Main / Glossary / Tokyo Stock Exchange

Tokyo Stock Exchange

The Tokyo Stock Exchange (TSE), also known as the Tōshō or TSE for short, is a premier financial market in Japan. Established in 1878, it has grown to become one of the largest stock exchanges in the world, both in terms of market capitalization and trading volume. The TSE is based in Tokyo, the capital city of Japan, and serves as a vital hub for domestic and international investors seeking opportunities in the Japanese equities market.

Boasting a rich history and a robust trading ecosystem, the TSE plays a pivotal role in the functioning of the Japanese economy. Its core function is to provide a platform for companies to raise capital by issuing shares to interested investors. By doing so, it facilitates the transfer of funds from savers or institutional investors to businesses that need capital for expansion, research and development, or other purposes. In addition to primary market offerings, the TSE also supports secondary market trading, enabling investors to buy and sell shares of listed companies.

As a key component of the global financial system, the TSE adheres to well-defined rules and regulations to ensure the integrity and transparency of its operations. It is overseen by the Financial Services Agency (FSA) and regulated by the Japan Exchange Regulation (JPX-R), a respected self-regulatory organization. This regulatory framework helps instill confidence in market participants and reinforces the stability and reliability of the TSE.

The TSE operates based on a market structure that facilitates efficient price discovery and fair trading opportunities. It employs an electronic trading system known as the arrowhead system, which enables seamless order matching and execution. This advanced system ensures that trades are executed quickly and accurately, maintaining a level playing field for all market participants. Additionally, the TSE operates trading sessions with predefined hours, including a morning session, an afternoon session, and a closing auction.

The TSE is home to a diverse array of listed companies, representing various sectors of the economy. It comprises primarily two sections: the First Section and the Second Section. The First Section, often referred to as the main board, encompasses large-cap companies with a strong market presence. The Second Section caters to smaller and mid-cap companies, providing them with a platform to enhance their visibility and attract investment.

Besides the traditional stock market, the TSE also operates various market segments to cater to specific investment needs. These include the Mothers (Market of the high-growth and emerging stocks) and JASDAQ (Japan Securities Dealers Association Quotations) market segments, which showcase promising high-growth and venture companies. Through these specialized segments, the TSE supports innovative enterprises and stimulates economic growth.

One significant aspect of the TSE is its partnership with other global exchanges. It actively collaborates with international stock markets to enhance cross-border trading and global investment opportunities. This collaboration promotes liquidity and diversification, benefiting investors who seek exposure to international markets and facilitating the flow of capital across countries.

To summarize, the Tokyo Stock Exchange is a leading financial marketplace, providing a conducive environment for companies to access capital and for investors to deploy their funds. With its robust infrastructure, transparent regulations, and diverse listing options, the TSE serves as a critical driver of the Japanese economy, connecting businesses with investors and fostering economic growth.