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Oct. 25, 2019 TSE Initiating Examination of RFQ Function in ETF Trading

 

Tokyo Stock Exchange, Inc. (TSE) introduced the ETF Market Making Incentive Scheme in July 2018 with the aim of improving the liquidity of ETFs, and then partially revised said scheme in April and October of this year. As the scheme has progressed, we have observed some positive impact on continuous auction trading. Building on that, we are now beginning to examine adding a request for quote (RFQ) function for ETF trading in response to the needs of institutional investors handling large transactions.

The RFQ function would enable institutional investors to communicate with a large number of market makers regarding the issues and quantities that they would like to buy or sell, as well as to buy and sell at a price indicated solely for the investor. Specifically, if an agreement is made between an institutional investor and a market maker in negotiations (preliminary indication of intent to trade and associated quoting thereof), an order will be placed automatically on ToSTNeT via a trading participant and be cleared and settled as an on-exchange transaction. This function is expected to offer larger quotes, allowing investors to buy and sell ETFs more cheaply and promptly while also allowing investors to compare many prices and obtain more transparent prices on ETFs for which it was previously difficult to execute transactions due to reasons such as a lack of adequate quotations available on continuous auction. This examination also aims to further streamline the ETF market, which plays an important role in investment considering the ever growing sophistication of financial institutions' asset management.

TSE will develop some components of the RFQ function on a trial basis for widespread use by market participants and consider the possibility of full-scale introduction of said function. Please refer to the attachment for more information.

Moving forward, TSE remains committed to providing highly convenient trading venues for investors.

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Enquiry

Tokyo Stock Exchange, Inc.　Equities Department
TEL:Tel: +81-3-3666-0141


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