There are no special rules for ETF trading compared to common stocks. Trading is conducted through securities companies, in the same way as common stock investment.
Trading Rules
- Limit and Market Orders are both capable, as with stocks.
- Tick sizes are also the same as those for stocks. Just as with stocks, order can be placed for "Bid at JPY 903" or "Offer at JPY 894".
- Additionally, execution of transactions (the principle of price and time priority) and price limits are the same as those for common stock transactions.
- In addition to auction trading, trading is also available through ToSTNeT trading, which can be used for large-lot transactions. However, off-auction trading of own shares (ToSTNeT-3) is not available.
Reference Price
- There are two types of ETFs: domestic ETFs created in Japan and foreign ETFs created in countries outside of Japan. Some foreign ETFs may set their base price based on home country quotes, similar to foreign stocks.
- For details on how the base price for foreign ETFs is set and how each issue is handled, please refer to the Base Price section of the Foreign Stock Trading Rules page.
Trading Units
- In ETFs, the trading unit differs depending on the product.
- For example, if the trading unit for a TOPIX-linked ETF was 10 units, for JPY 1,000 x 10 units, it would be possible to trade from JPY 10,000 with the movements of the overall TSE stock market.
Daily Price Limits
- As with domestic stocks, the daily price limits are set based on the base price.
- For ETFs, ETNs, and leveraged products, if the auction closes at the price of the stop price (low), the price limit will be expanded from the next business day (except for the expansion of the minimum price limit for issues with a trading unit of 1 unit for which the tick size for TOPIX 500 constituents is applied).
Tick Size
- As a general rule, the tick sizes applied to TOPIX 500 constituents (TOPIX 500 tick size table) will be applied to all ETFs, ETNs and leveraged products.
- If an ETF, ETN, or leveraged product has a trading unit of 1 unit and its closing price, etc. falls to JPY 5,000 or less, the tick sizes other than those applied to TOPIX 500 constituents (the non-TOPIX 500 tick size table) will be applied, in principle, from the second business day afterwards. If the closing price, etc. later increases to JPY 7,000 or more, the TOPIX 500 tick size table will be re-applied from the second business day after this.
| Handling of Operations Relating to Optimization of Tick Sizes for ETFs, ETNs, and Leveraged Products |
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Order Quantity Restrictions
- In order to prevent erroneous order placement, TSE configures Order Quantity Restrictions and does not accept orders in excess of certain quantities, which are set based on the number of listed units.
- For ETFs and ETNs whose asset under management are below certain values(*1), the parameters of the order quantity restrictions will be set to the number corresponding to certain order values that are calculated based on the market values as of the end of the previous month (*2).
- New parameters are effective from 21st in each month (the next business day if such date falls on a non-business day) .
Please refer to the attached file for actual parameter applied to each issue (*3)
| List of Order Quantity Restrictions (Last update: 2024/04/12) |
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| Announcement of "List of Order Quantity Restrictions" |
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| Handling of Order Quantity Restrictions for ETFs and ETNs |
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- JPY1 billion for the continuous trading market and JPY 100 billion for the ToSTNeT market.
- JPY300 million for the continuous trading market and JPY 30 billion for the ToSTNeT market.
- As a general rule, it will be announced around 5 p.m. business day before the applicable date.
Market Information
- As with stocks, market information is provided for price, trading volume, trading value, quote information, pre-open quote information, and special quote information.
- Additionally, open, close, low, and high prices, as well as trading volume can be found in newspapers, etc. in the same way as stocks.
Trading Method on Initial Listing Date
- The base price on the initial listing date shall be calculated based on the closing price of the underlying stock price index, etc. on the day preceding the initial listing date.
- Price limits will be applied according to this base price from the start of auction trading on the initial listing date.
- ToSTNeT trading shall be possible from 8:20 am on the Initial listing Date using the base price of such date.
