheraspects of an active market. Principle 7 does
not preclude the use of non-transactional

43

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Nikkei Indexes are determined by the prices from theAs the preconditions for the determination of theregulated exchanges and there is no hierarchy of data

financial indexes are different from those of the IOSCO

inputs.

principles, Nikkei doesn’t need to design anddata for such indices that are not designed torepresent transactions and where the natureof the index is such that non-transactional
data is used to reflect what the index isdesigned to measure. For example, certain
volatility indices, which are designed tomeasure the expected volatility of an index of
securities transactions, rely on nontransactional data, but the data is derived
from and thus “anchored” in an actual
functioning securities or options market.

8. Hierarchy of Data Inputs
An Administrator should establish andPublish or Make Available clear guidelines
regarding the hierarchy of data inputs andexercise of Expert Judgment used for the

For this reason, response to this principle is

not necessary.

implement any applicable processes. DTTL did not
perform any procedures therewith.

determination of Benchmarks. In general, thehierarchy of data inputs should include:

44

(TRANSLATION)IOSCO Principlesa)Nikkei’s Response

DTTL Procedures

Where a Benchmark is dependent upon
Submissions, the Submitters’ own
concluded arms-length transactions in
the underlying interest or related
markets;b)

Reported or observed concluded Arm’slength Transactions in the underlying
interest;c)Reported or observed concluded Arm’slength Transactions in related markets;d)Firm (executable) bids and offers; ande)Other market information or Expert
Judgments.

Provided that the Data Sufficiency Principle ismet (i.e., an active market exists), thisPrinciple is not intended to restrict an
Administrator’s flexibility to use inputs
consistent with the Administrator’s approach

45

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

to ensuring the quality, integrity, continuity
and reliability of its Benchmark
determinations, as set out in the
Administrator’s Methodology. The
Administrator should retain flexibility to use
the inputs it believes are appropriate under
its Methodology to ensure the quality andintegrity of its Benchmark. For example,
certain Administrators may decide to rely
upon Expert Judgment in an active albeit low
liquidity market, when transactions may not
be consistently available each day. IOSCO
also recognizes that there might becircumstances (e.g., a low liquidity market)
when a confirmed bid or offer might carry
more meaning than an outlier transaction.
Under these circumstances, non-transactional
data such as bids and offers andextrapolations from prior transactions might
predominate in a given Benchmark
determination.

46

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

9. Transparency of Benchmark

Nikkei stipulates in the “General Policy” that

DTTL obtained the “General Policy” and verified that

Determinations

determination, constituents selection, and other“Nikkei’s response” to this principle for the disclosure ofcalculation policies shall be described in the index

the calculation methodology were described in theguidebook and the index guidebook shall be made“General Policy”. DTTL also confirmed that the index

publicly available.

guidebook for each index included in Nikkei Indexes

The Administrator should describe andpublish with each Benchmark determination,
to the extent reasonable without delaying an
Administrator publication deadline:a)Such guidebooks are published on

the “Official Index Website”.

was disclosed on the “Official Index Website.”

A concise explanation, sufficient tofacilitate a Stakeholder’s or Market

Since Nikkei Indexes are calculated using the prices

Authority’s ability to understand howfrom the regulated exchanges and the guidebooks are

the determination was developed,

published as shown above, this principle is satisfied.

including, at a minimum, the size andliquidity of the market being assessed(meaning the number and volume oftransactions submitted), the range andaverage volume and range and averageof price, and indicative percentages ofeach type of market data that have been
considered in a Benchmark
determination; terms referring to thepricing Methodology should be included

47

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Nikkei stipulates in the “General Policy” that, at the

DTTL obtained the “General Policy” and verified thatIndex Administration Meeting for the annual review ofNikkei Indexes were to be regularly reviewed as

the index constituents, Nikkei shall review and decide if

described in the “Nikkei’s response” to this principle.

(i.e., transaction-based, spread-based orinterpolated/extrapolated);b)

A concise explanation of the extent towhich and the basis upon which Expert
Judgment if any, was used inestablishing a Benchmark determination.

