June 29th, 2017EXTENT Conference, London

Peter Babucke, Clearing Systems, JPX

© Japan Exchange Group, Inc. All rights Reserved.

Japan Exchange Group: ‘Grand Design’ for a new

Clearing System

TSE OSE

IT Planning Dept.

• Creates system ground design for JPX corporate group

• Sets rules and procedures for system quality assurance

Report Report

Set the rules and monitor compliance

• Develop and maintain TSE systems

JPX

Cooperation

Outline the strategic direction Outline the

strategic direction

• Develop and maintain OSE systems

• Operate and maintain OSE systems

• Responsible for service delivery

Operationalsupport

Technicalsupport

Set the rules and monitor compliance

• Operate and maintain TSE systems

• Responsible for service delivery

IT Development Dept. IT Services Dept. IT Services Dept. IT Development Dept.

Operationalsupport

Technicalsupport

JPX IT Organizational Chart

© Japan Exchange Group, Inc. All rights Reserved. 2

JPX IT Systems Setup

© Japan Exchange Group, Inc. All rights Reserved. 3

Primary Center

Secondary Center

AP１

AP2

arrownetOptical ring network

Trading systems

Clearing systems

Other systems

Trading systems

Clearing systems

Other systems

Tokyo Stock Exchange(Kabutocho)

Dedicated lines, VPN, etc.

Back-up offices

Osaka Exchange(Kitahama)

Users (Securities cos., etc.)

AP3

Overview of JPX Systems 1

arrowhead(cash trading)

ToSTNeT(Off-auction cash

trading)

1. Trading System

• In-house system developed with Japanese system vendor• Off-auction: ToSTNeT trading for stocks, domestic convertible bonds, etc.

J-GATE(Futures/options

trading)

• NASDAQ Genium Package• Futures: Japanese indices, overseas indices, volatility indices, bonds, etc.• Options: Equity options, index options, JGB futures options

OSE

TSE

• In-house system developed with Japanese system vendor• Stocks (domestic, foreign, preferred, etc.), ETF, REIT,

convertible bonds, etc.

2. Market Information System

Market Info. System

ISC • About 100 indices, statistics(Index Statistics Calculation Engine)

TSE

• Issues data, price, quote, trading volume, turnover, etc

© Japan Exchange Group, Inc. All rights Reserved. 4

Overview of JPX Systems 23. Information Systems

• TDnet facilitates electronic transmission of timely disclosure information of listed companies through the network to media outlets and investors.TDnet

4. Clearing Systems

Clearing Systems

TSE

5. Network

JSCC Clearing System (Cash/Derivatives): In-House (Japanese system vendor)

• Cutting-edge network infrastructure connecting JPX's trading, information, etc. systems (such as arrowhead) with trading participants and users.arrownet

© Japan Exchange Group, Inc. All rights Reserved. 5

JGB Clearing System: In-House (Japanese system vendor)

OTC Clearing System: Calypso

Core System Replacement: Master Plan

© Japan Exchange Group, Inc. All rights Reserved. 6

FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020～

* Details will be subject to future discussions.

arrowhead(Cash)

Launch9.2015

*

ISC(Index & Statistics

Calculation)

Next J-GATE(Futures/Options)

Launch *

Launch2015.9

7.2016(Scheduled) Service launch for TOCOM

*

Service9.2016

JSCCClearing System

Upgrade10.2015

Respond to new BOJ netLatter half, FY2017(Scheduled)

Renew Derivatives Clearing FunctionEnhance Risk and Collateral Management Functions

TBD

OTC Clearing System

JGB Clearing System

Upgrade9.2015

Cross Margin

UpgradeFY2016

New Products(Scheduled)

Latter Half, FY2017(Scheduled)

10.2015Upgrade5.2018

Shorter Settlement Cycle(Scheduled)

TBDLaunch

Trading Systems

Clearing Systems

Launched11.2011

ToSTNeT(Off-Auction)

Next ToSTNeT(Off-Auction)

*1.2017

(Scheduled)

Launch

J-GATE(Futures/Options)

UpgradeFY2017

New Products(Scheduled)

