TOCOM Global Business Development Tel:

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1 TOCOM Global Business Development Tel: Guide to TOCOM hip I. TYPES OF TOCOM MEMBERSHIP II. III. IV. RIGHTS AND PRIVILEGES OF MEMBERSHIP ELIGIBILITY AND REQUIREMENTS FOR MEMBERSHIP FINANCIAL OBLIGATIONS FOR OBTAINING MEMBERSHIP AND OTHER TRADING FEES V. APPLICATION PROCEDURES VI. VII. VIII. IX. STATUTORY BOOKS AND RECORDS ASSOCIATE MEMBERSHIP ORDER FLOW FINANCIAL REQUIREMENTS FOR CLEARING QUALIFICATION (JCCH) X. ENTRY COSTS TO OTHER COMMODITY FUTURES-RELATED ORGANIZATIONS XI. OVERALL MEMBERSHIP COST EXAMPLES - - August 2016

2 I. TYPES OF TOCOM MEMBERSHIP 1. Definitions (Exchange Market Rules, Articles 87 and 94) Broker Member Trade Member Remote Broker Member * Remote Trade Member * Affiliate Member qualified to execute proprietary transactions and customer transactions in the TOCOM market A Broker Member has direct access to TOCOM market. qualified to execute proprietary transactions only in the TOCOM market A Trade Member has direct access to TOCOM market. qualified to execute proprietary transactions and customer transactions (only based on consignment of commodity clearing transactions) in the TOCOM market. A Remote Broker Member has direct access to TOCOM market. qualified to execute proprietary transactions (only based on consignment of commodity clearing transactions) in the TOCOM market. A Remote Trade Member has direct access to TOCOM market who have membership qualification other than above. An Affiliate Member has indirect* 2 access to TOCOM market. * Although a business location in Japan is not a requirement, a Remote Broker Member and a Remote Trade Member must designate its clearing broker, or its representative in Japan pursuant to the Companies Act, as an Agent for Service of Process. These two types of also need to conclude a clearing agreement with its clearing broker. 2. Number of By hip Category (As of May 6, 2015) Market TOTAL Trade Broker Remote Trade Remote Broker Affiliate Rubber (RSS3) Precious Metals Oil Chukyo-oil Agricultural Product & Sugar TOTAL

3 II. RIGHTS AND PRIVILEGES OF MEMBERSHIP Brokerage Business Direct Access Expanded Position Limits Broker hip Trade hip Remote Broker hip * Remote Trade hip * Affiliate hip * TOCOM has received regulatory approvals for providing DMA to market participants in the U.S.A., Singapore, Hong Kong and Dubai. For legal requirements in other jurisdictions, please contact the regulatory authority of each country. III. ELIGIBILITY AND REQUIREMENTS FOR MEMBERSHIP 1. Eligibility (Exchange Market Rules, Article 85) Eligible applicants Broker Japanese entities licensed as Commodity Derivatives Business Operators by the Ministry of Economy, Trade and Industry (METI) or the Ministry of Agriculture, Forestry and Fisheries (MAFF), as described in Article of the Commodity Derivatives Act (CDA) Remote Broker Trade Remote Trade Affiliate Foreign entities licensed as equivalent to Commodity Derivatives Business Operators (i.e: FCMs) in the country where the office is located. * Commercials that engage in physical trading activities of TOCOM listed commodities * Commodity Derivatives Business Operators (i.e: FCMs) * Foreign FCMs * Specified OTC Commodity Derivative Dealers * CTAs, proprietary firms, financial institutions, etc. Reference: Exchange Market Rules, Article 85 (hip Qualification) hip qualification of the Exchange shall be limited to those falling under any of the following Items: (1) Those who engage commercially in buying and selling of Listed Commodity Component Products (including commodities enumerated in the following sub-items) and products underlying an exchange listed commodity index (limited to those prescribed by the Detailed Enforcement Rules for hip), act commercially as mediators, intermediaries or agents for buying and selling, or engage commercially in production, processing or use ( buying, selling, etc. ) of such goods on a continuous basis ( Commercials ): A. For the Rubber Market, rubber products; B. For the Precious Metals Market, (i) gold ore or gold products, (ii) silver ore or silver products, (iii) platinum products, or (iv) palladium products; - 2 -