10. Periodic Review
The Administrator should periodically review
the conditions in the underlying Interest thatthe Benchmark measures to determine
whether the Interest has undergone
structural changes that might requirechanges to the design of the Methodology.

there is a structural change in the underlying interest
which necessitate the changes in the calculation
methodology.

Refer to the Principle 12 regarding thechanges in the methodology.

DTTL also obtained the Index Administration Meeting
minutes and verified that the conditions in theunderlying interest of Nikkei Indexes were periodicallyreviewed.

The Administrator also should periodicallyreview whether the Interest has diminished or
is non-functioning such that it can no longer
function as the basis for a credible
Benchmark.

48

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

As described under the “Nikkei’s response” to the

DTTL obtained the “General Policy” and the Index

Principle 9, Nikkei publishes and makes available to theguidebooks and verified that “Nikkei’s response” to thispublic the methodologies of Nikkei Indexes as an index

principle were stipulated in them as described. DTTL

guidebook.

also confirmed that the index guidebooks were

The Administrator should Publish or Make
Available a summary of such reviews wherematerial revisions have been made to a
Benchmark, including the rationale for therevisions.

Quality of the Methodology
11. Content of the Methodology
The Administrator should document andPublish or Make Available the Methodology
used to make Benchmark determinations.

disclosed on the “Official Index Website.” DTTL also

The Administrator should provide therationale for adopting a particular
Methodology. The Published Methodology
should provide sufficient detail to allow
Stakeholders to understand how theBenchmark is derived and to assess its

confirmed that the “Contact Form” was available to thea), b) Information such as the definitions of key terms,

public on the “Official Index Website.”

determination process, input data selection and the
combinations are described in the respective index
guidebook.

representativeness, its relevance to particular
Stakeholders, and its appropriateness as a

49

(TRANSLATION)IOSCO Principles

Nikkei’s Responsereference for financial instruments.

c) Since the Nikkei Indexes are determined by the prices

At a minimum, the Methodology should
contain:a)

Definitions of key terms;b)

All criteria and procedures used todevelop the Benchmark, including input
selection, the mix of inputs used toderive the Benchmark, the guidelines

DTTL Proceduresfrom the regulated exchanges, there is no expert
judgement in the determination.

In the process of the constituent reshuffle of the Nikkei
225, Nikkei may confirm opinions of experts regarding
the deletions and additions.

However, the decision ismade by Nikkei at its own discretion.

that control the exercise of Expert
Judgment by the Administrator, priority
given to certain data types, minimum
data needed to determine a Benchmark,and any models or extrapolation
methods;c)d) Nikkei stipulates in the “General Policy” that Nikkei
determines the indexes using the latest available fair
prices based on the procedures described in the index
guidebook.

Procedures and practices designed topromote consistency in the exercise ofe) Nikkei stipulates in the “General Policy” theExpert Judgment between Benchmark

conditions and procedures to revise the indexes.

determinations;d)

The procedures which govern
Benchmark determination in periods of50

(TRANSLATION)IOSCO Principles

e)market stress or disruption, or periodsf) Nikkei stipulates in the “General Policy” that reviews

where data sources may be absent (e.g.,of the methodologies are conducted at the Index

theoretical estimation models);

Administration Meeting when and where necessary.

DTTL Procedures

The procedures for dealing with error
reports, including when a revision of a
Benchmark would be applicable;f)

Nikkei’s Responseg) Nikkei stipulates in the “General Policy” that Nikkei
accepts questions and comments from stakeholders

Information regarding the frequency forand strives to respond to such questions promptly andinternal reviews and approvals of theappropriately.

Methodology. Where applicable, theits “Official Index Website”.

Nikkei provides the “Contact Form” on

Published Methodologies should also
include information regarding theg)procedures and frequency for external

Also refer to Principle 12 “Changes to thereview of the Methodology;

Methodology” for “Consultation” regarding the changes

The circumstances and proceduresto the methodology, which are deemed material.

under which the Administrator willconsult with Stakeholders, as
appropriate; andh)The identification of potential limitationsh) Nikkei stipulates in the “General Policy” that potential
limitations are discussed at the periodic review underPrinciple 10.

of a Benchmark, including its operation

51

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Where a Benchmark is based on

Nikkei Indexes are determined by the security prices

As the preconditions for the determination of theSubmissions, the additional Principle also

from regulated exchanges.

financial indexes are different from those of IOSCO

applies:submissions.

in illiquid or fragmented markets andthe possible concentration of inputs.

