Financial Instruments and Exchange Act

If a financial instruments business operator, etc. conducts a transaction set forth in any of the following items, it must have the person prescribed in the relevant item bear its obligations and the counterparty's obligations from that transaction:

the over-the-counter derivatives transactions and other transactions specified by Cabinet Office Order as those which, in light of the transaction volume and other conditions of the transaction, if defaulted on, the default could have a material impact on Japan's capital market, and which, in consideration of the character of the transaction, need to be cleared in Japan:a financial instruments clearing organization;

the over-the-counter derivatives transactions and other transactions specified by Cabinet Office Order as those which, in light of the transaction volume and other conditions of the transaction, if defaulted on, the default could have a material impact on Japan's capital market (other than a transaction set forth in the preceding item):a financial instruments clearing organization (if the financial instruments clearing organization provides collaborative financial instruments obligation assumption services, this includes the collaborating clearing organization, etc.) or foreign financial instruments clearing organization.

A financial instruments clearing organization, etc. (meaning a financial instruments clearing organization or foreign financial instruments clearing organization; hereinafter the same applies in this Chapter) must, pursuant to the provisions of Cabinet Office Order, provide data on centrally cleared trades to a trade repository (meaning a person that has been designated under the provisions of Article 156-67, paragraph (1); the same applies hereinafter) or a designated foreign trade repository (meaning a person that conducts the same kind of business as a trade repository business (meaning a business concerning the collection and preservation of trade data; the same applies hereinafter) in a foreign country that is designated by the Prime Minister as a person from whom the Prime Minister expects to obtain trade data that has been collected and preserved by that person; the same applies in the following paragraph and the following Article).

Notwithstanding the provisions of the preceding paragraph, if a financial instruments clearing organization, etc. is unable to provide data on centrally cleared trades to a trade repository or designated foreign trade repository due to a disaster or other compelling reasons specified by Cabinet Office Order, the financial instruments clearing organization, etc. must, pursuant to the provisions of Cabinet Office Order, prepare and preserve records concerning the particulars specified by Cabinet Office Order with regard to data on centrally cleared trades, and must, pursuant to the provisions of Cabinet Office Order, report the data on centrally cleared trades it has preserved to the Prime Minister.

The term "trade data" as used in paragraph (1) and this paragraph means data on trades specified by Cabinet Office Order as data for which the status of transactions by a financial instruments business operator, etc. is required to be made clear for the protection of investors, and the term "data on centrally cleared trades" as used in the preceding two paragraphs means trade data concerning transactions for which a financial instruments clearing organization, etc. bears obligations, which is related to the trade specified by Cabinet Office Order in consideration of the transactions set forth in the items of the preceding Article and the status of transactions, etc.

A financial instruments business operator, etc. must, pursuant to the provisions of Cabinet Office Order, provide data on non-centrally cleared trades (meaning trade data (meaning the trade data prescribed in paragraph (3) of the preceding Article; hereinafter the same applies in this Chapter), excluding data on centrally cleared trades (meaning the data on centrally cleared trades prescribed in that paragraph; the same applies in Article 198-6, item (xvii)-2-2); the same applies in the following paragraph and that item) to a trade repository or designated foreign trade repository.

Notwithstanding the provisions of the preceding paragraph, if a financial instruments business operator, etc. is unable to provide data on non-centrally cleared trades to a trade repository or designated foreign trade repository due to a disaster or other compelling reasons specified by Cabinet Office Order, the financial instruments business operator, etc. must, pursuant to the provisions of Cabinet Office Order, prepare records on the particulars specified by Cabinet Office Order with regard to data on non-centrally cleared trades and preserve those records, and pursuant to the provisions of Cabinet Office Order, report the data on non-centrally cleared trades it has preserved to the Prime Minister.

A trade repository must, pursuant to the provisions of Cabinet Office Order, prepare records on the particulars specified by Cabinet Office Order with regard to the trade data that has been provided based on the provisions of Article 156-63, paragraph (1) and paragraph (1) of the preceding Article and preserve those records.

A trade repository must, pursuant to the provisions of Cabinet Office Order, report the trade data it has preserved based on the provisions of the preceding paragraph to the Prime Minister.

If a trade repository, in lieu of making a report under the provisions of the preceding paragraph, takes measures to enable the Prime Minister to inspect the trade data that is subject to the report under the provisions of that paragraph by means of using an electronic data processing system which is specified by Cabinet Office Order, the trade repository is deemed to have made the report.

