1. Scope and Summary

A CDS is a derivative contract which can transfer credit risk without directly transferring any credit asset. Reflecting the growing need to hedge credit risks in financial institutions, etc, the CDS market is expected to grow furthermore. Currently, CDS's are transacted in the over-the-counter (OTC) market, and therefore it is desirable that a prevailed and transparent benchmark rate exists. To answer to this current situation, Tokyo Financial Exchange (TFX) has decided to distribute CDS Reference Rates^1 with collaboration with many financial institutions. By doing so, TFX hopes for market participants such as investors and financing firms to make wide use of these rates as a useful benchmark, and contribute to the development of the Japanese credit markets^2.
*1	A CDS Reference Rate is the singular rate calculated from the best indicative rates in the OTC market provided by financial institutions.
*2	When TFX launches a new futures product related to CDS, CDS Reference Rates will be utilized for rates of the underlyings.

2. Outline of CDS Referece Rate


	TFX will publish the CDS Reference Rates calculated based on rates of CDS trades on specified reference entities (companies) every business day around 5:30PM.
	CDS reference rates are the average of the offer-bid middle rates^1 offered at 3PM on the OTC market by the Designated Financial Institutions, excluding a specific number of both the highest and lowest rates^2.
	*1	TFX publishes CDS Reference Rates of the CDS contracts which are quoted by at least 5 Designated Financial Institutions.
	*2	The CDS Reference Rate is the average of the indicative rates provided by the Designated Financial Institutions after excluding a specific number of both the highest and lowest rates respectively ('top and bottom cut'), rounded off to the second decimal place.
	The indicative rates provided by the designated financial institutions are the rates (premium) of the following standardized CDS contracts:
	-	5-year maturity
	-	Amount of 500 million yen for notional principle
	-	3 credit events*1 such as "bankruptcy", "failure to pay", and "restructuring (old restructuring)"
	-	A Physical Settlement*2 is required in case that any credit event occurs.
	*1	The definitions of 3 credit events are based on the "the 2003 ISDA Credit Derivatives Definitions".
	*2	The Physical Settlement is the way for delivering the credit asset in exchange for the specified amount of cash.

3. Designated Financial Institutions

Financial institutions which will provide rates on CDS to support the infrastructure development of CDS markets are as follows:

Barclays Capital Japan Limited
Credit Suisse Securities (Japan) Limited
Deutsche Securities Inc.
JP Morgan Securities Japan Co., Ltd.
Merrill Lynch Japan Securities Co., Ltd
Mitsubishi UFJ Securities Co., Ltd.
Mizuho Corporate Bank, Ltd.
Mizuho Securities Co., Ltd.
Morgan Stanley Japan Limited
Nikko Citigroup Limited
Sumitomo Mitsui Banking Corporation
UBS Securities Japan Ltd.

(as of 24th October, 2008; 12 companies; in alphabetical order)