Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

TSE Prime: Japan's Corporate Governance Code Finalized So Boxes Will Be Furiously Ticked

TSE Announces Market Structure Revisions: Still Much Ado About Nothing

TOPIX January 2022 FFW Rebalance - Much Nothing To Do

The TSE's Listing Criteria Revisions - Part I

Gravity Works As WeWork Doesn't; Now Plan B

Yukiguni Maitake IPO Valuation: Bain Capital Is Out and Leaving Little Upside for IPO Investors

Quiddity Advisors

Event-Driven

<p>Just over two years ago, the FSA and TSE set themselves on a journey to "Review" and then revise the "TSE's Cash Equity Market Structure".</p><p>There was a Council of Experts on the change in market structure, there were proposals for public comment, leaks of ideas in the papers and business magazines, a scandal where a major domestic broker got non-public info about the situation and told its clients, a delay, hints at corporate governance code changes, changes of plans, changes to the TSE Listing Criteria announced last summer and implemented on 1 November 2020, then in December 2020, the JPX and FSA announced the Outline of The Second Revision and put it out for public comment. </p><p>The most recent Revision sets out the names of the new Market Segments (which have basically been known or imagined for two years and are irrelevant anyway), the details of the listing requirements (which were basically known from spring 2020), the details of the transition process (which were roughly laid out in 2019), and the grandfathering rules (which were insinuated in other announcements in previous council recommendations. What's new? It's all in one place. </p><p>This process has been discussed at some length for Smartkarma readers because it promises significant changes to the major benchmark index for public equities in Japan. That would affect futures markets, options markets, ETFs, passive funds which track the major domestic indices, and not least, a bunch of companies. </p><table class="table table-striped"><tbody>
<tr><td colspan="2" style="width: 104.8px;"><h2>Insights on the Topic</h2></td></tr>
<tr>
<td style="width: 104.8px;"><strong>Date</strong></td>
<td style="width: 599.2px;"><strong>Title</strong></td>
</tr>
<tr>
<td style="width: 104.8px;">4 Jan 2019</td>
<td style="width: 599.2px;">
<a href="https://www.smartkarma.com/insights/big-trouble-in-little-stocks-maybe-tse-mulls-changing-topix" target="_blank" data-smartkarma-citation="insights:27039" rel="noopener">Big Trouble in Little Stocks? Maybe TSE Mulls Changing TOPIX</a> </td>
</tr>
<tr>
<td style="width: 104.8px;">30 Jan 2019</td>
<td style="width: 599.2px;"><a href="https://www.smartkarma.com/insights/comments-on-tse-review-of-cash-equity-market-structure" target="_blank" rel="noopener">Comments On TSE Review Of Cash Equity Market Structure</a></td>
</tr>
<tr>
<td style="width: 104.8px;">3 Apr 2019</td>
<td style="width: 599.2px;"><a href="https://www.smartkarma.com/insights/tse-s-market-structure-review-public-comments-as-expected-but-miss-the-mark" target="_blank" rel="noopener">TSE’s Market Structure Review: Public Comments As Expected, But Miss The Mark</a></td>
</tr>
<tr>
<td style="width: 104.8px;">31 May 2019</td>
<td style="width: 599.2px;"><a href="https://www.smartkarma.com/insights/tse-market-structure-review-back-to-the-drawing-board" target="_blank" rel="noopener">TSE Market Structure Review - Back to the Drawing Board</a></td>
</tr>
<tr>
<td style="width: 104.8px;">21 Nov 2019</td>
<td style="width: 599.2px;"><a href="https://www.smartkarma.com/insights/tse-fsa-think-prime-the-world-yawns" target="_blank" rel="noopener">TSE &amp; FSA Think “Prime” - The World Yawns</a></td>
</tr>
<tr>
<td style="width: 104.8px;">5 Jan 2020</td>
<td style="width: 599.2px;"><a href="https://www.smartkarma.com/insights/much-ado-about-nothing-the-fsa-s-big-market-restructuring" target="_blank" rel="noopener">Much Ado About Nothing: The FSA’s BIG Market Restructuring?</a></td>
</tr>
<tr>
<td style="width: 104.8px;">11 Sep 2020</td>
<td style="width: 599.2px;"><a href="https://www.smartkarma.com/insights/the-tse-s-listing-criteria-revisions-part-i" target="_blank" rel="noopener">The TSE’s Listing Criteria Revisions - Part I</a></td>
</tr>
<tr>
<td style="width: 104.8px;">29 Nov 2020</td>
<td style="width: 599.2px;"><a href="https://www.smartkarma.com/insights/topix-inclusions-new-regulations-who-is-ready-2-0" target="_blank" rel="noopener">TOPIX Inclusions:  New Regulations! Who Is READY? 2.0</a></td>
</tr>
</tbody></table><p>Unfortunately, there has been little new, and things have progressed quite slowly. Building consensus among people who have received guidance on what the results of their "study" should be seems to take longer than it should. And the fact that there has been no Official Japan effort to accelerate the content of the revisions to the Corporate Governance Code, or accelerate consideration of what might happen to hundreds of smallcap stocks which will be affected seems odd. </p><p>The big picture - that there are three major market segments with one for blue chips, one for pre-profit growth stocks, and one for everyone else - has been known since the start.</p><p>The market cap cutoff was mooted in the paper 2+yrs ago and it is the least impactful change among the possible cutoffs proposed. The fact that everyone would be grandfathered in has been known. And the campaign by corporates against radical change has been known since the first comments because nobody wants to cause pain to the hundreds (or thousands) of small caps which should not be in a major benchmark index with global aspirations in the first place. </p><p>So what's new? Now we have a timeline. This new timeline and the comments which come out of the Public Comment Period for the Second Revision will make waves in Japan. Most foreign investors will ignore the whole thing, as they should. But people who care about impact on benchmarks should pay attention to the details. </p><p>Below the fold, we have details.</p>

