Osaka Securities Exchange: Establishment Of Remote Transaction Participant System

Osaka Securities Exchange Co., Ltd. (hereinafter referred to as “OSE”) will establish a Remote Transaction Participant System which allows Foreign Securities Brokers to access directly to the OSE markets as Transaction Participants without having a branch office, etc. in Japan, in order to further increase liquidity of the OSE markets and to improve efficiency in pricing and the competitiveness of the OSE markets in the world.

• System Outline
  Foreign Securities Brokers permitted under Article 60, Paragraph 1 of the Financial Instruments and Exchange Law (hereinafter, referred to as the “Law”) (hereinafter, referred to as Authorized Transaction-at-Exchange Operators) may acquire Trading Qualification of OSE.
  
  • (1) Remote Transaction Participant
    • A Remote Transaction Participant means an Authorized Transaction-at-Exchange Operator that has Cash Trading Qualification or Future, etc. Trading Qualification of OSE.
      
      
  • (2) Type of Trading Qualification
    • Trading Qualification that Authorized Transaction-at-Exchange Operators may acquire shall be “Cash Trading Qualification” and “Future, etc. Trading Qualification”.
      
      
  • (3) Application for Acquisition of Trading Qualification
    
    • Authorized Transaction-at-Exchange Operators shall apply for acquiring a Transaction Qualification by submitting the application form for approval prescribed by OSE, with the following documents attached thereto:
      • the copy of the minutes of the board meeting, etc. concerning the application for the acquisition of Trading Qualification;
      • the document proving that a General Clearing Participant has agreed to enter into the Clearing Entrustment Agreement with the applicant;
      • the articles of incorporation and business reports (including audit report on the attached financial reports by an auditor); and
      • other documents that OSE finds necessary.
    
    
  • (4) Examination of Eligibility for Trading Qualification
    • When an Authorized Transaction-at-Exchange Operator applies as mentioned in 1(3), OSE shall carry out an examination, based on the following criteria:
      

      Criteria	Outline
      Financial condition	(a) The amount of the stated capital is not less than JPY 300 million. (b) The amount of net assets exceeds the amount of the stated capital. (c) The status of capital adequacy, etc. is appropriate. (d) It is expected to be stably profitable.
      Management system	The applicant shall maintain sound management system, being not controlled or influenced by a party that lacks social credibility and others deemed inappropriate.
      Business operation system	The applicant shall have an appropriate system for business operation in relation to acceptance and execution of orders, delivery settlement, loss risk management on the OSE markets, and observance of laws and regulations etc.
      Experiences in business	The applicant shall have continuously engaged in the business pertaining to transactions of the same kinds as transactions in securities, etc. it intends to conduct on the OSE markets for a period longer than 3 years.
      Accession to foreign self-regulatory organization	The applicant shall be a member of the overseas self-regulatory organization with which OSE has concluded the agreement on provision of information.

      
      
    
    
  • (5) Approval of Acquiring Trading Qualification and Grant of Trading Qualification
    • When OSE founds the applicant appropriate as a result of the examination above 1(4), OSE shall approve the applicant acquiring Trading Qualification. After OSE grants the approval, OSE requires the applicant to take the following procedures by the date designate by OSE:
      • payment of the Participation Fee;
      • conclusion of the Transaction Participant Agreement with OSE;
      • conclusion of Clearing Entrustment Agreement and designation of a Designated Clearing Participant;
      • notification of a Transaction Participant Representative and a Representative in Japan, appointment of a Person in Charge of Compliance and a Person in Charge of Trading and notification of contact information;
      • deposit of Guarantee Funds by cash; and
      • other procedures that OSE deems necessary.
        
    • OSE will grant Trading Qualification to the applicant who has completed all the procedures mentioned above as of the day following the due date. At that time, OSE will notify each Transaction Participant and make an announcement to that effect (OSE will not issue a public notice).
      
    
    
  • (6) Obligations of Remote Transaction Participant
    • The obligations of Remote Transaction Participants are the followings, in addition, the obligations for compliance with laws and regulations and the OSE’ s rules, conclusion of Transaction Participant Agreement, notification of Transaction Participant Representative, etc. as well as approval, notification and report on the matters prescribed by OSE, etc. are the same as of Domestic Transaction Participants:
      

      Obligation	Outline
      Notification of Representative in Japan	A Remote Transaction Participant shall notify OSE of the Representative in Japan notified to the FSA under the provision of Article 60-2, Paragraph 1 of the Law (including an Acting Representative Person under the provision of Article 60-4, Paragraph 1 of the Law).
      Appointment of Person in Charge of Compliance	A Remote Transaction Participant shall apply to OSE for approval of a person selected from among persons holding a position equivalent to or higher than a board member or an executive officer as a Person in Charge of Compliance and obtain the approval.
      Designation of Designated Clearing Participant	A Remote Transaction Participant shall conclude Clearing Entrustment Agreement with a General Clearing Participant. It shall designate a party from among the General Clearing Participants with which it has concluded the Clearing Entrustment Agreement to have regularly its transactions cleared pertaining to such type of the Clearing Qualification (Designated Clearing Participant).
      Handling of Customers’ Orders	A Remote Transaction Participant may not place orders from customers residing in Japan on the OSE markets. If a Remote Transaction Participant places customers’ orders excluding orders from customers residing in Japan on the OSE markets, it shall develop an appropriate system for fulfilling fiduciary duties as required by laws and regulations, and the OSE’ s rules.
      Others	A Remote Transaction Participant shall comply with the rules that OSE prescribes on administrating electronic data processing system for Transaction-at-Exchange Operation and conducting of placing orders on the OSE markets, etc. in the course of carrying out its business.

      
      
    
    
  • (7) Inspection, etc.
    • The methods and subjects of the inspection of a Remote Transaction Participant shall be the methods and subjects equivalent to those for Domestic Transaction Participants. When OSE requests for inspection of the book or submission of materials etc., a Remote Transaction Participant shall not refuse such request without any reasonable grounds.
    • When a Remote Transaction Participant violates laws and regulations, and the OSE’ s rules or orders based thereon, or refuses inspection, OSE may undertake disciplinary or regulatory actions such as imposition of a fine, revocation of Trading Qualification or suspension of entrustment of brokerage for clearing of securities, etc. against the Remote Transaction Participant.
      
    
    
  • (8) Others
    • The amount of Participation Fee for Remote Transaction Participants is one tenth of the fee for Domestic Transaction Participants. The amount of Examination Fee, Guarantee Fund and Transaction Participant Fee for a Remote Transaction Participant is the same as for Domestic Transaction Participants.
    • The procedures of withdrawal of Trading Qualification for Remote Transaction Participants are the same as for Domestic Transaction Participant.
      
  
  
  
  
• Effective Date
  The rules will be enforced on June 12, 2009.

Establishment of Remote Transaction Participant System

* Some confusing expressions etc. were amended to clarify the meanings (the amended parts are shown in red).