* TSE to delist Mothers stock which declines sharply -source
* To introduce new rules in November -source
(Adds comments)
By Noriyuki Hirata
TOKYO, Aug 24 (Reuters) - The Tokyo Stock Exchange plans to tighten its rules for new listings on the bourse's Mothers market for start-ups from November, a person familiar with the matter said.
The TSE, the world's second-largest exchange, set up the Mothers market in 1999 to encourage smaller firms to go public, but investors have been concerned it has sometimes helped companies not ready for public trade to list too easily.
The delisting of Internet firm Livedoor amid a widely publicised scandal in 2006 also pushed investors away from the market.
The TSE will delist a Mothers stock that stays more than 90 percent below its initial public offering price for a certain period, the person said, asking not to be named because an official announcement has not been made.
Provided the exchange publicly announces details later, the move is understandable as the TSE tries to differentiate Mothers from other start-up markets, said Jun Yokoyama, senior researcher at Daiwa Institute of Research.
"The exchange is trying to boost the brand for its Mothers market by filtering companies," Yokoyama said.
By tightening its rules, the TSE aims to encourage listed firms' executives to pay more attention to their share price and to refresh the make-up of the venture market, the person familiar with the matter said.
The Tokyo bourse aims to introduce the rule in November, targeting only new listees, while firms already listed on Mothers will not be subject to the rule, the person said.
The Osaka Securities Exchange plans to merge with Jasdaq, the nation's largest market for start-ups, next year. (Additional reporting by Junko Fujita and Yumiko Nishitani; Editing by Joseph Radford)