Just over two years ago, the FSA and TSE set themselves on a journey to "Review" and then revise the "TSE's Cash Equity Market Structure".There was a Council of Experts on the change in market structure, there were proposals for public comment, leaks of ideas in the papers and business magazines, a scandal where a major domestic broker got non-public info about the situation and told its clients, a delay, hints at corporate governance code changes, changes of plans, changes to the TSE Listing Criteria announced last summer and implemented on 1 November 2020, then in December 2020, the JPX and FSA announced the Outline of The Second Revision and put it out for public comment. The most recent Revision sets out the names of the new Market Segments (which have basically been known or imagined for two years and are irrelevant anyway), the details of the listing requirements (which were basically known from spring 2020), the details of the transition process (which were roughly laid out in 2019), and the grandfathering rules (which were insinuated in other announcements in previous council recommendations. What's new? It's all in one place. This process has been discussed at some length for Smartkarma readers because it promises significant changes to the major benchmark index for public equities in Japan. That would affect futures markets, options markets, ETFs, passive funds which track the major domestic indices, and not least, a bunch of companies. 
Insights on the Topic

Date
Title


4 Jan 2019

Big Trouble in Little Stocks? Maybe TSE Mulls Changing TOPIX 


30 Jan 2019
Comments On TSE Review Of Cash Equity Market Structure


3 Apr 2019
TSE’s Market Structure Review: Public Comments As Expected, But Miss The Mark


31 May 2019
TSE Market Structure Review - Back to the Drawing Board


21 Nov 2019
TSE &amp; FSA Think “Prime” - The World Yawns


5 Jan 2020
Much Ado About Nothing: The FSA’s BIG Market Restructuring?


11 Sep 2020
The TSE’s Listing Criteria Revisions - Part I


29 Nov 2020
TOPIX Inclusions:  New Regulations! Who Is READY? 2.0

Unfortunately, there has been little new, and things have progressed quite slowly. Building consensus among people who have received guidance on what the results of their "study" should be seems to take longer than it should. And the fact that there has been no Official Japan effort to accelerate the content of the revisions to the Corporate Governance Code, or accelerate consideration of what might happen to hundreds of smallcap stocks which will be affected seems odd. The big picture - that there are three major market segments with one for blue chips, one for pre-profit growth stocks, and one for everyone else - has been known since the start.The market cap cutoff was mooted in the paper 2+yrs ago and it is the least impactful change among the possible cutoffs proposed. The fact that everyone would be grandfathered in has been known. And the campaign by corporates against radical change has been known since the first comments because nobody wants to cause pain to the hundreds (or thousands) of small caps which should not be in a major benchmark index with global aspirations in the first place. So what's new? Now we have a timeline. This new timeline and the comments which come out of the Public Comment Period for the Second Revision will make waves in Japan. Most foreign investors will ignore the whole thing, as they should. But people who care about impact on benchmarks should pay attention to the details. Below the fold, we have details.

TSE Market Structure & Major Index Revision: Still Much Ado About Nothing

Japan Exchange Group

TSE Market Structure & Major Index Revision: Still Much Ado About Nothing