4 C. For crude oil in the Oil Market, oil products; D. For the Aluminum Market, aluminum ore or aluminum products; and E. For the Agricultural Product & Sugar Market, Soybeans, Azuki, Corn or Raw Sugar, or those products. (2) Those who are licensed to engage in the Commodity Futures Business under Article of the Act ( Commodity Derivatives Business Operator ); (3) Those who have obtained the same type of license in said foreign state under the provisions of the laws and regulations of said foreign state equivalent to a license under Article 190, paragraph 1 of the Act, with regard to accepting the consignment of transactions similar to Futures on a market in a foreign state equivalent to a Commodity Market, or engaging in business as a mediator, intermediary, or agent for said transactions (such license includes registration and other administrative dispositions similar to said license); (4) Those who have given notice under Article 349, paragraph 1 of the Act that he/she intends to engage commercially in Over-the-Counter Commodity Derivative with regard to the Listed Commodity Component Products, etc. of the Exchange; and (5) Those who fall under any of the following categories: A. Banks; B. Financial Instruments Business Operators, etc. prescribed in Article 2, paragraph 9 of the Financial Instruments and Exchange Act (Act No.25 of 1948). (Limited only to type I Financial Instruments Business operators prescribed in Article 28 paragraph 1 of the Financial Instruments and exchange Act.); C. The Shokochukin Bank Ltd.; D. The Development Bank of Japan Inc.; E. Shinkin banks and the Shinkin Bank Association; F. Credit cooperatives and cooperative associations which carry out business set forth in Article 9-9, paragraph 1, Item 1 of the Small and Medium Enterprises, etc. Cooperative Act (Act No.181 of 1949); G. Industrial banks and the Industrial Bank Association; H. The Norinchukin Bank; I. The agricultural cooperatives and the Agricultural Cooperative Associations which engage in business set forth in Article 10, paragraph 1, Item 3 of the Agricultural Cooperative Association Act (Act No. 132 of 1947); J. Insurance companies and foreign insurance companies, etc. prescribed in Article 2, paragraph 7 of the Insurance Business Act (Act No. 105 of 1995); K. Commodities investment advisors prescribed in Article 2, paragraph 8 of the Act on Regulation of Business Pertaining to Commodity Investment (Act No. 66 of 1991), or those who are equivalent to in a foreign state; and L. The person engages or intends to engage in a business of proprietary transactions (such transactions includes the transactions consigned to other ) on a commodity market or a market in a foreign state equivalent to a commodity market. 2. Requirements It is necessary for Broker and Trade to fulfill the requirements below: - To register its head office in Japan - To register as a foreign company in case of a foreign company (Companies Act: Article 818) - 3 -

5 IV. FINANCIAL OBLIGATIONS FOR OBTAINING MEMBERSHIP AND OTHER TRADING FEES Note: Guarantee Fund is refundable at the time of withdrawal. For Broker, Trade, Remote Broker and Remote Trade, trading system related costs are additionally required. Consumption tax (8% as of July 2014) will be added at the time of payment. 1. Broker (unit: JPY) Market Divisions: Rubber Precious Agricultural Product Oil Chukyo-Oil Metals & Sugar Guarantee Fund 1 million 3million 1 million 1 million 1 million Registration Fee Per Market Division: 10 million (cap: 25 million) 10 million Annual hip Dues 720,000 per Market Division 480, ,000 Fee to Amend Registered Name 1 million Exchange Fee (per contract; one-way) (Volume Discount Available) Delivery Fee (per delivery; for each Buyer /Seller) * JCCH clearing fee of JPY 1 is included. * Standard Futures: 54 * Mini Gold and Mini Platinum: 19 * Gold Rolling Spot: 11 * Crude Oil: 69 * Options: * 70 * 140* 2. Trade (unit: JPY) Market Divisions: Rubber Precious Agricultural Product Oil Chukyo-Oil Metals & Sugar Guarantee Fund 1 million 3 million 1 million 1 million 1 million Registration Fee Per Market Division: 10 million (cap: 25 million) 10 million Annual hip Dues 600,000 per Market Division 360, ,000 Fee to Amend Registered Name 1 million Exchange Fee Delivery Fee Same as for Broker 3. Remote Broker / Remote Trade (unit: JPY) Market Divisions: Rubber Precious Metals Oil Chukyo-Oil Agricultural Product & Sugar Guarantee Fund 1 million 3 million 1 million 1 million 1 million Registration Fee Per Market Division: 1 million (cap: 2.5 million) 1 million Annual hip Dues 600,000 per Market Division 360, ,000 Fee to Amend Registered Name 1 million Exchange Fee Delivery Fee Same as for Broker 4. Affiliate (unit: JPY) Market Divisions: Rubber Precious Agricultural Product Oil Chukyo-Oil Metals & Sugar Guarantee Fund 1 million 3 million 1 million 1 million 1 million Registration Fee Per Market Division: 1 million (cap: 2.5 million) 1 million Annual hip Dues 120,000 per Market Division 60, ,000 Fee to Amend Registered Name 1 million - 4 -

