JAPAN Law and Practice Contributed by: Daisuke Tanimoto, Etsuko Yamazaki and Miki Okuda, Anderson Mōri & Tomotsune
above) is not available for ETDs listed on a financial instruments exchange licensed in Japan. (2) Exemption from the regulation of Foreign Securities Dealer under the FIEA 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. In the case of securities-related ETDs listed on a for - eign financial instruments exchange, a Foreign Secu - rities Dealer is permitted to engage in such ETDs for Japanese customers under the regulatory framework for a Foreign Securities Dealer as described in 1 (2) above. Further, in the case of non-securities-relat - ed ETDs listed on a foreign financial instruments exchange, a foreign dealer is permitted to engage in such ETDs for Japanese customers under a regulatory framework similar to the regulatory framework for a Foreign Securities Dealer as described in 1 (2) above. (3) Exemption from the Commodity Derivatives Business Operator licensing requirement under the CFEA As distinct from OTC Commodity Derivatives Transac - tions discussed in 1 (3) above, entering into commod - ity ETDs as a principal does not trigger this licensing requirement. Further, a person who engages in the business of commodity ETDs listed on a foreign com - modity exchange by acting as an intermediary, broker or agent in such foreign commodity ETDs need not be licensed as a Commodity Derivatives Business Opera - tor, if customers and counterparties in Japan are lim - ited to Eligible Commodity Derivatives Investors. Non-derivative Products Including Spot Transactions Regarding the definitions of the terms “OTC Finan - cial Derivatives Transactions” and “OTC Commodity Derivatives Transactions”, the following types of trans - actions are considered neither OTC Financial Deriva - tives Transactions nor OTC Commodity Derivatives Transactions: • forward foreign exchange transactions (ie, physi - cally-settled FX spot transactions, physically-set -
tled FX forward transactions and physically-settled FX swap transactions); and • derivatives transactions whose underlying asset are neither financial instruments nor commodities (eg, certain emissions allowances or freight). In addition, physically settled securities forward trans - actions are generally not regulated as OTC Financial Derivatives Transactions but are regulated as sales and purchases of securities under the FIEA. Physically settled FX spot/forward transactions are generally entered into as sale and purchase transac - tions of currencies. However, since foreign exchange margin transactions are rolled over, such FX transac - tions could be regulated as OTC Financial Derivatives Transactions. For more information about the regula - tion applicable to a provider of FX transactions (eg, for retail investors), please see 3.1.6 Business Conduct . OTC Financial Derivatives Transactions are regulated by the JFSA pursuant to the FIEA, whereas OTC Com - modity Derivatives Transactions are regulated by the METI and the MAFF pursuant to the CFEA. 3.1.2 Clearing OTC Derivatives Subject to Mandatory Clearing Requirements The following categories of OTC Financial Derivatives Transactions for which the JSCC offers clearing ser - vices are subject to the mandatory clearing require - ment under the FIEA: • credit derivatives transactions which refer to an index of iTraxx Japan (“Designated Cleared CDSs”); and • interest rate swap transactions which refer to TONA compounded in arrears (“Designated Cleared IRSs”, and together with Designated Cleared CDSs, “Designated Cleared Transac - tions”). 3. Regulation of Derivatives 3.1 National 3.1.1 National Regulators
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