Press Conference by the Commissioner

(Excerpt)

March 7 , 2005

Q.

Takeover bid (TOB) regulations concerning off-hours trading are used now and then primarily by institutional investors. What does the Financial Services Agency (FSA) look out for, in order to maintain market fairness and to secure a free trading environment?

A.

We provided an explanation of regulations concerning off-hours trading at the meeting of the First Subcommittee of the Financial System Council on March 3. We reported that we are examining the possibility of revising TOB regulations to restrict off-hours trading which take a similar form to stock trading conducted outside a stock exchange. I have been informed that the members of the Council have no particular objection to this.

Off-hours trading plays an extremely important role. It was originally introduced as a form of trading to be conducted under the stock exchange's rules for various purposes without causing substantial stock price volatility, including the restructuring of stock portfolios by institutional investors and stock buybacks. We must therefore maintain such functions. However, off-hours trading can take an extremely similar form to stock trading conducted outside a stock exchange. Focusing on this aspect, if stocks are purchased with the aim of taking control of a company, it will run contrary to the TOB system's objective, especially the objective of giving shareholders equal opportunities to sell their stock. It is the same as trading stocks outside a stock exchange under the cloak of off-hours trading in the market. The risk of turning a blind eye to this is that the raison d'etre of the TOB system may be undermined, so we plan to apply the TOB regulations to cases in which the shareholding ratio exceeds a third of the total stocks outstanding as a result of the stocks being acquired in a manner similar to trading outside a stock exchange. We are not planning to revise the TOB regulations to restrict all forms of off-hours trading without exception. We plan to apply the TOB regulations only to cases in which the shareholding ratio exceeds a third of the total stocks outstanding as a result of the stocks being acquired in a manner similar to trading outside a stock exchange. By doing so, we should be able to meet the market demands for protecting investors and giving shareholders equal opportunities, and provide the crucial market functions of off-hours trading, both in a well balanced manner.