Business Report 2010
Tokyo Financial Exchange Inc.

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For the fiscal year ended March 31, 2011

Tokyo Financial Exchange Inc.

Business Report 2010

To O ur Shareholders
We would ﬁrstly like to express our sincere gratitude to ourshareholders for your continued support of our operations and business.
We would also like to express our deepest condolences to the victimsof the Great East Japan Earthquake that struck on March 11, 2011, andour sincerest wishes for the speedy recovery of the aﬀected areas.
In ﬁscal year 2010, the global economy was generally recovering.
However, a surge in crude oil prices resulting from rising tensions in
the Middle East from the beginning of 2011, concerns over inﬂation in
emerging economies, and other adverse factors made the outlook
increasingly uncertain.
The domestic Japanese economy, meanwhile, continued to stage an
overall recovery. In the aftermath of the March earthquake, however,growth turned negative once again. Although reconstruction demand is
as expected, the road to recovery remains uncertain.

Contents
To Our Shareholders

2

Other Activities of TFX in Fiscal Year 201011

About Tokyo Financial Exchange

3

Challenges in Fiscal Year 201112

Summary of Operating Results

4

New Medium-Term Business Plan

13

Interview with the President

5

Financial Statements

15

Topic1

History of Click 365 (Fifth Anniversary)

7

Market Data

17

Topic2

Listing of Click kabu 365

9

Corporate Profile

18

01 Business Report

In the short-term money markets, because the Bank of Japan adopted
a notably accommodative monetary policy, interest rates continued to
decline steadily. Rates then fell further when the Bank introduced
comprehensive monetary easing in October 2010. Although the Bank ofJapan was providing ample liquidity in the wake of the Great East
Japan Earthquake, the ﬁnancial markets were in a state or paralysis.
In foreign exchange markets, exchange rates ﬂuctuated signiﬁcantly,
mainly reﬂecting the reemergence of repeated ﬁscal crises in Southern
Europe. In September 2010, the monetary authorities conducted aforeign exchange intervention to correct the appreciation of the yen,
and in November 2010, the yen began to ease following the adoption of
a second round of quantitative easing (QE2) by the FRB. The yen also
temporarily hit a record high at the end of ﬁscal 2010, after theearthquake.
The stock market was generally declining in the ﬁrst half of ﬁscal
year 2010, but it began to rise in the second half of the ﬁscal year,
spurred by the impact of monetary easing and optimism about theeconomic recovery. The market, however, weakened once again after
the devastating earthquake and tsunami.
Annual trading volumes of Three-Month Euroyen Futures fell 5.7%

year on year, to 11 million lots and, as
activity in the short-term money
markets slowed with the continued
loose monetary policy of the Bank ofJapan.
Trading volumes of Click 365, theExchange FX Margin Contracts,
temporarily fell with the introductionof margin restrictions against FX
margin transactions (so-called leverage restrictions) in August 2010.
However, volumes recovered to their previous level two months later.
As a result, with the increase in the number of trading members andthe number of accounts, annual trading volumes jumped 53.6% from theprevious ﬁscal year, to 123 million lots.
Annual trading volumes of Click kabu 365, Exchange Equity Index
Margin Contracts, which were listed in November 2010, reached 447
thousand lots in ﬁscal 2010.
In total, the trading volume of all products during ﬁscal 2010 was 135
million lots, up 46.2% from the previous ﬁscal year.
As a result, operating revenues climbed 28.5% year on year, to 10,966
million yen, the ﬁrst time revenues have topped the 10 billion yen level
since ﬁscal 2007.
Net income also jumped 29.7% from the previous ﬁscal year, to 2,242
million yen.
We will continue our eﬀorts to bolster trading volumes by improving
the convenience of existing listed products, and developing new
products that meet investor needs. We are also resolved to achieve
proﬁtable operations through comprehensive cost cutting.
We are also committed to maintaining market fairness and reliability,and eﬀectively managing the markets in a transparent manner.
We sincerely ask you, our shareholders, for your ongoing support andcooperation.
June 2011
President and CEO

Shozo Ohta
Business Report02About Tokyo Financial Exchange

Summary of Operating Results

Operations of Tokyo Financial Exchange

Financial Accounts - Highlights

Tokyo Financial Exchange (TFX) contributes to the sound development of the ﬁnancial markets and the economy
of Japan by developing ﬁnancial instruments markets, as public infrastructure related to ﬁnancial instruments
transactions that provides a superior degree of fairness, reliability, and convenience.
Tokyo Financial Exchange is engaged in the following operations in accordance with the Financial Instruments andExchange Act:(i) TFX, as a ﬁnancial instruments exchange,
establishes a ﬁnancial instruments
market, provides facilities for the market,
publishes market prices, and is engaged
in other operations related to theestablishment of a ﬁnancial instruments market.

(ii) TFX, as a clearing organization fortransactions of ﬁnancial instruments,
is engaged in the ﬁnancial instruments
obligation assumption businessassociated with market derivatives
transactions carried out on the market
established by TFX.

(iii) TFX, as a self-regulatory organization,is engaged in operations such as
examining the details of transactions
and inspecting trading members, toensure the fairness, transparency, andreliability of the market.

