The Tokyo Stock Exchange on Monday told the Financial Services Agency it plans to retain its ability to regulate the market even after it goes public, despite concerns over potential conflicts of interest.
The exchange plans to list its own shares by the end of the current fiscal year, but there are deep misgivings that its regulatory ability will be compromised by pressure to produce returns for its investors once it goes public.
Some observers fear the exchange might be tempted to accept questionable companies to increase the number of listed firms, which would mean more revenue for the bourse but higher risks for those who trade on it.
But in a report submitted to the FSA on Monday, the TSE contended that its regulatory function is an inseparable part of its trading operations, exchange officials said.
To ensure the independence of the regulatory division, the TSE will give a bigger role to the panel of outsiders that currently oversees the division, the officials said.
The FSA demanded the TSE submit a report on the matter, including information on its delisting rules and information management, after the bourse decided May 13 to delist 116-year veteran Kanebo Ltd. for perpetrating massive accounting fraud.
The FSA is said to be peeved by the decision because Kanebo is currently receiving restructuring help from the governmental Industrial Revitalization Corp. of Japan.
"It's not like its 'the TSE vs. the FSA,' as some people like to imagine," said TSE Director Hironaga Miyama. "This is the start of discussions. We are not saying we will not concede at all" to the FSA's demands.
Under the Securities and Exchange Law, stock exchanges are given the authority to issue their own regulations and manage transactions to protect investors and ensure fairness in stock dealings.