Financial Instruments and Exchange Act

A financial instruments exchange market must be operated so as to ensure fair and smooth purchase and sales of securities and market derivatives transactions, as well as to contribute to the protection of investors.

Only the member, etc. of a financial instruments exchange that operates a financial instruments exchange market may make a purchase and sale of securities or a market derivatives transaction on that financial instruments exchange market.

The provisions of the preceding paragraph do not apply if a member, etc. referred to in that paragraph entrusts a clearing member provided for in Article 156-7, paragraph (2), item (iii) with brokerage for clearing of securities, etc., and the clearing member conducts a transaction provided by Cabinet Office Order.

An incorporated association-operated financial instruments exchange, in accordance with the articles of incorporation, may grant a person set forth in any of the following (limited to a persons that is not a member) a trading license for engaging in the purchase and sale of securities and conducting market derivatives transactions on the financial instruments exchange market that the incorporated association-operated financial instruments exchange operates (of a person as set forth in item (ii), this is limited to transactions involving the services of a registered financial institution):

a financial instruments business operator or authorized firm for on-exchange transactions; and

a registered financial institution.

Beyond what is provided for in the preceding paragraph, a membership-type financial instruments exchange may, in accordance with the provisions of articles of incorporation, grant the qualification for trading for conducting only commodity-related market derivatives transactions in the financial instruments exchange market established by the relevant membership-type financial instruments exchange. In this case, it must not grant the qualification for trading to an individual, a person falling under any of Article 29-4, paragraph (1), item (i), (a) through (c), or a corporation that has an officer falling under any of item (ii), (a) through (i) of that paragraph.

The provisions of Articles 94 and 95 apply mutatis mutandis to a persons that is granted a trading license pursuant to the provisions of the preceding two paragraphs. In this case, in Article 94, the term "financial instruments membership corporation" is deemed to be replaced with "incorporated association-operated financial instruments exchange" and the term "withdraw" is deemed to be replaced with "forfeit its trading license"; in Article 95, the term "following grounds" is deemed to be replaced with "following grounds (with regard to a commodity trading participant prescribed in Article 151, excluding the grounds listed in item (i))"; in Article 95, the term "withdraw" is deemed to be replaced with "forfeit its trading license"; in Article 95, item (i), the term "financial instruments business operator, etc." is deemed to be replaced with "person set forth in any of the items of Article 112, paragraph (1)"; and in Article 95, item (iii), the term "expulsion" is deemed to be replaced with "rescission of its trading license".

An incorporated financial instruments exchange, in accordance with the operational rules, may grant a person set forth in any of the following a trading license for engaging in the purchase and sale of securities and market derivatives transactions on the financial instruments exchange market operated by that incorporated financial instruments exchange (for a person as set forth in item (ii), this is limited to transactions involving the services of a registered financial institution):

a financial instruments business operator or authorized firm for on-exchange transactions; and

a registered financial institution.

Beyond what is provided for in the preceding paragraph, an incorporated financial instruments exchange may, in accordance with the operational rules, grant the qualification for trading for conducting only commodity-related market derivatives transactions in the financial instruments exchange market established by the relevant incorporated by that financial instruments exchange. In this case, it must not grant the qualification for trading to an individual, a person falling under any of Article 29-4, paragraph (1), item (i), (a) through (c) or a corporation that has an officer falling under any of item (ii), (a) through (i) of that paragraph.

The provisions of Articles 94 and 95 apply mutatis mutandis to a person that is granted a trading license pursuant to the provisions of the preceding two paragraphs. In this case, in Article 94, the term "articles of incorporation" is deemed to be replaced with "operational rules", the term "financial instruments membership corporation" is deemed to be replaced with "incorporated financial instruments exchange", and the term "withdraw its membership" is deemed to be replaced with "forfeit its trading license"; in Article 95, the term "the following reasons" is deemed to be replaced with "the following reasons (excluding the reason set forth in item (i), in the case of a commodity trading participant prescribed in Article 151)", and the term "the membership of a member is withdrawn" is deemed to be replaced with "a member forfeits its trading license"; in Article 95, item (i), the term "financial instruments business operator, etc." is deemed to be replaced with "person set forth in any of the items of Article 113, paragraph (1)"; and in Article 95, item (iii), the term "expulsion" is deemed to be replaced with "rescission of its trading license".