6 V. APPLICATION PROCEDURES 1. Procedures Prior consultation/explanation for obtaining membership qualification Prior confirmation of applicant s eligibility, etc., (interview based on Summary Explanation Document hip Application Form provided to applicant hip Application Form submitted by applicant * Please refer to (2)-i Screening of the applicant (document-based screening and field audit) Examination and approval by Self-Regulatory Committee Full payment of Registration Fee & hip Dues Conclusion of hip Agreement Deposit of Guarantee Fund hip Granted * Please refer to (2)-ii (Exchange Market Rules Article 93.1) 2. Required Documents for Submission (1) Upon Submission of hip Application Form [For all membership categories] - Filled hip Application Form; 1 copy - Notification of Representative of Member; 1 copy - Document describing the outlook of the corporation and business of the applicant; 1 copy - Written pledge of applicant s eligibility for membership prescribed in Article 85 (hip Qualification) of the Market Rules:1 copy - Proof of applicant s eligibility for membership prescribed in Article 85 (hip Qualification) of the Market Rules:1 copy - Written statement showing the location of the applicant s head office or principal office; 3 copies - Resumes of all the officers including the auditor; 1 copy for each officer - Written pledge that the applicant doesn t fall under conditions prescribed in Article 88 (Disqualifying Conditions); 3 copies - Written pledge from all the officers including the auditor that he/she doesn t fall under conditions prescribed in Article 88 (Disqualifying Conditions); 1 copy from each officer - Written statement showing that the applicant has no connection with antisocial forces; 1 copy - Notification of hip in Other Exchanges; 1 copy - Articles of Incorporation of the applicant; 1 copy - Certified copy of commercial registration (In case of foreign companies, an equivalent); 1 copy - Certificates of residence of all the officers (showing registered address at birth; for foreign citizens, copy of passport or Certificate of Alien Registration); 1 copy for each officer - Financial Statements or Securities Report (For previous 3 terms); 1 copy - Auditors report: 1 copy - Company organization chart (showing the number of employees and the names of the person in charge); 1 copy - 5 -

7 - Document describing the amount of trading expected after obtaining membership; 1 copy - Internal audit charter; 1 copy - Implementation schedule and record of internal audit; 1 copy - External audit report; 1 copy - Organization chart of the departments to related to commodity futures trading (showing the number of employees and the names of the person in charge); 1 copy - Internal governance structure (showing the number of employees and the names of the person in charge); 1 copy - Internal governance rules related to commodity futures trading; 1 copy - Document describing internal governance in commodity futures trading; 1 copy - Any other documents deemed necessary and required accordingly by the Exchange [For all membership categories except Affiliate Member] - List of officers in charge of buying and selling order management; 1 copy - Part of the company rules corresponding to the guidelines for order management; 1 copy - Layout chart of the terminal installation site; 1 copy - Operation rules for trading system; 1 copy - Document describing the outlook of trading system; 1 copy - List of officers in charge of managing trading system; 1 copy - Contingency plan in case of the system failure, etc.; 1 copy - Document describing the management of the order history, etc.; 1 copy - Sample of ledger sheet; 1 copy [For Broker and Remote Broker ] - Flowchart describing from the order receipt to the order placement; 1 copy - Rules for trades and clearing margins; 1 copy - List of officials in charge of brokerage or customer relations; 1 copy - Document describing how to manage collection of the clearing margins from customers; 1 copy [For Remote Broker and Remote Trade ] - Application for approval of designating a Clearing Participant; 1 copy - Written agreement signed with a contact agent for service of process; 1 copy - Notification of contact agent; 1 copy - Written pledge (showing the contact agent s commitment for meeting requirements, etc.,); 1 copy - Notification of the contact information, etc., of contact agent; 1 copy - Certificate of registered matters of contact agent (In case the agent is the representative in Japan ); 1 copy - Resume of contact agent (In case the agent is the representative in Japan ); 1 copy (2) Upon Conclusion of hip Agreement - hip Agreement; 1 copy - 6 -