There is no index based onprinciples, Nikkei doesn’t need to design andimplement any applicable processes. DTTL did not
perform any procedures therewith.

The Administrator should clearly establish
criteria for including and excluding
Submitters. The criteria should consider any
issues arising from the location of theSubmitter, if in a different jurisdiction to the
Administrator. These criteria should beavailable to any relevant Regulatory
Authorities, if any, and Published or Made
Available to Stakeholders. Any provisions
related to changes in composition, including
notice periods should be made clear.
12. Changes to the Methodology

In its General Policy, Nikkei defines a material change in

DTTL obtained the “General Policy” and verified that it

the methodology as “the changes in the underlying

matched the description the “Nikkei’s response” to this52

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

An Administrator should Publish or Makeinterest that the Nikkei Indexes intend to measure as

principle.

Available the rationale of any proposedwell as the changes in the constituent selection rules or

DTTL also obtained the meeting minutes of the materialmaterial change in its Methodology, andindex calculation method which makes managers of thechanges in the methodology, which were obtained byprocedures for making such changes. These

financial instruments linked to the Nikkei Indexes alter

the Index Administration Meeting and the Index

procedures should clearly define what

the composition of the products.”

Committee during the period under review. As a result,constitutes a material change, and thewe verified that the necessity of the material changes

method and timing for consulting or

was discussed in the Index Administration Meeting andnotifying Subscribers (and other Stakeholders

Necessity of the material change is discussed in thereviewed and decided by the Index Committee

where appropriate, taking into account theIndex Administration Meeting and reviewed andafterwards.

breadth and depth of the Benchmark’s use)

decided by the Index Committee.

Furthermore, we obtained samples of the consultationof changes.

documents on the changes in the methodology during
the period under review and verified that proposed
Upon changes to the methodology which are deemedchanges and the consultation closing date wereThose procedures should be consistent withmaterial, Nikkei consults with stakeholders before

officially announced. We also verified that the changes

the overriding objective that an

implementation as stipulated in the "General Policy"in the methodology, which were determined in

Administrator must ensure the continued("Consultation").

accordance with the consultation, were disclosed on the

integrity of its Benchmark determinations.

contents of the proposed changes and the consultation

When changes are proposed, theperiod are announced.

Administrator should specify exactly what

methodology decided by Nikkei with reference to thethese changes entail and when they are

opinions received by the consultation are made public

intended to apply.

on "Official Index Website".

In its consultation document, the“Official Index website.”

The changes to the53

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

The Administrator should specify howchanges to the Methodology will be
scrutinised, by the oversight function.

The Administrator should develop
Stakeholder consultation procedures inrelation to changes to the Methodology thatare deemed material by the oversightfunction, and that are appropriate andproportionate to the breadth and depth of
the Benchmark’s use and the nature of the
Stakeholders. Procedures should:a)Provide advance notice and a clear
timeframe that gives Stakeholders
sufficient opportunity to analyse andcomment on the impact of suchproposed material changes, having
regard to the Administrator’s

54

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Nikkei establishes the “Cessation Policy” and makes it

DTTL confirmed that the “Cessation Policy” wasavailable to the public through its “Official Indexestablished and disclosed on the “Official Index

Website”.

Website.”a) Nikkei stipulates in the “Cessation Policy” that whena)assessment of the overall circumstances;andb)

Provide for Stakeholders’ summarycomments, and the Administrator’ssummary response to those comments,
to be made accessible to all
Stakeholders after any given
consultation period, except where thecommenter has requested
confidentiality.

13. Transition
Administrators should have clear written
policies and procedures, to address the needfor possible cessation of a Benchmark, due tomarket structure change, product definitionchange, or any other condition which makes
the Benchmark no longer representative of
its intended Interest. These policies andprocedures should be proportionate to the

DTTL obtained the “Cessation Policy” and verified

an index being used for financial instruments isthat it matched the description in the “Nikkei’s

permanently ceased, considerations are rendered toresponse” to this principle

the stakeholders such as the provider of the55

(TRANSLATION)IOSCO Principles

Nikkei’s Response

estimated breadth and depth of contracts

financial instruments by an alternative index or

and financial instruments that reference a

sufficient advanced notice period.