TFX, as a comprehensive exchange for ﬁnancial derivatives, has listed products that cover all three major sectors
for ﬁnancial derivatives: interest rates, foreign exchange, and stocks.

Market Highlights
Annual Trading volume(Change from previous ﬁscal years)

FY2006
Operating Revenues
10,774(million yen)
Operating Profit
7,021(million yen)
Ordinary Profit
7,166(million yen)
Net Income
7,188(million yen)
Net Income per Share
8,296.63(yen)
Total Assets
108,110(million yen)
Net Assets
19,717(million yen)
Net Assets per Share
19,269.90(yen)

FY2007

FY2008FY2009FY2010Change from
FY2009Interest
Interest Rate
Rate Futures
Futures transactions
Three-month Euroyen futures, etc.

Foreign Exchange Sector

Click
Click 365
365
Exchange FX Margin Contracts
23 trading currency pairs in total（

03 Business Report

12 Yen Currency Pairs
11 Cross Currency Pairs

）

TFX
TFX
Stocks Sector

Click
Click kabu
kabu 365
Exchange Equity Index
Margin Contracts

4 equity indexes, including Nikkei 225(in thousands)

FY2008FY2009FY201067,596(▲8.7%)

92,549(+36.9%)135,346(+46.2%)

12,123

8,458

8,532

10,966+28.5％

7,565

2,660

2,525

3,927

+55.5％

7,731

2,817

2,770

4,232

+52.8％

FY2008FY2009FY201018,584(▲47.4%)

12,161(▲34.6%)

11,466(▲5.7%)

Three-Month Euroyen Futures(in thousands)

5,228

1,444

1,728

2,242

+29.7％

6,060.24

1,674.18

2,004.01

2,599.02+29.7％

174,955

163,134

180,674

238,807+32.2％

FY2008FY2009FY201019,554

20,136

21,43323,244+8.４％

48,334(+37.0%)80,368(+66.3%)

123,432(+53.6%)

22,665.33

23,339.52

24,843.53

26,942.55+8.４％

Click 365

Outline of Financial Results
Interest Rate Sector

Total Trading Volume of Listed Products

Operating revenues rose 28.5% over the previous ﬁscal year, to 10,966 million yen, given an
increase in trading volumes for Click 365, which noticeably oﬀset a decline in volumes for
Three-Month Euroyen Futures.
Operating expenses increased 17.2% year on year, to 7,039 million yen, mainly reﬂecting an
increase in expenses related to systems as a result of the listing of Click kabu 365.
Operating proﬁt jumped 55.5%, to 3,927 million yen, thanks to the steady increase intransactions of Click 365. Despite the recording of extraordinary losses, the result of theapplication of the accounting standards for asset retirement obligations, and other factors, net
income rose 29.7% from the previous ﬁscal year, to 2,242 million yen.
Net income per share rose 29.7% year on year, to 2,599.02 yen, and net assets per share
increased 8.4%, to 26,942.55 yen.
Taking into account strong results achieving higher revenues and proﬁts for the ﬁscal year
under review, we decided to increase dividend payments per share by 200 yen compared withthose for the previous ﬁscal year, to 700 yen, with a dividend payout ratio amounting to 26.9%.
We will continue to focus on the return of proﬁts to our shareholders.

(in thousands)

Click kabu 365(in thousands)

FY2008FY2009FY2010

―
―

―
―

447
(―%)

Summary of markets
Trading volumes of Three-Month Euroyen Futures
declined for the fourth consecutive term, but volumesof Click 365 continued to rise for the ﬁfth consecutive
term since its listing. Click kabu 365 was listed andstarted trading in November 2010. As a result, thetotal trading volume of listed products rose 46.2%
from the previous ﬁscal year, to 135 million lots and,exceeding 100 million for the ﬁrst time.
TFX was ranked 18th among global derivatives
exchanges in terms of annual trading volumes in2010.

Business Report04

Interview with the President
Future Outlook for Tokyo Financial Exchange

Q1 Fiscal 2010 was the ﬁnal year of the Medium-Termdetails?

(i) List new products based on the LIBOR, in addition to thoseBusiness Plan, which was established in May 2008 as theA2

inaugural plan made by Tokyo Financial Exchange. Please

Term Business Plan, we will improve

explain the achievements over these three years.

and strengthen TFX s management

A 1 Under the previous Medium-Term Business Plan, we

Under the new Medium-foundationasacomprehensive

set three management goals. These were as follows:

exchange for ﬁnancial derivatives(i) Establish a comprehensive exchange for ﬁnancial derivatives

that we achieved in ﬁscal 2010.

based on the TIBOR;(ii) Enhance market liquidity by adopting a liquidity provider
scheme;securities derivatives sector. How do you expect to revitalize themarket in the future?

A5 Since its listing in 2010, Click kabu 365 has steadily

expanded the number of trading accounts and the outstanding(iii) Establish a global network to capture overseas business;balance of margins.