A trade repository must, pursuant to the provisions of Cabinet Office Order, publicize the size of the trade and other particulars specified by Cabinet Office Order with regard to the trades related to the trade data that is subject to the reporting under the provisions of paragraph (2) of the preceding Article.

The Prime Minister is to publicize the size of the transaction and other necessary particulars for making clear the outline of the transaction with regard to the transactions related to the trade data reported under the provisions of Article 156-63, paragraph (2) or Article 156-64, paragraph (2).

At the application of an entity satisfying the following requirements, the Prime Minister may designate that entity as an entity that conducts trade repository business pursuant to the provisions of this Section:

it is a corporation (including an organization without legal personality for which a representative or administrator has been designated and excluding a corporation incorporated based on foreign laws and regulations or any other foreign organization);

it does not fall under an entity that has had a designation under this paragraph rescinded pursuant to Article 156-83, paragraph (1) and five years have not passed since the date of the rescission;

it does not fall under an entity that has been sentenced to a fine (including an equivalent sentence under foreign laws and regulations) for violating the provisions of this Act or for violating the provisions of a foreign law or regulation that is equivalent to this Act, and five years have not passed since the day on which the entity finished serving the sentence or ceased to be subject to its enforcement;

it has no officer (including the representative or administrator of an organization without legal personality for which a representative or administrator has been designated; hereinafter the same applies in this Section) that falls under any of the following persons:

a person specified by Cabinet Office Order as being unable to properly perform their duties due to a mental or physical disorder;

a person that has become subject to an order to commence bankruptcy proceedings and has not been released from bankruptcy restrictions, or a person that is treated in the same manner under foreign laws and regulations;

a person that has been sentenced to imprisonment or a heavier punishment (including an equivalent sentence under foreign laws and regulations), and five years have not passed since the day on which the person finished serving the sentence or ceased to be subject to its enforcement;

a person that, during the 30 days prior to the date of rescission, was the officer (including a person treated in the same manner under foreign laws and regulations; the same applies in (e)) of a corporation (including an organization without legal personality for which a representative or administrator has been designated and a corporation or any other foreign organization incorporated based on foreign laws and regulations), in a case in which the designation under this paragraph has been rescinded pursuant to the provisions of Article 156-83, paragraph (1) or in a case in which an administrative disposition that is similar to the designation and that has been issued in a foreign country pursuant to the provisions of a foreign law or regulation that is equivalent to this Act, has been rescinded; for whom five years have not passed since the date of the rescission;

a person falling under an officer whose dismissal has been ordered pursuant to the provisions of Article 156-83, paragraph (1) or the provisions of a foreign law or regulation that is equivalent to this Act, for whom five years have not passed since the day of the disposition; or

a person that has been sentenced to a fine (including an equivalent sentence under foreign laws and regulations) for violating the provisions of this Act or the provisions of a foreign law or regulation that is equivalent to this Act, and five years have not passed since the day on which the person finished serving the sentence or ceased to be subject to its enforcement;

the relevant entity has a financial basis sufficient to soundly conduct trade repository business, and has good prospects in terms of expected income and expenditures in connection with trade repository business; and

in light of its personnel structure, the relevant entity is found to have sufficient knowledge and experience for conducting trade repository business properly and reliably, and to have sufficient social credibility.

Upon making a designation under the preceding paragraph, the Prime Minister must make public notice of the trade name or name and the location of the principal business office or office of the trade repository, and of the day on which the Prime Minister made that designation, in the Official Gazette.

An entity seeking designation under paragraph (1) of the preceding Article must submit a written application for designation stating the following particulars to the Prime Minister:

its trade name or name;

the name and location of its principal business office or office and any other business offices or offices for conducting trade repository business;

the names or trade names of its officers;

transactions subject to trade repository business; and

if the entity conducts business other than trade repository business and business incidental to trade repository business, the details of that business.

The following documents must be attached to the written application for designation referred to in the preceding paragraph:

a document pledging that the applicant satisfies the requirements set forth in paragraph (1), items (iii) and (iv) of the preceding Article;

the articles of incorporation and certificate of registered information of the corporation (including documents equivalent to them);

its operational rules;

an inventory of property, balance sheet, profit and loss statement or income statement, and business report;

documents stating the expected income and expenditures; and

documents other than what is set forth in the preceding items, which are specified by Cabinet Office Order.

In the case referred to in the preceding paragraph, if the articles of incorporation, inventory of property, balance sheet, profit and loss statement or income statement, or business report has been prepared as an electronic or magnetic record, the electronic or magnetic record may be attached to the written application for designation in lieu of a written document.