JAPAN Law and Practice Contributed by: Ken Kawai, Shunsuke Aoki, Takeshi Nagase and Keisuke Hatano, Anderson Mori & Tomotsune
engaging in unfair trading in the spot trading of crypto-assets or crypto-related derivative trans - actions. 7. High-Frequency and Algorithmic Trading 7.1 Creation and Usage Regulations Given the increased volume of high-frequency trading (HFT) and its influence on the market, Japan implemented regulations relating to this type of trading in 2018. Although commonly referred to in English as HFT, this type of trading is known in Japan as “high-speed trading (HST)” ( kousoku torihiki ) pursuant to the FIEA. In line with this terminology, the frequency of trading is not a requirement for HST pursuant to the FIEA. The FIEA specifies certain categories of trading as HST, including: • the sale or purchase (or entrustment thereof) of securities or market transactions of deriva - tives; • the management of funds or other assets constituting the sale or purchase; and • the execution of over-the-counter derivative transactions that cause a counterparty to conduct the sale or purchase. These categories constitute HST when the trad - ing decision is made automatically through an electronic information processing system and the information necessary for the trade based on that decision is communicated through IT to the financial instruments exchange or proprie - tary trading system (PTS) via a method used to shorten the time typically required for that com - munication.
A trader engaging in HST is required to register as a high-speed trader and establish an opera - tional control system, manage risks, and provide certain information relating to that trading to the FSA. However, simply developing or creating trading algorithms or other electronic trading tools is not regulated under the FIEA. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity There is no such requirement under the FIEA. 7.3 Regulatory Distinction Between Funds and Dealers HST regulations under the FIEA are principally applicable to traders (including funds) – although certain reporting requirements are also applica - ble to dealers (ie, financial instruments business operators registered under the FIEA) when the dealers are engaging in proprietary trading. A financial instruments business operator may not accept HST orders from: • a trader who is not registered pursuant to the FIEA; or • a registered trader for which the financial instruments business operator is unable to confirm the appropriate trading system man - agement has been implemented. 7.4 Regulation of Programmers and Programming There is no such regulation under the FIEA (see 7.1 Creation and Usage Regulation s).
8. Insurtech 8.1 Underwriting Processes
In Japan, when a company (including fintech companies) engages in insurance solicitation (ie,
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