JAPAN Law and Practice Contributed by: Daisuke Tanimoto, Etsuko Yamazaki and Miki Okuda, Anderson Mōri & Tomotsune
(3) Commodity Derivatives Business Operator licensing requirement under the CFEA A person is considered to engage in the business of OTC Commodity Derivatives Transactions if such per - son acts as a principal, intermediary, broker or agent in such transactions as a business. Under the CFEA, depending on the type of commodities, a person who engages in such business must be licensed by the Ministry of Economy, Trade and Industry (METI) and/ or the Ministry of Agriculture, Forestry and Fishery (MAFF) as a Commodity Derivatives Business Opera - tor. Exchange-Traded Derivatives Type I or Type II FIBO registration requirement under the FIEA A person who engages in the business of exchange- traded derivatives (ETDs) in Japan must be registered (i) as a Type I FIBO if the underlying instruments of such ETDs are certain highly liquid securities (eg, gov - ernment bonds, municipal bonds, corporate bonds, corporate shares, share option certificates, units in investment trusts, commercial papers, mortgage securities, depositary receipts and negotiable deposit certificates) or if such ETDs are commodities futures listed on a financial instruments exchange licensed in Japan or (ii) as a Type II FIBO if such ETDs do not fall under the scope of (i) above but are still regulated under the FIEA. Regulation of Foreign Securities Dealer under the FIEA A Foreign Securities Dealer is generally prohibited from acting as a principal, intermediary, broker or agent in securities-related transactions with a cus - tomer in Japan, including securities-related ETDs. In addition, a Foreign Securities Dealer is permitted to trade ETDs listed on a financial instruments exchange licensed in Japan without being registered as an FIBO if it has obtained permission from the JFSA. Commodity Derivatives Business Operator licensing requirement under the CFEA Under the CFEA, a person who engages in the busi - ness of acting as an intermediary, broker or agent in commodities ETDs listed on a commodities exchange licensed in Japan or on a commodities exchange
outside Japan must be licensed as a Commodity Derivatives Business Operator. As distinct from OTC Commodity Derivatives Transactions discussed in (3) above regarding OTC derivatives, entering into com - modities ETDs as a principal does not trigger this
licensing requirement. 2.5 Asset Classes
The JFSA published the aggregated notional amounts of OTC derivatives reported to it as of March 2024. According to such published material, the underly - ing financial instruments of OTC derivatives predomi - nantly traded in Japan are as follows in descending order on the basis of the aggregate notional amounts: • interest rates (97.1%): • FX (1.7%); • credit (0.8%); and • equity (0.4%). In addition, commodity, electricity, earthquake and weather derivatives have been traded in Japan. As new asset classes, OTC crypto-asset derivatives have recently been emerging in Japan. OTC derivatives referencing new asset classes may be caught by the prohibition of gambling under the Criminal Code (Act No 45 of 1907, as amended). Gam - bling means any provision or receipt of money or other economic value on a contingency basis. This defini - tion is sufficiently broad to include virtually all deriva - tives transactions, including OTC Financial Deriva - tives Transactions and OTC Commodity Derivatives Transactions. Gambling is a criminal offence unless it is authorised by law or there is a legitimate reason. For a detailed description of the situations where OTC derivatives transactions are authorised by law, please see below. FIEA Provisions Any off-market act aimed at providing and/or receiving a monetary difference based on quotations or indices of stock exchanges or financial futures exchanges in Japan is illegal, unless it is an OTC Financial Deriva - tives Transaction to which an FIBO or Registered Financial Institution is a party, or an FIBO or Regis - tered Financial Institution acts as an intermediary, broker or agent.
40 CHAMBERS.COM
Powered by FlippingBook