(iv) Improve overseas marketing and the support system for

To further respond to the needs of investors and bolster theoverseas customers.

attractiveness of Click kabu 365, we will aim to list a wide rangethat covers all three major sectors ‒ namely, interest rates,

We seek to enhance investor

foreign exchange, and stocks;

convenience and the trading volumes of existing products in

Q 4 Margin restrictions for FX margin transactions (so-called

each sector of interest rates, foreign exchange and stocks, whileleverage restrictions) were introduced in August 2010. Thesewill(ii) Achieve annual trading volumes of 150 million and ROE of
15% or similar levels in ﬁscal 2010;of stock index products for the UnitedStates and emerging economies. We
also

improveliquiditybydeveloping new products that meet investors needs. With theserestrictions are expected to be strengthened in August 2011. In

increasing the number of market(iii) List the shares of TFX on a stock exchange in 2011.

initiatives, we will achieve total trading volumes of 300 million,

this environment, how do you see the outlook of the market formakers from the two we currently

Click 365?

have.

With respect to (i), we became a comprehensive exchange for

expand our business foundations, and bolster earnings in ﬁscal

ﬁnancial derivatives by listing Click kabu 365 in November 2010.

2013. We will also complete the listing of TFX shares afterA4

As for (ii), as a result of the increase in trading volumes of Clicktaking into account the state of the stock market and otherratio, but with the restrictions, the ratio is limited to 50 times.

and365, total trading volumes of all products reached 135 million,

relevant factors.

This has severely impacted the activities of investors who dealt

strategies to bolster the visibility ofat high leverage levels. However, because transactions throughTFX to investors.

only a little shy of 150 million. We could not, however, achieve

Previously, there were no limitations on the margin

We are also planning aggressive
large-scale

publicrelationsthe targeted ROE, given the diﬃcult management environment

Q3

following the collapse of Lehman Brothers and other factors.

Futures remains challenging. What kind of policies will you

restrictions have had very little impact on trading.

Q 6 What is your vision for the future direction of Tokyo

With respect to (iii), given sluggish conditions in the stock

adopt during the current ﬁscal year?

The margin ratio will be halved this year. I believe that thisFinancial Exchange?

The trading environment for Three-Month Euroyen

Click 365 were mostly carried out at low leverage levels, themarket due to the global ﬁnancial crisis, and other factors, we

A 3 Trading volumes for Three-Month Euroyen Futures

will contribute to the sound growth of the foreign exchange

A6 Under the new Medium-Term Business Plan, TFX, as ahave decided to revise the timing of the listing of TFX. We are,declined for the fourth consecutive term in ﬁscal 2010, as

margin market. We are resolved to further invigorate the Clickcomprehensive exchange for ﬁnancial derivatives, aspires toat present, steadily making preparations for our listing.

demand for hedging interest rates has declined with recent

365 market by oﬀering attractive new products through the newcontribute to the revitalization of the Japanese ﬁnancial markets

With this progress, I think that we achieved most of the goals

ultralow interest rates in the short-term money market. Given

listing of Asian currencies, and expanding the number of broker

by meeting the needs of investors both in Japan and overseasof the Medium-Term Business Plan.

these severe conditions, we will develop a trading environment

members.

and listing sound and attractive investment products.

Q2 Tokyo Financial Exchange established a new
Medium-Term Business Plan in April 2011. Can you explain the05 Business Reportconducive to a wide range of investors, both in Japan andoverseas.

Q 5 With the listing of Click kabu 365 in November 2010,

We will take the following speciﬁc measures:Tokyo Financial Exchange has successfully entered theWe will continue to make every eﬀort to manage a transparent
and eﬃcient market.

Business Report06Topic 1

History of Click 365 (Fifth Anniversary)

Click 365, Exchange FX Margin Contracts, achieved its fifth anniversary last fiscal year since its listing as Japan s
first public foreign exchange market in July 2005. Through these years, Click 365 has steadily expanded its market
as investors came to understand the structure of Click 365, with its advantageous pricing and its superior features,
including the reliability of the public exchange, tax benefits, and the protection of margin money.
(i) Increase in the number of listed currency pairs
July 2005 : Listing of Click 365, Exchange FX Margin Contracts (four currency pairs at the time of listing)
October 2005 : Three currency pairs added.
October 2008 : 16 currency pairs added. (A total of 23 currency pairs to date)August 2011 : Three Asian currency pairs are due to be listed.

FY2005

FY2006

FY2007

FY2008FY2009FY2010

Number of Trading Members

14

15

17

22

23

29

Number of Market Makers(out of Trading Members)

3

3

3

6

5

6

Numberof Accounts(in thousands)
500

Number of Accounts andOutstanding Balance of Margins

Outstanding Balanceof Margins(in billions yen)
200(iv) Changes in trading volumes and open interest
Trading Volumes(in thousands)

Trading Volumes andOpen Interest

Open Interest(in thousands)

140,000

700

120,000

600

400

160

100,000

500

300

120

80,000

400

200

80

60,000300

40,000

200

100

40

20,000100

00FY2005 FY2006 FY2007 FY2008 FY2009 FY2010

Number of
Accounts

Outstanding
Balance of Margins

00
FY2005 FY2006 FY2007 FY2008 FY2009 FY2010

Trading Volumes

Open Interest(v) Upgrading of the trading systems
To improve market convenience, in October 2008, TFX upgraded its trading systems and bolstered their processing capabilities
and functions.