Settlement Date
- Settlement is conducted on T+2 or same day settlement. In the case of T+2 settlement, the money for the sale and the purchased ETF are exchanged on the 3th day counting from the transaction date, in the same manner as common stocks.
Dividends
- As with stock dividends, dividends are paid to investors which hold the ETF (beneficiaries) on the earnings date. (However, there are cases where dividends are zero.)
- The record date for distribution payment differs depending on the issue, so please check the brochure for details.
Creation and Redemption
- One distinct trait of ETFs is, in addition to being able to receive a basket of equities, etc. for a certain amount of ETF units (redemption), the ability to acquire the ETF from a certain basket of equities, etc. (creation). *1*2
- In this way, since it is possible for mutual exchange between the ETF and baskets of equities, etc., active arbitrage trading is conducted and interrelation between the underlying index and the ETF's market price is ensured.
- For Foreign ETFs (overseas ETFs), there may be cases where creation and redemption are not possible within Japan.
- For the "Nikkei 300 Stock Index Listed Fund", creation is conducted with cash, similar to regular investment trusts, and not with baskets of equities.
Exemption from Short Selling Regulations
In order for ETF prices to be reliable, a system is needed to facilitate arbitrage and hedging transactions between ETFs and cash equities or between ETFs and index futures. In July 2001, the "Cabinet Office Ordinance on Short Selling of Securities" was revised to establish a distribution system for smooth trading. Currently, the regulations are set forth in the "Cabinet Office Ordinance on Regulation of Securities Transactions" (hereinafter referred to as the "Ordinance").
For an overview of short sale regulations, please click here.
In view of the commodity nature of ETFs and the nature of transactions, the following transactions are exempt from the obligation of clarification and confirmation or price regulation.
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Exemption from the Obligation to Explicitly Indicate and Confirm |
Exemption from Price Regulation |
Short selling of ETFs in cases where ETFs are allocated by split-ups of beneficial interests, etc.
(Article 11, Article 9-3, Item 12 of the Cabinet Office Ordinance) |
✔ |
✔ |
Short selling of share certificates in the case where ETFs are requested to be exchanged for share certificates, etc.
(Article 11, Article 9-3, Item 16 (a) of the Ordinance of the Ministry of Finance) |
✔ |
✔ |
Short selling of such ETFs in the case where additional establishment of ETFs is requested
(Article 11, Article 9-3, Item 16(b) of the Cabinet Office Ordinance) |
✔ |
✔ |
Short selling, etc. conducted by a Trading Participant for the purpose of ensuring smooth distribution by its own calculation
(Article 11 and Article 9-3, Item 17 of the Cabinet Office Ordinance) |
✔ |
✔ |
Short selling of ETFs in the case of a commitment to buy ETFs at the VWAP price
(Article 15, Article 9-3, Item 22 of the Cabinet Office Ordinance) |
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✔ |
Arbitrage between ETFs operating on the same index
(Article 15, Article 9-3, Item 26 of the Cabinet Office Ordinance) |
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✔ |
Short selling of such ETFs or share certificates, etc. in the case of arbitrage/hedging transactions between ETFs and share certificates, etc.
(Article 15 and Article 9-3, Items 27 and 28 of the Cabinet Office Ordinance) |
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✔ |
Short selling of such ETFs in the case of arbitrage/hedging transactions between ETFs and index futures contracts
(Article 15, Article 9-3, Items 29 and 30 of the Cabinet Office Ordinance) |
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✔ |
Short selling of ETFs in the case of arbitrage/hedging transactions between ETFs and ETF options
(Article 15, Article 9-31 and Article 9-32 of the Cabinet Office Ordinance) |
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✔ |
| Short selling of ETFs for the purpose of equalizing the price of the ETFs to the underlying stock price index, etc.(Article 15, Article 9-3, Item 33 of the Cabinet Office Ordinance) |
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✔ |
(note)
- ･The table above is a brief description of laws and regulations to make them easier to understand. Please check the laws and regulations as well for actual transactions.
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