The Financial Services Agency will issue a business-improvement order to the Osaka Securities Exchange for its failure to prevent market manipulation, sources said Tuesday.
The nation's top financial regulator is also poised to demand that the Osaka bourse put off until next year its plan to go public.
It had hoped to do so in the fall.
The expected move follows the Securities and Exchange Surveillance Commission's recommendation earlier in the day that the FSA take administrative action against the OSE.
It would be unusual for the FSA to punish a securities exchange, which by its nature has a role similar to that of a public entity.
In issuing a business improvement order, the FSA is expected to demand that the OSE tighten its measures against illegal transactions, the sources said.
The FSA is also likely to prohibit the listing of new financial derivatives on the Osaka bourse and the opening of a new securities market there for the time being.