07 Business
ReportAnnual Report

Commemorating the ﬁfth anniversary of the listing of Click
365, TFX held the Click 365 Fair in Osaka and Tokyo. During
the fair, TFX arranged special lectures by prominent experts,
presentation booths provided by trading members, a wide
range of presentations, and various other events.

Active Promotional Activities(ii) Changes in the number of trading members and market makers(iii) Changes in the number of accounts and the outstanding balance of margins

Click 365 Fifth Anniversary Fair

TFX has been actively engaged in promotional
activities via the media, including television, radio, andinternet advertisements, to ensure that Click 365 isused by as many investors as possible.
Since May 2011, TFX has been sponsoring Click 365
Market Information, a program in Tokyo Market Wideon TOKYO MX TV (Channel 9 on terrestrial digital broadcasting), from Monday to Friday between 11.00 a.m. and11.15 a.m.

With strong support from investors, Click 365 has steadily expanded its trading volume.
TFX will continue to strive to maintain Click 365 as an attractive investment product in the future to meetthe requirements of customers by improving and bolstering Click 365 s specifications to suit investors needs.
[List of Trading Members (in alphabetical order)]ACE KOEKI Co., Ltd., Cosmo Securities Co., Ltd., CyberAgent FX, Inc., Daiwa Securities Co. Ltd., FX Trading Systems Co., Ltd., Gaitame.Com Co.,
Ltd., GMO CLICK Securities, Inc., HiroginUtsumiya Securities Co., Ltd., INVAST SECURITIES CO., LTD., kabu.com Securities Co., Ltd., Kanetsu FX,
INC., KOYO FINANCIAL TRADE Co., Ltd., MITA SECURITIES Co., Ltd., Mizuho Securities Co., Ltd., Nomura Securities Co., Ltd.*, OKASAN ONLINESECURITIES CO., LTD., OKAYASU SHOJI CO., LTD., Rakuten Bank, Ltd., Retela Crea Securities Co., Ltd., SBI Sumishin Net Bank, Ltd., STAR KAWASESECURITIES CO., LTD., TRADERS SECURITIES CO., LTD., YUTAKA SHOJI Co., Ltd.
Market Makers: The Bank of Tokyo-Mitsubishi UFJ, Ltd., Barclays Bank PLC, COMMERZBANK AKTIENGELLSCHAFT, Deutsche Securities Inc.,
Goldman Sachs Japan Co., Ltd.
＊Nomura Securities Co., Ltd. is also engaged in market making operations.
Risks related to product specifications……Since the transaction amount is much larger than the deposited exchange margin, these fluctuations
may cause a loss exceeding the deposited exchange margins, depending on market conditions.
Risks of changes in tax systems, laws, etc.……Changes in tax systems, laws or their future interpretation may cause unfavorable results.

Business
Annual Report08Topic 2 Listing of Click kabu 365
On November 22, 2010, Tokyo Financial Exchange started trading

The Nikkei 225 is a representative indicator of the Japanese
economy and the best known stock index in Japan. TFX also handles
other major global indexes, including the FTSE 100 of the United
Kingdom, the DAX® of Germany, and other indexes in Asia, toensure that investors can invest in their countries of interest.

of Click kabu 365, Exchange Equity Index Margin Contracts.
■List of Trading Members (in alphabetical order)
Cosmo Securities Co., Ltd., INVAST SECURITIES CO., LTD.,
Kanetsu FX, INC., Monex, Inc., OKASAN ONLINE SECURITIESCO., LTD., STAR KAWASE SECURITIES CO., LTD.,YUTAKA SHOJI Co., Ltd.

（2）Trading hours■Market Makers (in alphabetical order)
Daiwa Securities Capital Markets Co., Ltd.,
Deutsche Securities Inc.

10,000

Outstanding Balanceof Margins(in millions yen)
2,500

300,000

9,000

8,000

2,000

250,000

7,500

6,000

1,500

200,000

6,000

150,000

4,500

4,000

1,000

100,000

3,000

2,000

500

50,0001,500

Number of
Accounts

0

Number of Accounts and the Amount on Margin

Nov

Dec

Jan

Number of Accounts

Feb

Mar

0

Outstanding Balance of Margins

Trading
Volumes0

Trading Volume and Open Interest

Nov

Dec

Jan

Trading Volumes

Feb

Mar

Open
Interest

0

Open Interest

Features of Click kabu 365

The Nikkei 225 Margin contracts are tradable virtually 24 hours a day.
Due to this feature, investors can trade the Nikkei 225 on a real-timebasis, even at night when the stock market is closed in Japan, without
missing price movements that may be caused by fluctuations in major
global stock markets. Overseas stock indexes are, in principle, tradable
during the local trading hours of each index.
（3）Overseas stock indexes are traded in yen
Overseas stock indexes contracts have a simple structure, in which investors can trade the indexes in yen without needing to beconcerned about fluctuations in foreign exchange rates.
（4）Buyers and sellers pay or receive interest and dividend cash flows.
TFX computes interest and dividends that investors will pay and receive in accordance with their trading positions.
(Note) DAX® Margin Contract is a stock index that includes dividends. As a result, no dividend payments are involved.

（5）Investments can start from a small amount
By depositing margin as collateral, investors can enter into transactions with a small amount of funds (margin deposits).

