Derivatives 2025

JAPAN Law and Practice Contributed by: Daisuke Tanimoto, Etsuko Yamazaki and Miki Okuda, Anderson Mōri & Tomotsune

Where the mandatory clearing requirement applies, parties must clear Designated Cleared Transactions through central counterparty clearing houses (CCPs) (including overseas CCPs) licensed in Japan. Exemptions From Mandatory Clearing Requirements Designated Cleared CDSs are exempt from the man - datory clearing requirement where: • one counterparty to the transaction is not an FIBO or a Registered Financial Institution (“FIBO etc”); • the transaction is entered into by a trustee on behalf of the trust; • the transaction is entered into by and between entities which belong to the same corporate group; or • either (or both) of the counterparties to the transac - tion is an entity which is not a clearing member and whose parent companies or subsidiaries are not clearing members (limited to cases where there is a reasonable reason why none have or will become clearing members). Designated Cleared IRSs are exempt from the manda - tory clearing requirement where: • one counterparty to the transaction is not an FIBO etc; • the transactions are entered into by a trustee on behalf of the trust (excluding cases where the average aggregate notional amount of certain OTC derivatives of the trust is not less than JPY300 bil - lion); • the transactions are entered into by and between entities which belong to the same corporate group; or • either (or both) of the counterparties to the transac - tions is an FIBO etc that meets either of the follow - ing criteria: (a) it is (i) an FIBO which is not a Type I FIBO or (ii) a Registered Financial Institution that is neither a bank, The Shoko Chukin Bank, Development Bank of Japan Inc., Shinkin Central Bank, The Norinchukin Bank nor an insurance company; or

(b) it is an FIBO etc whose average aggregate notional amount of certain OTC derivatives is less than JPY300 billion. 3.1.3 Mandatory Trading OTC Derivatives Subject to Mandatory Trade Execution Requirements Mandatory trade execution requirements under the FIEA apply to Specified OTC Financial Derivatives Transactions, which are defined as JPY interest rate swap transactions involving the exchange of a floating rate and a fixed rate meeting the following conditions: • The floating rate is TONA compounded in arrears. • The notional amount remains unchanged during the term of the transaction. • The effective date of the transaction is two busi - ness days after the trade date. • The term of the transaction is either five, seven or ten years. • As a business day convention, if a date designated by the parties is not a business day, that date will be taken to be the first following day that is a busi - ness day unless that day falls in the next calendar month, in which case the date will be taken to be the first preceding day that is a business day. • The fixed rate is paid once every year and is calcu - lated based on the actual number of days divided by 365. • The floating rate is paid once every year and is calculated based on the actual number of days divided by 365. • The JSCC offers clearing services for the transac - tion. Specified OTC Financial Derivatives Transactions must be executed using an electronic trading plat - form (ETP) operated by an FIBO etc or by a foreign ETP operator which has obtained a licence in Japan. Exemptions From Mandatory Trade Execution Requirements Specified OTC Financial Derivatives Transactions are exempt from the mandatory trade execution require - ment where: • the transactions are entered into by a trustee on behalf of the trust;

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