(Provisional Translation)
June 13, 2014
Securities and Exchange Surveillance Commission

Recommendation for Administrative Monetary Penalty Payment Order for Market Manipulation by Musashi Securities Co., Ltd.

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1. Contents of the Recommendation

The Securities and Exchange Surveillance Commission (“SESC”), today, made a recommendation to the Prime Minister and the Commissioner of the Financial Services Agency that an administrative monetary penalty payment order be issued in regard to market manipulation by Musashi Securities Co., Ltd. (“Musashi”) pursuant to Article 20(1) of the Act for Establishment of the Financial Services Agency. This recommendation is based on the findings of the investigation into the market manipulation, whereby the following violations of laws and ordinances were identified.

2. Summary of the Findings Regarding Violations of the Laws and Ordinances

Musashi is a corporation registered by the Prime Minister to conduct the Type I Financial Instruments Business. Musashi, through its dealer, in relation to its business, in TOPIX Futures (Future Contract Month: September 2013), with the purpose of inducing market transactions of derivatives, during 6 trade days in total from July 29 to July 31, 2013 and from September 9 to September 11, 2013 as described in Appendix 1, by means of placing a large number of purchase and sales orders of the said futures at the best bid or offer prices without intention to be executed, purchased and sold 2,016 units in total while placing orders for the purchase of 43,554 units and for the sales of 44,889 units in total on its own account. This constituted a series of market transactions of derivatives and offers that would mislead other persons into believing that market transactions of derivatives were thriving and would cause fluctuations in prices of the said futures.

The above acts by Musashi were recognized as “a series of Sales and Purchase of Securities, etc.” and “offer” conducted “in violation of Article 159(2)(i)” as stipulated under Article 174-2(1) of the Financial Instruments and Exchange Act (“FIEA”).

3. Calculation of the Amount of the Administrative Monetary Penalty

Pursuant to the FIEA, the amount of the administrative monetary penalty applicable to the above violation is 5,430,000 yen.

Details of the calculation are presented in the Attachment.

4. Others

We appreciate the assistance of the Japan Exchange Regulation (JPX-R) in this matter.

Attachment

● Method of Calculation of the Amount of the Administrative Monetary Penalty

1. Pursuant to Article 174-2(1) of the FIEA, the amount of the administrative monetary penalty shall be calculated as below:

Amount pertaining to a Matching Volume of Sales and Purchase^{(Note 1)}:
(Value pertaining to sales, etc. of securities) - (Value pertaining to purchase, etc. of securities)

Note 1: Matching Volume of Sales and Purchase: Whichever is smaller; number of securities sold or number of securities purchased concerning the violations.

2. In the present case, the amount of the administrative monetary penalty is 5,430,000 yen. This amount is a sum of the amounts calculated as in (1) and (2) below^{(Note 2)}, each of which has been rounded down for the amount less than 10,000 yen pursuant to Article 176(2) of the FIEA.

(Appendix 1: List of Transactions) (PDF:230KB)

(Appendix 2: Outline of Transactions) (PDF:201KB)

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