（1）Stock Indices Traded
Click kabu 365 provides 4 global stock indexes, including the Nikkei 225, to investors.
Nikkei 225

A stock index that comprises 225 issues listed on the First Section of the Tokyo Stock Exchange, which are selected by taking into account the liquidity in themarket, the balance of business sectors, and other factors

ＦＴＳＥ１００

A stock index that comprises the 100 most highly capitalized companies listed on the London Stock Exchange

ＤＡＸ®

A stock index that comprises 30 major companies listed on the Frankfurt Stock Exchange

FTSE/CHINA 25

A stock index that comprises the 25 largest Chinese companies by market capitalization and liquidity, which are listed on the Hong Kong Stock Exchange

09 Business
ReportAnnual Report

Risks related to product specifications …Because trading amounts are large compared with margins deposited, losses that exceed the margins deposited may occur as a result of market
fluctuations.
Risks related to forecast of dividends…TFX calculates the dividend amount as the theoretical amount that will impact the equity index in the future based on the forecast of dividends
as of the last cum-rights date. The amount equivalent to the dividends calculated by TFX is resultantly different from that calculated based on
actual dividend payments, or forecast of dividends or actual dividends for the actual shares that comprise the index.

Business
Annual Report10Other Activities of TFX in Fiscal Year 2010

Challenges in Fiscal Year 2011

1.Interest Rate Futures
Remote Trading Member
TFX was the ﬁrst exchange to adopt a remote membership
scheme in Japan. Subsequently, on September 1, 2010, G.H.
Financials Limited became a remote trading member.
This was the ﬁrst instance for a Japanese exchange topermit an overseas investor, which does not have a tradingoﬃce in Japan, to acquire trading membership.

1

Proximity Services
To respond to the needs of market participants requiringa high-speed, high-quality and cost-eﬀective connection
environment, in November 2010, TFX adopted the services
of KVH Co., Ltd. for TFX Proximity Services* for its interest
rate systems. KVH Co., Ltd. is a market leader in network
communication specializing in high-frequency transactions.

Listing of LIBOR Futures(Interest Rate Futures)

TFX currently lists Euroyen futures basedon the Tokyo Interbank Oﬀered Rate (TIBOR).
To respond to the increasingly diversiﬁedneeds of trading members, TFX will also list
Euroyen futures based on the London＊ A connection method in which access is made from market participants
hardware (trading servers and other hardware) installed in a data center
designated by TFX to the market managed by TFX via a high-speed network

Interbank Oﬀered Rate (LIBOR).

The following companies have started to trade as trading members:- GMO CLICK Securities, Inc., (August 2010)- Mizuho Securities Co., Ltd. (January 2011)- FX Trading Systems Co., Ltd. (February 2011)- KOYO FINANCIAL TRADE Co., Ltd. (March 2011)
In August 2010, Nomura Securities Co., Ltd., which was engaged inmarket making operations, commenced brokerage operations of Click 365.

*The liquidity provider scheme is a system in which a low commission table is given to speciﬁc customers on the condition that thecustomers maintain minimum trading volumes. The system isdesigned to encourage investors who trade large amounts on afrequent basis to participate and carry out active transactions onmarkets managed by TFX.

Seminars
To further enhance investors understanding about Click
365 and Click kabu 365, TFX held Click 365 Fairs and Click
Fairs on four occasions. In ﬁscal 2010, the seminars were
held in Tokyo and Osaka with guest speakers from thebusiness and academic communities.
TFX also sponsored other seminars held by trading
members, media, and other organizers.

3.Marketing and Communication Activities
Communication with overseas investors
TFX participated in exhibitions and international conferences that were organized by
the Futures Industry Association (FIA) and others (in Chicago, Boca Raton, London, andSingapore). Through these activities, TFX sought to promote its operations to overseas
players, and further improve the convenience of its market by actively communicatingwith institutional investors, ﬁnancial institutions, and other investors.
TFX also held basic seminars on trading regulations and other matters for trading
members new staﬀ.

11 Business Report

TFX will introduce a liquidity provider scheme* in ﬁscal year
2011 in an eﬀort to expand trading volumes and liquidity.

Moreover, TFX is at present examining the possibility ofinterconnection with the network of NYSE Euronext. With these
initiatives, TFX will aim to further improve its global network.

2.Click 365 and Click kabu 365
Increase in the Number of Trading Members of Click 365

2

Introduction of a Liquidity Provider
Scheme and Expansion of the Global
Network (Interest Rate Futures)

Challenge 2011
3

Listing of Asian
Currencies (Click 365)

TFX expects to list currency pairs(Chinese yuan, Korean Won and Indianrupee) of the Asia region in the Click
365 market in August 2011. With thislisting, the number of currency pairs
available in the Click 365 market will be
26. TFX will then be able to provide aneven wider range of investment opportunities to the market participants.

4

Expansion of Liquidity by Increasing
the Number of Market Makers andthe Listing of New Stock Indexes(Click kabu 365)

5

Establishing a StructureWith a View to Listing
TFX s shares

TFX will strive to increase the

TFX will strengthen its manage-

number of market makers toment structure with a view tobolster market liquidity. It will also

listing its shares by strengthening

strive to list highly convenient new

its business execution structure,

products, and will take the initiative

consolidating its internal control

in encouraging the entry of newreporting structure, and otherbroker members.

measures.