DTTL Procedures

Benchmark and the economic and financial
stability impact that might result from thecessation of the Benchmark. Theb) During the period under review, DTTL obtainedb) Within each index guidebook, Nikkei includes the

samples of the license agreements on Nikkei

Administrator should take into account thestatements which stipulate that Nikkei has right toIndexes and the index guidebooks and verified thatviews of Stakeholders and any relevantchange or cease the index. The same statements

they matched the description in “Nikkei’s response”

Regulatory and National Authorities inare included in the license agreement for financial

to this principle.

determining what policies and procedures

instruments, and for stakeholders to acknowledge

are appropriate for a particular Benchmark.

the possibility of significant change or cessation.
DTTL also made an inquiry to responsible parties
and confirmed that there were no transitions ofThese written policies and procedures should

There was no cessation or transition from July 1, 2021,

Nikkei Indexes during the period from July 1, 2022,

be Published or Made Available to all

to June 30, 2022.

to June 30, 2023.

Stakeholders.

Administrators should encourage Subscribers
and other Stakeholders who have financial
instruments that reference a Benchmark totake steps to make sure that:

56

(TRANSLATION)IOSCO Principlesa)Nikkei’s Response

DTTL Procedures

Contracts or other financial instrumentsthat reference a Benchmark, have robust
fall-back provisions in the event ofmaterial changes to, or cessation of, thereferenced Benchmark; andb)

Stakeholders are aware of the possibility
that various factors, including external
factors beyond the control of the
Administrator, might necessitatematerial changes to a Benchmark.

Administrators’ written policies andprocedures to address the possibility ofBenchmark cessation could include thefollowing factors, if determined to bereasonable and appropriate by the
Administrator:a)

Criteria to guide the selection of acredible, alternative Benchmark such as,
but not limited to, criteria that seek to57

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

match to the extent practicable theexisting Benchmark’s characteristics(e.g., credit quality, maturities andliquidity of the alternative market),differentials between Benchmarks, theextent to which an alternative
Benchmark meets the asset/liability
needs of Stakeholders, whether therevised Benchmark is investable, theavailability of transparent transaction
data, the impact on Stakeholders andimpact of existing legislation;b)

The practicality of maintaining parallel
Benchmarks (e.g., where feasible,
maintain the existing Benchmark for adefined period of time to permit existing
contracts and financial instruments tomature and publish a new Benchmark) inorder to accommodate an orderlytransition to a new Benchmark;58

(TRANSLATION)IOSCO Principlesc)

Nikkei’s Response

DTTL Procedures

The procedures that the Administrator
would follow in the event that a suitable
alternative cannot be identified;d)

In the case of a Benchmark or a tenor ofa Benchmark that will be discontinued
completely, the policy defining theperiod of time in which the Benchmark
will continue to be produced in order topermit existing contracts to migrate toan alternative Benchmark if necessary;ande)

The process by which the Administrator
will engage Stakeholders and relevantMarket and National Authorities, as
appropriate, in the process for selecting
and moving towards an alternative
Benchmark, including the timeframe forany such action commensurate with thetenors of the financial instruments
referencing the Benchmarks and the59

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Nikkei Indexes are determined by the security prices

As the preconditions for the determination of thefrom regulated exchanges.

financial indexes are different from those of IOSCO

adequacy of notice that will be provided
to Stakeholders.

14. Submitter Code of Conduct
Where a Benchmark is based on Submissions,the following additional Principle also
applies:submissions.

There is no index based onprinciples, Nikkei doesn’t need to design andimplement any applicable processes. DTTL did not
perform any procedures therewith.

The Administrator should develop guidelines
for Submitters (“Submitter Code of
Conduct”), which should be available to any
relevant Regulatory Authorities, if any andPublished or Made Available to Stakeholders.

