JAPAN: JPX Implementation of Margin Trading Restrictions

Tuesday March 28 2017

Japan Exchange Group (JPX) has announced restrictions are to be applied to various new margin trades.

If an issue subject to daily publication falls under any of the criteria specified in the following(1) to (4), the Exchange shall implement the measure to raise the customer margin ratio for new margin sales and purchases on and after the next business day when the Exchange confirms that the stock falls under the criteria.

(1) Criteria for outstanding margin trades in the case of falling under any of the following:

• The ratio of outstanding sales to listed shares is 15% or more, and ratio of outstanding sales to outstanding purchases is 70% or more.
• The ratio of outstanding purchases to listed shares is 30% or more, and the difference in the price of the stock and its 25-day moving average is 30% or more for 3 consecutive business days (limited to cases where the price of the stock on each business day is above its 25-day moving average)
• When the Exchange publicizes an “Issue for which outstanding margin trading is continuously increasing”, on or after the corresponding day of the following month, the ratio of outstanding sales to listed shares is 15% or more, or the ratio of outstanding purchases to listed shares is 30% or more.

(2) Criteria for margin trading ratio in the case where the difference in the price of the stock and its 25-day moving average is 30% or more for 3 consecutive business days, and falling under any of the following (limited to cases where the trading volume on each business day is 1,000 trading units or more):

• The ratio of new margin sales is 20% or more for 3 consecutive business days (limited to cases where the price of the stock on each business day is below its 25-day moving average)
• The ratio of new margin purchases is 40% or more for 3 consecutive business days (limited to cases where the price of the stock on each business day is above its 25-day moving average)

(3) Criteria for turnover ratio in the case where the difference in the price of the stock and its 25-day moving average is 40% or more on any given business day, and falling under any of the following:

• The trading volume on the business day is equal to or more than the number of listed shares, and the ratio of new margin sales on the business day is 30% or more (limited to cases where the price of the stock on the business day is below its 25-day moving average)
• The trading volume on the business day is equal to or more than the number of listed shares, and the ratio of new margin purchases on the business day is 60% or more (limited to cases where the price of the stock on the business day is above its 25-day moving average)

(4) For cases that do not fall under any of the criteria in (1) to (3), where the Exchange demes that measures are necessary in consideration of the margin trading conditions and the nature of the stock.

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