Business Report12New Medium-Term Business Plan (from Fiscal 2011 to Fiscal 2013)
Overview
Global exchanges are expected to play a leading role in helping to revitalize the ﬁnancial markets and spur economic growth in an environment inwhich ﬁnancial regulations have tightened in response to the credit crisis that followed the collapse of Lehman Brothers.
The outlook for the Japanese economy is expected to remain uncertain, given factors such as the devastating damage caused by the recent earthquake
and tsunami just as the economy looked set to recover, the burden of the recovery eﬀorts from this disaster, the uncertainty surrounding ﬁnancial andﬁscal policies in dealing with the disaster, and the impact on interest rates and foreign exchange from medium- to long-term policies designed to improve
the soundness of public ﬁnances. In this environment, Tokyo Financial Exchange believes that it has a mission, as a comprehensive exchange forﬁnancial derivatives, to provide attractive and reliable products to investors, and to help to invigorate Japan s ﬁnancial market.
To achieve these goals, TFX established a Three-Year Medium-Term Business Plan that started in ﬁscal year 2011.

FutureFuture Vision
VisionManagement
Management Goals
Goals

Basic Strategies

As a comprehensive
exchange for ﬁnancial
derivatives, TFX will
respond to the needs ofinvestors both in Japanand overseas, and list
sound and attractive
investment products,
contributing to therevitalization of Japan s
ﬁnancial market.

1．TFX will seek to improve
investor convenience andincrease trading volumes ofexisting listed products ineach sector of interest
rates, foreign exchange, andstocks, and develop new
products that meet theneeds of investors.

1. Provide sound andconvenient products.

2．In ﬁscal 2013, the ﬁnal yearof the Medium-TermBusiness Plan, TFX will
aim to achieve total trading
volumes of 300 million.
3．TFX will bolster its businessfoundation and its earnings,
and, by taking into account thesituation of the stock market
and other factors, will aim tolist its shares on a stock
exchange in ﬁscal 2013 or later.

13 Business Report

2. Bolster trading volumes
and earnings.
3. Establish strong andadvanced exchange trading
systems.
4. Maintain a fair andreliable market, andmanage a transparent
and eﬃcient market.

Business
Business Strategies
Strategies（１）
Provide sound and convenient products.
（３）Establish strong and advanced exchange trading
Interest Rate Futures transactions
systems.
■ List LIBOR Futures (2011)(i) Develop an ISV test environment in the Click■ Develop new interest rate products (2013).
365 and Click kabu 365 trading systems
Click 365(2011).
■ List Asian currencies (2011)(ii) Update the interest rate trading systems■ List currencies of emerging economies(2013).
(2012 and beyond)Lower the total cost of ownership (TCO), etc.
(iii) U p d a t e t h e C l i c k 3 6 5 a n d C l i c k k a b u
Click kabu 365■ Enhance liquidity by increasing the
365 trading systems (2013).
number of market makers (2011).
Improve processing capabilities, etc.
■ List new stock indexes（４）Maintain a fair and reliable market, and manage(2011 and beyond)a transparent and eﬃcient market.
(i) Further strengthen and improve monitoring.
（２）
Bolster trading volumes and earnings.
(i) Introduce a liquidity provider scheme to the(ii) Respond appropriately to global standards as
Three-Month Euroyen Futures market
a clearing organization (2012).
(iii) Improve self-regulatory functions.
(2011).
(ii) Improve the global network of Interest
Appropriately deal with diversifying transacRate Futures transactions (2011).
tions.
(iii) Increase the number of broker membersof Click 365 and Click kabu 365.
(iv) Take steps to invigorate Euroyen Futures(far dated contract months) transactions
and other transactions (2012).
(v) Introduce an overseas broking system toClick 365 (2012).
(vi) Improve the overseas marketing andoverseas customer support systems.

Business Report14Financial Statements
Balance Sheet
Account Titles(in millions yen)
FY2010(As of March 31, 2011)

FY2009(As of March 31, 2010)(in millions yen)
FY2010FY2009［As of March 31, 2011］ ［As of March 31, 2010］

Account Titles(ASSETS)(LIABILITIES)