The Administrator should only use inputs or
Submissions from entities which adhere to
the Submitter Code of Conduct and theAdministrator should appropriately monitor
and record adherence from Submitters. The

60

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Administrator should require Submitters to
confirm adherence to the Submitter Code of
Conduct annually and whenever a change to
the Submitter Code of Conduct has occurred.

The Administrator’s oversight function should
be responsible for the continuing review andoversight of the Submitter Code of Conduct.

The Submitter Code of Conduct should
address:a)

The selection of inputs;b)

Who may submit data and information
to the Administrator;c)

Quality control procedures to verify theidentity of a Submitter and any
employee(s) of a Submitter who
report(s) data or information and the61

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

authorization of such person(s) to reportmarket data on behalf of a Submitter;d)

Criteria applied to employees of a
Submitter who are permitted to submit
data or information to an Administrator
on behalf of a Submitter;e)

Policies to discourage the interim
withdrawal of Submitters from surveys
or Panels;f)

Policies to encourage Submitters to
submit all relevant data; andg)

The Submitters’ internal systems andcontrols, which should include:i.

Procedures for submitting inputs,
including Methodologies todetermine the type of eligible
inputs, in line with the
Administrator’s Methodologies;

62

(TRANSLATION)IOSCO Principles
ii.

Nikkei’s Response

DTTL Procedures

Procedures to detect and evaluate
suspicious inputs or transactions,
including inter-group transactions,and to ensure the Bona Fide natureof such inputs, where appropriate;

iii.

Policies guiding and detailing theuse of Expert Judgment, including
documentation requirements;

iv.

Record keeping policies;v.

Pre-Submission validation of inputs,
and procedures for multiple reviewsby senior staff to check inputs;vi.

Training, including training withrespect to any relevant regulation(covering Benchmark regulation or
any market abuse regime);vii.

Suspicious Submission reporting;viii.

Roles and responsibilities of key
personnel and accountability lines;

63

(TRANSLATION)IOSCO Principles
ix.

Nikkei’s Response

DTTL ProceduresInternal sign off procedures bymanagement for submitting inputs;x.

Whistle blowing policies (in linewith Principle 4); andxi.

Conflicts of interest procedures andpolicies, including prohibitions on
the Submission of data from Front
Office Functions unless the
Administrator is satisfied that there
are adequate internal oversight andverification procedures for Front
Office Function Submissions of data
to an Administrator (including
safeguards and supervision toaddress possible conflicts ofinterests as per paragraphs (v) and(ix) above), the physical separationof employees and reporting lines
where appropriate, theconsideration of how to identify,
disclose, manage, mitigate and64

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

avoid existing or potential
incentives to manipulate orotherwise influence data inputs(whether or not in order toinfluence the Benchmark levels),
including, without limitation,
through appropriate remuneration
policies and by effectively
addressing conflicts of interest
which may exist between the
Submitter’s Submission activities(including all staff who perform orotherwise participate in Benchmark
Submission responsibilities), andany other business of the Submitteror of any of its affiliates or any of
their respective clients orcustomers.

65

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

15. Internal Controls over Data Collection

For the Nikkei Indexes not commissioned to the third

As the preconditions for the determination of theparties and calculated by Nikkei, the following outside

financial indexes are different from those of IOSCO

data points are used.

principles, Nikkei doesn’t need to design andWhen an Administrator collects data fromany external source the Administrator should
ensure that there are appropriate internal

Nikkei uses the spot and forward currency exchange

controls over its data collection andrates provided by WM Reuters in the calculation of thetransmission processes. These controls

Currency Hedged Indexes.

should address the process for selecting the

WM Reuters are the de facto standard in the financesource, collecting the data and protecting thefield and widely used by other currency hedged

integrity and confidentiality of the data.

indexes.

Where Administrators receive data from
employees of the Front Office Function, theAdministrator should seek corroborating
data from other sources.

implement any applicable processes. DTTL did not
perform any procedures therewith.

These rates provided by

The stock prices used in the calculation of the Nikkei
225 High Dividend Yield Stock 50 Index are thosepublished by the TSE. The options prices used in thecalculation of the Nikkei 225 Covered Call Index, andthe futures prices and delivery months used in thecalculations of the Nikkei 225 VI Futures Index are thosepublished by the Osaka Exchange.
Among the indices calculated by QUICK, the constituent
weights of the Nikkei ESG-REIT Index are calculated
once a year by Nikkei using the ESG scores for the realestate investment trusts provided by GRESB.

