TRADERS HOLDINGS CO.,LTD.

The FX margin trading market has matured, and competition to lower spreads and raise swap points has intensified. Customers are highly sensitive to trading conditions, and if the Company falls behind in competitive terms, there is a risk of a negative spiral involving outflows of customer deposits and a decline in trading volume. The Company is responding through the development of differentiated products such as frank cross currency pairs, agile system modifications leveraging its group company FleGrowth, and strengthening entry barriers through patent applications.

The Company group operates under strict regulations such as the Financial Instruments and Exchange Act, and if a violation of laws or a material deficiency in its internal control systems is found, it may be subject to administrative sanctions such as business improvement orders, business suspension orders, or revocation of registration. This could have a significant impact on social credibility, customer trust, and financial condition. The Company is responding by establishing a three-lines-of-defense framework, operating a Compliance Committee and Risk Management Committee, and conducting regular training and operating a whistleblowing system.

Regulatory tightening, such as reductions in maximum leverage and increases in mandatory loss-cut levels, has been ongoing, and regulations may be further tightened in the future due to changes in the policies of regulatory authorities and self-regulatory organizations. This could lead to a decline in trading volume and customer attrition, potentially having a material impact on financial condition and business performance. The Company is responding through continuous monitoring of regulatory trends, diversification of products and services, and ensuring flexibility in its systems and operational structure.

Sharp fluctuations in foreign exchange rates can cause losses for customers, potentially leading to a decrease in customer deposits, reduced trading activity, and account closures. For the Company group as well, this could affect operating revenue and profitability through a decline in trading volume, reduced spread income, and fluctuations in swap revenue. The Company is responding by enhancing margin maintenance rate alerts and automatic loss-cut functions, expanding its network of cover-trading financial institutions, and regularly conducting simulations of sharp price movements.

Unauthorized access due to cyberattacks or system failures/malfunctions could result in the inability to accept customer orders, significant trading losses due to delays in cover trades, and claims for damages. In particular, serious system failures are recognized as a risk that could occur on a routine basis. The Company is responding through 24/7 monitoring, established incident response manuals, and the implementation of capacity management and performance verification.

There is a constant risk that cyberattacks such as ransomware could cause system outages, or that leaks of personal information or confidential information could result in claims for damages, administrative sanctions, loss of social credibility, and deteriorating profitability. This is closely related to unauthorized use of customer accounts (phishing scams, account takeovers via malware), requiring integrated risk management. The Company is responding by enhancing multi-layered authentication technologies, strengthening fraud detection and blocking systems, and establishing an incident response framework.

Fund settlements with overseas counterparties may be delayed by one business day or more, and in the event of major foreign exchange rate fluctuations, the amount of funds advanced for margin refunds and similar purposes could become large, temporarily straining cash flow. Based on past experience, this is considered a risk that could materialize. The Company is responding through rigorous daily cash flow management, securing overdraft facilities and commitment lines from financial institutions, and diversifying counterparties.

If extreme price gaps occur while the FX market is closed, such as over a weekend, customer settlement losses may exceed their deposited margin, requiring Traders Securities to bear the shortfall as an advance payment. If recovery of such advance payments becomes difficult and bad debt losses occur, this could affect the financial condition and business results. The Company is responding through advance risk disclosure, position limits and margin ratio adjustments, and continuous enhancement of its automatic loss-cut system.

In the stress tests conducted every business day, if a decline in capital or an increase in the maximum estimated loss amount causes the "amount of non-fixed capital" to fall below the "maximum estimated loss amount," additional restrictions on margin ratios or capital reinforcement measures may become necessary, potentially affecting business results and financial condition. The Company is responding through constant monitoring of uncovered positions, expansion and diversified management of cover-trading counterparties, and strengthening capital through the accumulation of retained earnings.

The Company's local subsidiaries in China and Vietnam conduct development and maintenance of IT infrastructure, but there is a risk that operations at these local sites could be suspended or restricted due to changes in the political and social situation in either country, natural disasters, pandemics, or cybersecurity threats. As these are important sites supporting the Company's IT infrastructure, a suspension of operations would directly affect business continuity. The Company is responding by securing a pool of engineers, distributing operations across three sites in China, Vietnam, and Japan, and reviewing its BCP with regular drills.