2,997

4,640

Cash and bank deposits

160

1,399

Accounts payable-trade

Accounts receivable-trade

1,329

761

Accounts payable-other

155

91

Securities

1,197

2,211

Income taxes payable

1,262

658

Current Assets

Current Liabilities

1,915

1,151

228

190

Prepaid expenses

97

96

Provision for officers bonuses

36

18

Deferred tax assets

162

138

Provision for employees bonuses

108

92

Others54

35

Allowance for doubtful receivables▲3▲2

235,810176,033

2,245

2,325

476

Furniture and equipment
Construction in progress

Non-current Assets
Tangible Fixed Assets
Buildings

Intangible Fixed Assets
Software
Software development in progress

124

100

213,647

158,089

Provision for retirement benefit for directors and corporate auditors

174

240

Provision for retirement benefit for employee

246

208

496

Deposits received from members

213,226

157,640

1,769

1,637

Exchange margins received

208,580

152,396―

192

Market entry deposits received

483

395

3,806

4,162

3,792

3,726

5

426

OthersNon-current Liabilities

Clearing deposits received
Total Liabilities

4,162

4,849

215,562

159,2408

916,531

11,905

Shareholders Equity

23,244

21,433

Investment in securities

14,917

9,983

Common stock

5,844

5,844

Long-term bank deposits

500

500

Capital surplus

6,045

6,045

Guarantee money deposits

763

848

Capital reserve

6,045

6,045

Long-term loan receivable

317

475

Retained earnings

11,354

9,543

Deferred tax assets

14

52

11,354

9,543

Others

19

45

1,994

1,994

Allowance for doubtful receivables▲0▲0Assets Held for Guarantee from Members

213,226

157,640

Bank deposits held for exchange margins received

208,580

Bank deposits held for market entry deposits received
Bank deposits held for clearing deposits received
Total Assets

15 Business Report

Account Titles
Operating Revenues
Fixed amount exchange fees
Per-contract exchange fees
Income relating to system equipment
Member registration fees and others
Income from information services
Operating Expenses
Personnel expenses
Marketing expenses
Facility-related expenses
Administrative expenses
Operating Profit
Non-operating Revenues
Non-operating Expenses
Ordinary Profit
Extraordinary Income
Extraordinary Losses
Head office relocation expenses
Loss on retirement of tangible fixed assets
Effects of the application of the accounting
standards for asset retirement obligations

Investments and Other Assets

OthersProfit and Loss Statement(NET ASSETS)

Other retained earnings
Default compensation reservefor financial futures contract

152,396

Default compensation reservefor exchange forex margin contract

936

936

483

395

Retained earnings brought forward

8,424

6,613

4,162

4,849

Total Net Assets

23,244

21,433

238,807

180,674

Total Liabilities and Net Assets

238,807

180,674

Impairment loss
Loss on valuation of golf club memberships
Income Before Income Taxes
Income taxes-current
Income taxes-deferred
Net Income(in millions yen)

FY2010［From April 1, 2010
to March 31, 2011)

FY2009［From April 1, 2009
to March 31, 2010］

10,96648
10,233
359
69
255
7,039
1,512
235
4,995
296
3,927
306
1
4,232
―
211
―
―
38
148
24
4,020
1,762
14
2,242

8,532
44
7,925
278
23
261
6,006
1,368
35
4,233
369
2,525
247
2
2,770
0
13
9
4
―
―
―
2,756
995
32
1,728

Points related to the balance sheet
1. Bank deposits held for exchange margins received rose 56,184 million yen,
to 208,580 million yen, mainly reﬂecting the increase in the open interestof Click 365 and the application of leverage restrictions.
2. As a result of the completion of trading and clearing systems of Click kabu
365, which had been developed ahead of the listing of Click kabu 365,
construction in progress related to the relevant systems and softwaredevelopment in progress as at the end of the previous ﬁscal year weretransferred to furniture and equipment and to software respectively.
Consequently, software development in progress as at the end of the ﬁscal
year under review was 5 million yen.
3. With investments of excess funds, investment in securities rose 4,934
million yen, to 14,917 million yen.
4. Given the increase of income, income taxes payable rose 604 million yen,
to 1,262 million yen.

Points related to the proﬁt and loss statement
1. Per-contract exchange fees rose 29.1% compared to the previous ﬁscal
year, to 10,233 million yen, reﬂecting the signiﬁcant rise in trading volumesof Click 365. As a result, operating revenues amounted to 10,966 millionyen.
2. The trading and clearing systems of Click kabu 365 started operating,following the listing of Click kabu 365 in November 2010. As a result,facility-related expenses rose 762 million yen, to 4,995 million yen, andoperating expenses stood at 7,039 million yen.
3. As a result, operating proﬁt rose a signiﬁcant 55.5%, ordinary proﬁt,
climbed 52.8%, and net income rose 45.9%, all on a year-on-year basis.

Statement of Changes in Shareholders Equity (Summary)
Account Titles
Balance of Mar 31, 2010
Changes during the term
Dividend paid
Net Income
Total amount changed during the term
Balance as of Mar 31, 2011

FY2010 [from April 1, 2010 to March 31, 2011]

Shareholders Equity
Capital surplus
Retained earnings(in millions yen)

Total shareholders equity

Total Net Assets

5,844

6,045

9,543

21,433

21,433

―
―
―
5,844

―
―
―
6,045

▲431
2,242
1,810
11,354

▲431
2,242
1,810
23,244

▲431
2,242
1,810
23,244

Common stockBusiness Report

16

Corporate Profile

FY2006

FY2007

FY2008FY2009FY2010

Annual Trading Volume36,284,057

35,315,872

18,584,732

12,161,642

11,466,264

Average Daily Trading Volume147,496

144,146

75,856

49,84346,801Company NameFounded30,000Address
20,000＊TFX invoked intraday additional margin once in ﬁscal 2010 (on March 14, 2011).
10,000

Options on Three-Month Euroyen Futures
Annual Trading Volume

FY2006

FY2007

4,234,894

3,454,194

FY2008FY2009678,197

0

FY201019,000FY2006 FY2007 FY2008 FY2009 FY2010

0(in thousands) Click 365 Annual Trading Volumes

Click 365

140,000

FY2007

FY2006

FY2008FY2009FY2010120,000
100,000

Annual Trading Volume

15,945,190

35,282,228

48,334,039

80,368,758

123,432,149

80,000

Average Daily Trading Volume

61,564

135,701

191,139

309,111472,92060,000＊In March 2011, Click 365 recorded a record monthly trading volume of 15,870,475.
＊In May 2010, Click 365 recorded a record average daily trading volume of 714,452 since its listing.
＊May 6, 2010, the daily trading volume reached record 1,630,780.

