JAPAN Law and Practice Contributed by: Daisuke Tanimoto, Etsuko Yamazaki and Miki Okuda, Anderson Mōri & Tomotsune
• the transactions are entered into by and between entities which belong to the same corporate group; • either (or both) of the counterparties to the trans - actions is an FIBO etc which meets either of the following 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 nor The Norinchukin Bank; or (b) it is an FIBO etc whose average aggregate notional amount of certain OTC derivatives as of each month-end during the last one-year period is less than JPY6 trillion. 3.1.4 Position Limits Neither the FIEA nor the CFEA imposes any statu - tory position limit on the trading of derivatives, but registered FIBOs or licensed Commodity Derivatives Business Operators would impose a position limit on their customers for the purpose of their credit risk management. For ETDs, a position limit may also be imposed by the relevant financial exchange. For completeness, under the Banking Act, banks licensed in Japan are subject to large exposure rules which set forth the upper limit on the total credit risk exposure (including derivatives exposure) for each counterparty. In addition, a loss cut rule must be established for certain retail derivatives, as we describe in 3.1.6 Business Conduct . 3.1.5 Reporting OTC Derivatives Subject to Trade Data Reporting Requirement A trade data reporting requirement applies to the fol - lowing OTC Financial Derivatives Transactions: • forward transactions (except those settled within two business days); • index forward transactions (except those settled within two business days); • option transactions (except those whose exercise period is within two business days); • index option transactions (except those whose exercise period is within two business days); • swap transactions; and • credit derivatives transactions.
The trade data reporting requirement applies to FIBOs etc (limited to (i) a Type I FIBO and (ii) a Registered Financial Institution that is a bank, The Shoko Chukin Bank, Development Bank of Japan Inc., Shinkin Cen - tral Bank, The Norinchukin Bank or an insurance com - pany (any such entity in (i) and (ii), a “Reporting Deal - er”)). Reporting Dealers must report the trade data to a trade repository designated by the JFSA, unless there is a natural disaster or any other due reason why the Reporting Dealers cannot report to the trade reposi - tory (in such case, Reporting Dealers may report the trade data to the JFSA). Exemptions From Trade Data Reporting Requirements If either or both of the counterparties to uncleared OTC Financial Derivatives Transactions are any of the following entities, the reporting requirements do not apply: • national government; • local public entities; • Bank of Japan; • foreign governments, local public entities and cen - tral banks; • international organisations designated by the Com - missioner of the JFSA; or • an entity which belongs to the same corporate group as the other counterparty which is an FIBO etc. In addition, if one party is a Reporting Dealer, the other party that is not a Reporting Dealer will be exempt from the reporting requirement. Furthermore, if a Reporting Dealer of which its average aggregate notional amount of certain OTC derivatives is less than JPY300 billion has filed a notification to the JFSA and the designated trade repository, such Reporting Dealer is exempt from the reporting require - ment on OTC Financial Derivatives Transactions other than those that refer to an interest rate, debt securities or FX.
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