66

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Since these data points are widely used and sufficiently
reliable, Nikkei has concluded that the requirements ofthis Principle 15 are not applicable.

Since Nikkei Indexes are determined using the prices
formed in the regulated exchanges, Nikkei does notreceive data from employees in the front office
function.

Accountability
16. Complaints Procedures
The Administrator should establish andPublish or Make Available a written

Nikkei establishes the “Complaints Policy” and makes it

DTTL obtained the “Complaints Policy” and verified thatavailable to the public through the “Official Index

it matched the description in the “Nikkei’s response” toWebsite”.

this principle. DTTL also confirmed that “Complaints
Policy” was disclosed on the “Official Index Website.”complaints procedures policy, by which
Stakeholders may submit complaints
including concerning whether a specific
Benchmark determination is representative of
the underlying Interest it seeks to measure,applications of the Methodology in relation

DTTL also made an inquiry to the responsible parties“Complaints Policy” defines the “complaint” as “aand confirmed that there were no complaints to Nikkei

complaint or request pertaining to the Nikkei Index

Indexes in the past five years.

determination process submitted from a company
which has a license to use the Nikkei Indexes”.

Itprovides the list of information to be supplied upon

67

(TRANSLATION)IOSCO Principles

Nikkei’s Response

to a specific Benchmark determination(s) andclaiming the complaints and stipulates that Nikkei shallother Administrator decisions in relation to aconsider the complaint seriously and respond swiftly.

DTTL Procedures

Benchmark determination.
Complaints are submitted through “Contact Form” on
The complaints procedures policy should:a)Permit complaints to be submitted
through a user-friendly complaints
process such as an electronic
Submission process;b)

the “Official Index Website”.

Record of official complaints shall be kept for at least
five years.

Contain procedures for receiving andinvestigating a complaint made about

There was no “Complaint” during the period of thisthe Administrator’s Benchmark

report.

determination process on a timely andfair basis by personnel who are
independent of any personnel who may
be or may have been involved in thesubject of the complaint, advising thecomplainant and other relevant partiesof the outcome of its investigation

68

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

within a reasonable period and retaining
all records concerning complaints;c)

Contain a process for escalatingcomplaints, as appropriate, to the
Administrator’s governance body; andd)Require all documents relating to acomplaint, including those submitted by
the complainant as well as the
Administrator’s own record, to beretained for a minimum of five years,
subject to applicable national legal or
regulatory requirements.

Disputes about a Benchmarking
determination, which are not formal
complaints, should be resolved by the
Administrator by reference to its standard
appropriate procedures. If a complaint results
in a change in a Benchmark determination,that should be Published or Made Available

69

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Nikkei commissions an independent auditor on a yearly

Independent Assurance Report is included in Section 3.

to Subscribers and Published or Made
Available to Stakeholders as soon as possible
as set out in the Methodology.

17. Audits
The Administrator should appoint an
independent internal or external auditor withappropriate experience and capability tobasis to assure the descriptions regarding the design,
implementation and the operating effectiveness of the
responses comply with the IOSCO Principles.

periodically review and report on the
Administrator’s adherence to its statedcriteria and with the Principles. The frequency
of audits should be proportionate to the sizeand complexity of the Administrator’soperations.

Where appropriate to the level of existing or
potential conflicts of interest identified by the
Administrator (except for Benchmarks thatare otherwise regulated or supervised by a
National Authority other than a relevant

70

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

Nikkei maintains a database of the information used to

DTTL obtained the calculation results of some Nikkei

calculate the indexes.