Click kabu 365
FY2006

FY2007

FY2008FY2009FY201040,00020,0000

FY2006 FY2007 FY2008 FY2009 FY2010(in thousands) Total Annual Trading Volume of Listed Products
140,000

Annual Trading Volumes

−

−

−

−

447,814120,000

Average Daily Trading Volume

−

−

−

−

5,128

100,000
80,000All Listed Products
Annual Trading Volume

FY2007

FY2008FY2009FY201056,472,251

74,057,650

67,596,968

92,549,400

135,346,227

40,00020,0000

FY2006 FY2007 FY2008 FY2009 FY2010

Trading in Fiscal 2010
（1）Three-Month Euroyen Futures （2）Click 365
As the Bank of Japan maintained and even loosened
its notably accommodative monetary policy, short-term
interest rates continued to decline from the start of theﬁscal year under review. Interest rates fell further inthe wake of the decision made by the Bank of Japan in
October 2010 to adopt a comprehensive monetaryeasing policy. In this environment, Three-MonthEuroyen Futures transactions remained sluggish, withannual trading volumes amounting to 11,466,264 and,falling 5.7% year on year.

17 Business Report

In May 2010, trading volumes rose signiﬁcantly, with record daily
trading volumes, reﬂecting the severe ﬂuctuations of the foreignexchange market stemming from the reoccurrence of the ﬁscal crisis inSouthern Europe.
Trading volumes fell temporarily, given leverage restrictions inAugust 2010. However, they had almost returned to their previous
level within two months. As a result, given the increase in the numberof trading members and accounts, annual trading volumes jumped
53.6% from the previous ﬁscal year, to 123,432,149. In March 2011, Click
365 posted a record monthly trading volume.

Marunouchi Park Building 15th Floor,
2-6-1 Marunouchi, Chiyoda-ku, Tokyo,
100-6915
5,844,650,000 yen
119 (as of March 31, 2011)
March 31
President & CEO
Shozo Ohta
Senior Managing Director & COO
Makoto Yamamuro
Managing Director
Wataru Ito
Managing Director & CIO
Takuo Hirota
Member of the Board
Takashi Imai
Member of the Board
Keimei Kaizuka
Member of the Board
Junko Hirakawa
Member of the Board
Masatoshi Yano
Member of the Board
Eiji Nakai
Standing Statutory Auditor Nagao Hashimoto
Statutory Auditor
Osamu Sekine
Statutory Auditor
Toshihiko Fujie

No. of TFX Members (as of March 31, 2011)
Interest Rate Futures Trading and Clearing Members

60,000FY2006

CapitalNo. of Employees
Fiscal Term
Management

Tokyo Financial Exchange Inc.
April 1989 (In April 2004, TFX changed from amembership organization to a stock company.)（3）Click kabu 365
Click kabu 365 was listed and started
trading on November 22, 2010.
Annual trading volumes reached 447,814.
The number of trading accounts and theoutstanding balance on margin rosesteadily from the time of listing to March
2011.

47

Organizational Chart
Board of Auditors

Statutory Auditor
General Administration
Department

Budget and Accounting
Department
Market Development
Department

3

FX Margin Trading and Clearing Members

29

Including 7 Equity Index Margin Contracts Trading and Clearing Members
Including 6 Market Makers

Equity Index Margin Contracts Trading and Clearing Members

Planning Office

Budget and Accounting OfficeMarket Planning Group
Research OfficeInstitutional Marketing Group

Marketing
Department

FX Products Retail Marketing Group
Equity Index Products
Retail Marketing Group

Self-Regulatory Committee

Clearing and Settlement
Department

Clearing and Settlement Group

Discipline Committee

Interest Rates Market
Surveillance Department

Interest Rates Market
Surveillance Group・Interest Rate Futures etc.
Market Operation Committee
・FX/Equity Index Market
Operation Committee

Margin Contracts Market
Surveillance Department

System
Department

Including 5 FX Margin Trading and Clearing Members
Including 2 Equity Index Margin Contracts Trading and Clearing Members

Interest Rate Futures Trading Members

Administration Affairs andHuman Resources OfficePublic Relations Office

President & CEO(in thousands) Three-month Euroyen Futures Annual Trading Volumes
40,000Board of Directors

Three-Month Euroyen Futures

Shareholders Meeting

Market Data

FX Market Surveillance Group
Equity Index Market
Surveillance Group
System Group
System Planning OfficeCompliance OfficeInternal Auditing OfficeSelf-Regulation Bureau

9

Including 2 Market Makers

Share Information (as of March 31, 2011)
Total No. of Shares Authorized
3,400,000
No. of Shares Issued and Outstanding 862,750
No. of Shareholders
69
U R L http://www.tfx.co.jp/en

Business Report18