A member, etc. must deposit guarantee funds with a financial instruments exchange, in accordance with the articles of incorporation (or the operational rules, if this is an incorporated financial instruments exchange; hereinafter the same applies in the following paragraph and paragraph (3) of this Article, paragraph (1) of the following Article (including as applied mutatis mutandis pursuant to Article 119, paragraph (6)), Article 116, paragraph (1) (including as applied mutatis mutandis pursuant to Article 132), and Article 119, paragraph (1)).

Securities may serve as guarantee funds, pursuant to the provisions of the articles of incorporation.

A financial instruments exchange must specify how guarantee funds are managed in its articles of incorporation.

A person that entrusts a member, etc. with the purchase and sale of securities or a market derivatives transaction on a financial instruments exchange market has the right to receive payment of a claim arising due to that entrustment out of the guarantee funds of that member, etc., in preference over other creditors.

If a member, etc. causes damage to another member, etc. or to the financial instruments exchange or financial instruments clearing organization (limited to one specified in the articles of incorporation of the financial instruments exchange) due to a default on an obligation arising from a purchase and sale of securities or a market derivatives transaction on the financial instruments exchange market, the member, etc., financial instruments exchange, or financial instruments clearing organization that incurs the damage has the right to receive payment out of the guarantee funds of the member, etc. that has caused that damage, in preference over other creditors.

The right of priority of a person that entrusts a person with a purchase and sale of securities or a market derivatives transaction on a financial instruments exchange market under paragraph (4) of the preceding Article prevails over the right of priority under the preceding paragraph.

If a member, etc. withdraws from a financial instruments exchange (or if a trading participant forfeits its trading license), the financial instruments exchange, in accordance with the articles of incorporation, must have the former member, etc., its general successor, or another member, etc. complete the purchase and sales of securities and market derivatives transactions being conducted by the former member, etc. on the financial instruments exchange market. In such a case, the former member, etc. or its general successor is deemed to still be a member, etc. inasmuch as the task of completing such transactions is concerned.

If a financial instruments exchange has another member, etc. complete the transactions prescribed in the preceding paragraph pursuant to the provisions of that paragraph, a contract of mandate is deemed to have been established between the former member, etc. or its general successor, and that other member, etc.

A financial instruments exchange must establish detailed regulations for the following particulars in connection with the financial instruments exchange markets it operates, for each of its financial instruments exchange markets (excluding items (i) and (ii), if it is an incorporated association-operated financial instruments exchange), in its operational rules:

the particulars of its trading participants;

the particulars of guarantee funds;

the particulars of clearing margins;

the standards and methods for the listing and delisting of securities subject to purchase and sales of securities;

the type and period of purchase and sales of securities or market derivatives transactions;

the starting, ending, and suspension of purchase and sales of securities or market derivatives transactions;

the process for concluding a contract for the purchase and sale of securities or a market derivatives transaction;

delivery and other means of settlement for purchase and sales of securities or market derivatives transactions; and

necessary particulars relevant to the purchase and sale of securities or market derivatives transactions, other than the particulars set forth in the preceding items.

A financial instruments exchange must, when establishing a financial instruments exchange market in which commodity-related market derivatives transactions are conducted, specify in its operational rules, beyond what is listed in each item of the preceding paragraph, the detailed regulations on the financial instruments, etc. related to such commodity-related market derivatives transactions, for each type of commodity-related market derivatives transactions in the relevant financial instruments exchange market, for each financial instruments exchange market established by it.

For each financial instruments exchange market that a financial instruments exchange operates, the financial instruments exchange may prohibit members, etc. from making purchases of securities with which it has been entrusted by a person other than a professional investor, etc. (excluding the issuer of the securities or a person specified by Cabinet Office Order) (such a purchase is referred to as a "purchase for a general investor" in the following paragraph), as prescribed by its operational rules.

If a financial instruments exchange prohibits purchases for general investors pursuant to the provisions of the preceding paragraph, beyond the matters set forth in the items of paragraph (1) of the preceding Article, it must make provisions in its operational rules for the following matters in connection with its specified financial instruments exchange markets:

the particulars of limitations imposed on members, etc. in accepting requests to entrust them with the purchase and sale of securities; and

the content, and the means of provision or timing for the disclosure of the specified information on securities and information on the issuer that an issuer of specified listed securities is required to provide or disclose, and necessary particulars otherwise relevant to the provision or disclosure of information on specified listed securities.