Indexes and verified that there was a framework inRegulatory Authority), an Administrator
should appoint an independent external
auditor with appropriate experience andcapability to periodically review and reporton the Administrator’s adherence to its
stated Methodology. The frequency of audits
should be proportionate to the size andcomplexity of the Administrator’s Benchmark
operations and the breadth and depth of
Benchmark use by Stakeholders.
18. Audit Trail
Written records should be retained by the
Administrator for five years, subject toapplicable national legal or regulatory
requirements on:a)

All market data, Submissions and anyother data and information sources
relied upon for Benchmark

Nikkei can confirm thedetermination process of the indexes for the past 5

place to check the calculation process of Nikkei Indexes.

years.
a) Nikkei retains information such as security prices
used to calculate the Nikkei Indexes in a databasefor five years.

a) DTTL obtained samples of the calculation results of
Nikkei Indexes and some information used, andverified that the information was retained for the
past five years.

determination;

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(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Proceduresb)b) There is no expert judgement in the determinationb) As the preconditions for the determination of thec)

The exercise of Expert Judgment madeby the Administrator in reaching aof the Nikkei Indexes.

Benchmark determination;

constituent reshuffle of the Nikkei 225, Nikkei may

principles, Nikkei doesn’t need to design andconfirm opinions of experts regarding the deletions

implement any applicable processes. DTTL did not

and additions.

perform the procedures therewith.

Other changes in or deviations fromstandard procedures andIn the process of the

However, the decision is made by

Nikkei at its own discretion.

Methodologies, including those madeduring periods of market stress or
disruption;d)e)financial indexes are different from those of IOSCO

c)
Changes in the index methodology and index

noted that the information about Nikkei Indexes

The identity of each person involved indeterminations deviated from standard procedures

and the calculation methodology were disclosed on

producing a Benchmark determination;

are announced on the “Official Index Website”.

the website.

andInformation regarding the index management since

Any queries and responses relating todata inputs.

If these records are held by a RegulatedMarket or Exchange the Administrator may
rely on these records for compliance with thisPrinciple, subject to appropriate written
record sharing agreements.

c)

DTTL inspected the “Official Index Website” and2000, including the changes and deviations, isavailable in the “News & Release” section of the“Official Index Website”.

d) Records of the members of the Index
Administration Meeting and Index Committee areretained for five years.

d) DTTL obtained the list of the members of the Index
Administration Meeting and the Index Committee
and verified that the participants were recorded forfive years.

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(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedurese) Queries and answers by telephone calls ande) DTTL obtained samples of inquiries and the“Official Index Website” are retained.

“Nikkei’s responses” to these inquiries and verified
that the record of those inquiries and responses
were retained for five years.

When a Benchmark is based on

Since Nikkei Indexes are not based on submissions,

As the preconditions for the determination of theSubmissions, the following additional

Nikkei’s response to this principle is not necessary.

financial indexes are different from those of IOSCO

Principle also applies:

principles, Nikkei doesn’t need to design andimplement any applicable processes. DTTL did not
perform the procedures therewith.

Submitters should retain records for five
years subject to applicable national legal or
regulatory requirements on:a)

The procedures and Methodologies
governing the Submission of inputs;b)

The identity of any other person who
submitted or otherwise generated anyof the data or information provided to
the Administrator;c)Names and roles of individuals

73

(TRANSLATION)IOSCO Principles

Nikkei’s Response

DTTL Procedures

responsible for Submission andSubmission oversight;d)Relevant communications between
submitting parties;e)

Any interaction with the Administrator;f)

Any queries received regarding data or
information provided to the
Administrator;g)

Declaration of any conflicts of interests
and aggregate exposures to Benchmark
related instruments;h)Exposures of individual traders/desks to
Benchmark related instruments in orderto facilitate audits and investigations;andi)Findings of external/internal audits,
when available, related to Benchmark
Submission remedial actions andprogress in implementing them.

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Nikkei’s Response

DTTL Procedures

19. Cooperation with Regulatory

Nikkei Indexes are administered by Nikkei, a media

DTTL performed inquiry of responsible parties and was

Authorities

company. Since Nikkei does not have a regulatory

informed that the Nikkei did not have a regulatory

authority, there is no specific arrangements.

authority; however, DTTL was informed that Nikkei

Relevant documents, Audit Trails and otherdocuments subject to these Principles shallbe made readily available by the relevant
parties to the relevant Regulatory Authorities

However,

for the stability and development of the financial

would communicate with the relevant regulatory

markets, Nikkei shares information with the authorities

authorities if necessary.

when necessary.

in carrying out their regulatory or supervisory
duties and handed over promptly uponrequest.

75