8 VI. STATUTORY BOOKS AND RECORDS 1. Obligations of the Compliance with Articles of Incorporation, Business Rules and other rules of the Exchange Broker Trade Remote Broker Remote Trade Affiliate Payment of hip Dues Payment of Exchange Fee (at each trade) Payment of Guarantee Money 2. Statutory Books and Records CDA Cabinet Orders Books related to Article 50 [Separate accounting in books, etc] Books Related to Article 113 [Keeping the books] Books Trade / Remote Trade Affiliate Broker / Remote Broker Journal of Futures *1 Futures Settlement Calculation Journal *1 Order Form *2 Journal of Commodity Derivatives - Commodity Derivatives Ledger - Commodity Derivatives Balance - Commodity Derivatives Settlement Calculation Journal - Records for Introducing Broker or Agent - *3 : Preparation is mandatory *1: No need to prepare if stored in another form *2: Even though it is not a legal requirement to prepare the form for Trade/Remote Trade, the Exchange encourages said members to keep order records as a part of their transaction management. *3: Only information related to the introducing broker or agent needs to be specified

9 VII. ASSOCIATE MEMBERSHIP 1. Eligibility and Financial Obligations for Associate a) Eligibility Conditions: Persons in foreign countries who engage commercially in activities such as the buying and selling of products listed in the commodity markets of the Exchange and who, in principle, are members of exchanges or associations which deal with products listed in the commodity markets of the Exchange. Note: Besides these conditions, those who hold the following status are eligible for associate membership. 1. Foreign FCMs under foreign country s laws corresponding to those in Japan 2. Foreign financial institutions (e.g. bank, securities companies, insurance companies) under foreign country s laws corresponding to those in Japan. 3. Proprietary firms, CTAs b) Financial Obligations: Market Division Registration Fee Financial Obligations (unit: JPY) Annual hip Dues Precious Metals 500, ,000 Oil 200, ,000 Rubber 100,000 50,000 Agricultural Product & Sugar 200, ,000 * No Associate hip for Chukyo-Oil 2. Required Documents a) Application for registration b) Certificate of the applicant s membership at other overseas exchanges, or other relevant organizations c) Letters of recommendation d) Letters of recommendation from two current TOCOM members are required. e) Financial statements (i.e.: Balance Sheet, Profit & Loss) f) Certified copy of the Company Registration g) Material describing the company in general (Company brochure etc.) 3. Procedure The application will be examined through the following process. a) Submit the application b) Exchange examines the application c) Approval by the Marketing Department d) Approval by the President & CEO e) Make payment of Registration Fee and Annual hip Dues - 8 -

10 VIII. ORDER FLOW Channels for Participating in the TOCOM Markets Customers (domestic) Affiliate Overseas Customers Request Request Intermediary (Commodity Derivatives Business Operator) Request Broker Request Intermediary (Foreign Brokers /FCM) Request Request /Consign Consign Remote Broker Consign Trade Remote Trade Proprietary Request Proprietary Consign Proprietary TOCOM - 9 -

