JAPAN: FSA extends temporary measures regarding restrictions on Japan short selling

Tuesday October 25 2011

The following regulatory measures on Japan short selling are currently in place, with regard to all listed stocks in Japan:

1) An “uptick rule requirement” which prohibits, in principle, short selling at the same as or prices lower than the latest market price

2) Requirements for traders to verify and flag whether or not the transactions in question are short selling; and

3) Request the exchanges to make daily announcements on their aggregate price of Japan short selling regarding all securities and aggregate price of Japan short selling by sector (The announcements have been made sequentially since October 14, 2008). (See the FSA press release on October 14, 2008.)

In addition, the Financial Services Agency has put in force the following measures, as temporary measures effective until 31 October 2011:

1) Naked short is prohibited (effective since 30 October 2008); and

2) Holders of a short position of a certain level or more (in principle, 0.25 percent or more of outstanding issued stocks) are required to report to exchanges through securities firms. Exchanges are required to publicly disclose such information (effective since 7 November 2008).

Regarding the purchase of own stocks by listed companies, taking into consideration the of situation Japan`s capital markets, the following restrictions have been temporarily relaxed over the period from 14 October 2008, to 31 October 2011.

1) Upper limit on the daily purchase volume

The limit will be raised from the current 25% to 100% of average daily trading volume during the four weeks immediately preceding the repurchase.

2) Timing of purchaseCompanies are currently required to repurchase their own stocks during hours other than the 30 minutes immediately before the close of trading. This restriction will be lifted.

3) The FSA decided to further extend these temporary measures until 30 April 2012. To this end, the Cabinet Office Ordinances and FSA Regulatory Notices necessary for these extensions will be promulgated before expiry of these measures by the end of October, 2011.

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