“Grand Design”

Future Vision of the JPX Clearing System

© Japan Exchange Group, Inc. All rights Reserved. 7

7

Clearing Infrastructure

OTCClearingSystem

JGB ClearingSystem

ListedClearingSystem

MemberMember Member

Deriv

Cash

Listed Derivatives

System(Cinnober)

OTCSystem

(Calypso)

Listed Cash System

JGB System

Risk Management System (Cinnober)

Collateral Mgmt System (Calypso)

Clearing Infrastructure

Listed Derivatives

System(Cinnober)

OTCSystem

(Calypso)

Listed Cash System

JGB System

Risk Management System

Collateral Management System

・Clearing

・Risk

・Collateral

・ReportingPh

ase ２

/3Ph

ase １

・Clearing ・Clearing ・Clearing ・Clearing

・Clearing

・Risk

・Clearing

・Reporting

・Clearing

・Reporting

・Clearing・Risk・Collateral・Reporting

・Clearing・Risk・Collateral・Reporting

・Clearing・Risk・Collateral・Reporting

Clearing System after Replacement

© Japan Exchange Group, Inc. All rights Reserved. 8

Clearing Function (Listed C

ash /Listed D

erivatives)

Fund Settlement /

Collateral

Managem

ent Function

(Listed Cash /

Listed Derivatives)

As Is

Clearing Function

(Listed Cash)

Clearing Function

(Listed Derivatives)

Fund Settlement

Function (Listed D

erivatives)C

ollateral M

anagement Function

(Listed Cash /

Listed Derivatives)

After Change

Terminal

Single Sign OnLog-in

TerminalDirect

Connection System

Direct Connection

System

Web GUI

JSCC Clearing System

Participant Participant

FIX Base(*) FpML Base(*)Custom

Specifications

(*) Global standard specifications will be adopted.

Can log-in with 1ID

Custom Specifications

Web GUIFund Settlem

ent Function

(Listed Cash)

CMF(non-Web base)

CMF (non-Web base)

Agile Testing and Migration (with Cinnober)

© Japan Exchange Group, Inc. All rights Reserved. 9

Production environment

2016.05 2017.07 2018.02

Current system

Historical dataMaster dataTrade data

[JSCC]Account UpdateMaster Update

[Cinnober]

[JPX]

Performance Test

Cinnober Sprint Release (1-15)

[JPX]

SP1. . . SP15

・・・・・・・・・・・・・

Testing environment

Functional Test

[JPX]Program ReleaseParameter

Program Release

・・

Acceptance Test

[JPX]

Failover Test Migration Rehearsal

Go Live

Milestones and Test Timeline

© Japan Exchange Group, Inc. All rights Reserved. 10

2016 2017 2018

4-6 7-9 10-12 1-3 4-6 7-9 10-12 1-3 4-6 7-9

Major JSCC Project

【Milestone】

【Framework / Operation】

【System】

▲ 【JGB OTC】JGB T+1

▲ Publish Outlines

▲ 【Listed Derivatives】Next J-GATE Launch

▲ Rule Enforcement

【Listed Derivatives】Derivatives Clearing

Renewal Project

▲ Briefing or Posting via Target- Clearing Framework Change, Various Notifications,

Participant Test, Migration to Live Environment

▲ Briefing or Posting via Target-System Function Change, Connection Specifications, Schedule Update

Individual Follow-up for Participants (to be continued beyond Launch)

Discussion on Framework/Practice Accept Various Operational Notifications

▲Direct Connection Specifications (Draft)

Accept Various System Notifications

▲ Direct Connection Specifications (Final)

Participants Test (Weekday Test Environment)

Participant Test / Migration Rehearsal (Holiday Test Environment)

Development Period on Participants’ Side

▲ Launch

Discussion on System Change

Thank you

© Japan Exchange Group, Inc. All rights Reserved. 11

Peter BabuckeVice President – IT Development, Clearing SystemsTokyo Stock Exchange, Inc.

Mail: p-babucke@jpx.co.jpPhone: +81-50-33-777-666

2-1 Nihombashi Kabutocho103-8220 TokyoJapan