11 IX. FINANCIAL REQUIREMENTS FOR CLEARING QUALIFICATION (JCCH) TOCOM with direct access to the market (i.e.: Broker, Trade and Remote Trade ) must either become a JCCH Individual Clearing Participant or sign a clearing agreement with a JCCH General Clearing Participant. An applicant for clearing qualification of the Japan Commodity Clearing House (JCCH) must satisfy the financial requirements specified below. 1. Registration Fee at JCCH (one-time): JPY 100, Clearing Fee: JPY 6 (per contract; one-way) 3. Net Asset Requirement for Clearing Participants (unit: JPY) Qualification Criteria Minimum Capital: 300 million Minimum Net Assets: 2 billion Net Asset Ratio Requirement*: > 200% Maintenance Criteria Minimum Capital: 300 million Minimum Net Assets: 1 billion Net Asset Ratio Requirement*: > 140% Individual Clearing Participants (Individual clearing participants can accept and clear trades on their own behalf or on behalf of their customers) General Clearing Participants Commercials who have experience in spot transactions and who has received a guarantee from their parent company (Commodity Derivatives Business Operators excluded) Entities that have received a guarantee from their parent company (General clearing participants may accept and clear trades on their own behalf, on behalf of their customers as well as on behalf of non-clearing participants) Firms with the following guaranteed by their parent company: Minimum Capital: Minimum Net Assets: 300 million 5 billion 1) Firms with the following guaranteed by their parent company: Minimum Capital: 300 million Minimum Net Assets: 20 billion 2) If the applicant is a Commodity Derivatives Business Operators, the below is additionally required: Net Asset Ratio Requirement*: > 200%* Net Asset Ratio Requirement*: > 140% Minimum Capital: Minimum Net Assets: 300 million Net Asset Ratio Requirement*: > 200% 5 billion: Up to 5 firms 10 billion: Up to 10 firms 20 billion: No limit on no. of participants * Net Asset Ratio is applicable only to Commodity Derivatives Business Operators (i.e.: FCM) 4. Amount of Required Ordinary Clearing Funds (unit: JPY) Market Initial Deposit Amount Trade Deposit at Time of Clearing Amount of Deposit Cumulative Limit on the Amount Initial Deposit Amount Broker Deposit at Time of Clearing Cumulative Limit on the Amount Rubber *2 10/Cont. 30 million *3 10/Cont. 30 million Precious Metals 20 million 10/Cont.*1 (None for Palladium) 110 million 50 million 10/Cont.*1 (None for Palladium) 110 million Oil 50 million 10/Cont. 100 million 50 million 10/Cont. 100 million Chukyo-oil 15 million None 15 million *4. 5/Cont. 30 million Agricultural Product & Sugar 7 million 10/Cont. 20 million 30 million 10./Cont 100 million *1: Including mini contracts *2: Avg. amount of deposits from existing Trade, etc. on the last day of the month preceding acquisition of Clearing Qualification. *3: Avg. amount of deposits from existing Broker, etc. on the last day of the month preceding acquisition of Clearing Qualification. *4: Avg. amount of deposits from existing Broker, etc. on the last day of the month preceding acquisition of Clearing Qualification. (Minimum amount: JPY 15 million)

12 X. ENTRY COSTS TO OTHER COMMODITY FUTURES-RELATED ORGANIZATIONS A Commodity Derivatives Business Operator (i.e: FCM) must join the National Futures Protection Fund (a fund to protect investors) and the Commodity Futures Association of Japan (an organization that serves as an SRO and registers sales representatives). Said Operator may also choose to join the Japan Commodity Futures Industry Association, whose aim is to develop the commodity futures market. 1. National Futures Protection Fund (NFPF) Entry Costs As mandated by the CDA, this fund was established to protect customer funds, such as margin deposits made by retail investors. Entrance Fee JPY 4,200,000 Annual Dues JPY 200,000 Contract Fee JPY 2.85 (per lot; one way for fiscal 2016) *The NFPF website (in Japanese language only): 2. Commodity Futures Association of Japan (CFAJ) Costs CFAJ is an association registered with both METI and MAFF, in accordance with the provisions of Article 245 of the CDA. CFAJ is mandated to register commodity futures sales representatives. CFAJ related cost is comprised of Entrance Fee (JPY 1,000,000), Registration Fee for Sales Representative (JPY 1,000 per representative), Annual Due (JPY 2,941,100 for fiscal 2014), Annual Proportional Due, etc. *The CFAJ website (in Japanese language only):

13 XI. OVERALL MEMBERSHIP COST EXAMPLES Full Clearing hip Initial Deposit Entry Costs Yearly Costs Approx. Total Upfront Fee per contract (JPY Million) (JPY) TOCOM JCCH (+10 deposit) NFPF CFAJ* Total * In addition to the above, CFAJ requires Proportional Due as a yearly cost. The above approximate figures reflect the following: Brokerage hip for all TOCOM Market Divisions Individual Clearing Participant Status at JCCH NFPF hip Note: Some products have different TOCOM Exchange Fees and JCCH s deposit and other fees per contract (e.g: mini contracts are cheaper; clearing fee on delivery is only JPY 1). The above chart only reflects the most general fees