The Tokyo Stock Exchange will relax its rules on issuing convertible bonds to prevent the hollowing out of the domestic market, a press report said on Sunday.
The bourse aimed to ease the rules to match those at overseas markets as Sony Corp, Toshiba Corp and other major Japanese companies were increasingly issuing convertible bonds abroad, the Nihon Keizai Shimbun said.
Under the new rules, a regulation calling for issuers to sell the bonds to a large number of individual investors would be scrapped, the business daily said.
Currently, they have to set aside a majority of their bonds for sale to the public at large and are required to secure at least 1,000 buyers.
This rule has apparently been burdensome for convertible bonds issuers in Japan, often leaving them unable to satisfy demand from large-lot institutional investors.
The Tokyo Stock Exchange was also set to remove rules on the minimum required trading value of convertible bonds at the bourse to encourage companies to sell the bonds to investors wishing to buy them for the long term, the daily said.
It also plans to allow convertible bonds issuers to raise the par value of their instruments to five million yen (45,450 dollars), from the current maximum of one million yen, the report said.
This change was aimed at helping firms trim their issuing costs by enabling them to raise the same amount of money with fewer bonds.
The stock exchange is hoping to put the new rules into effect from November, the report added.
In 2003, Japanese companies floated about one trillion yen worth of convertible bonds overseas, accounting for 60 percent of their total equity-related fund raising, the daily said.
The exchange is responding to growing calls from Japanese firms issuing convertible bonds in London and other overseas markets to loosen issuance rules in Japan so they can return to the domestic market, the report said.