Business Rules for Clearing of Over-the-Counter Commodity Derivatives - TABLE OF CONTENTS

Transcription

1 Business Rules for Clearing of Over-the-Counter Commodity Derivatives - TABLE OF CONTENTS CHAPTER 1. GENERAL PROVISIONS Article 1. Purpose Article 2. Definitions Article 3. Transactions Subject to Clearing Article 4. Requirements for Eligible OTC Transactions Article 5. Application Period for Obligation Assumption Concerning Eligible OTC Transactions Article 6. Holidays Article 7. Break Days Article 8. Temporary Suspension, Etc. of Accepting Applications for Obligation Assumption Article 9. Substitute Securities CHAPTER 2. OTC CLEARING PARTICIPANT Section 1. Acquisition of OTC Clearing Qualification Article 10. Application and Approval for OTC Clearing Qualification Article 11. Requirements for OTC Clearing Qualification Article 12. Procedures Upon Acquisition of OTC Clearing Qualification Article 13. Acquisition Date of OTC Clearing Qualification Section 2. Obligations of OTC Clearing Participant Article 14. Execution of OTC Clearing Participant Agreement Article 15. Representatives of Clearing Participant Article 16. Person Responsible for Default Arrangements Article 17. Person Responsible for Settlement Operations Article 18. Mutual Relationship or Controlling Relationship with Officers or Other Persons Article 19. Payment of Fees by OTC Clearing Participant Article 20. Responsibilities Concerning the OTC Clearing Business Article 21. Notification Requirements Article 22. Reporting Requirements Article 23. Audit of OTC Clearing Participant Section 3. Loss of OTC Clearing Qualification Through Application by OTC Clearing Participant Article 24. Application for the Relinquishment of OTC Clearing Qualification Article 25. Loss of OTC Clearing Qualification Article 26. Special Measures in Cases Involving Merger, Etc. of Parties Applying to Relinquish OTC Clearing Qualification Article 27. Repayment of Obligations Upon Relinquishment of OTC Clearing Qualification Article 28. Application of These Rules, Etc. Upon Relinquishment of OTC Clearing Qualification Section 4. Measures to Be Taken for OTC Clearing Participant Article 29. Measures to Be Taken for OTC Clearing Participant Article 30. Instructions to Improve the Status of Positions Held Article 31. Release from Measures Such as Suspension of Obligation Assumption Article 32. Filing of Objections 1

2 Article 33. Notices Concerning Measures Imposed Article 34. Treatment of Clearing Contracts Upon Revocation of OTC Clearing Qualification Article 35. Measures for OTC Clearing Participant Becoming Subject to Suspension of Obligation Assumption Article 36. Recommendations to OTC Clearing Participant Section 5. Miscellaneous Rules Article 37. Transfer of Unsettled Contracts in Case of Company Split or Transfer of Business Operations CHAPTER 3. CLEARING INTERMEDIATION Article 38. Transactions Subject to Clearing Intermediation Article 39. Execution of Clearing Intermediation Agreement Article 40. Application for Approval Concerning Conclusion of Clearing Intermediation Agreement Article 41. Notification of Cancellation of Clearing Intermediation Agreement Article 42. Effectiveness of a Letter of Commitment, Etc. Article 43. Segregated Management of Clearing Contracts CHAPTER 4. OBLIGATION ASSUMPTION AND CLEARING CONTRACTS Section 1. Obligation Assumption Article 44. Application for Obligation Assumption Article 45. Obligation Assumption Section 2. Clearing Contracts Article 46. Content of Clearing Contracts Article 47. Early Termination Fee Article 48. Agreed Completion of Clearing Contracts Article 49. Agreed Cancellation of Clearing Contracts Section 3. Special Measures for Clearing Intermediation Article 50. Consignment of Clearing Intermediation Article 51. Execution of Clearing Contracts Based on the Consignment of Clearing Intermediation Article 52. Profit and Loss Attribution Concerning Clearing Contracts Consigned Article 53. Agreed Completion Concerning Clearing Contracts (Customer Account) Article 54. Clearing Intermediation Account CHAPTER 5. OTC MARGINS Section 1. General Provisions Article 55. Purpose of OTC Margins Section 2. Minimum OTC Margin Amount Article 56. Initial Clearing Margin for OTC Clearing Participants Article 57. Initial Clearing Margin for Clearing Intermediation Customers Article 58. Variation Margin for OTC Clearing Participants Article 59. Variation Margin for Clearing Intermediation Customers Article 60. Minimum OTC Margin Amount Article 61. Deadline for Deposit of OTC Clearing Margin Article 62. Methods to Deposit and Refund OTC Clearing Margin 2

3 Article 63. Deposit of OTC Clearing Margin by Clearing Intermediation Customers Article 64. Replacement Deposit Article 65. Temporary Change of Initial Clearing Margin Article 66. Classification and Management of OTC Clearing Margin Article 67. Segregation Management of OTC Clearing Margin Article 68. Right to Claim for Refund of OTC Clearing Margin Article 69. Application for Deposit and Refund of OTC Clearing Margin CHAPTER 6. FUND SETTLEMENT Article 70. Method of Fund Settlement CHAPTER 7. OTC CLEARING FUNDS Article 71. Purpose of OTC Clearing Funds Article 72. Amount of OTC Ordinary Clearing Funds Article 73. Method to Deposit OTC Ordinary Clearing Funds Article 74. Amount of OTC Special Clearing Funds Article 75. Management and Investment of OTC Clearing Funds Article 76. Prohibited Use of OTC Clearing Funds Article 77. Replenishment of OTC Ordinary Clearing Funds Article 78. Refund of OTC Clearing Funds Article 79. Refund of OTC Clearing Funds Upon Relinquishment of OTC Clearing Qualification CHAPTER 8. TRANSFER OF CLEARING CONTRACTS CONSIGNED Article 80. Transfer of Clearing Contracts Consigned Article 81. Treatment of OTC Clearing Margins Consigned Article 82. Special Measures for the Right to Claim for Refund of OTC Clearing Margins for Customer Account CHAPTER 9. MEASURES FOR THE INSOLVENCY OF OTC CLEARING PARTICIPANT Section 1. Acknowledgment of Default Article 83. Measures for Default Article 84. Measures for Possible Default Article 85. Notification of Suspension of Obligation Assumption Section 2. Treatment of Clearing Contracts of Defaulting Clearing Participant Article 86. Forcible Termination of Clearing Contracts Article 87. OTC Default Management Committee Article 88. Measures for Loss Avoidance Article 89. Transfer of Clearing Contracts Consigned Article 90. Appointment of Surety for Default Tenders Article 91. Execution of Transactions Subject to Clearing by Underwriting Section 3. Netting and Security Appropriation Concerning Obligations of Defaulting Clearing Participant Article 92. Obligation Assumption Concerning Default Measures Article 93. Method to Settle Defaulted Clearing Contracts 3

4 Section 4. Assumption of Losses Due to Other OTC Clearing Participants Article 94. Calculation of Losses Incurred Due to Default Article 95. Loss Compensation with OTC Default Compensation Reserve Article 96. Adjustments to Finalized Losses Article 97. Allocation of Funds Collected from Defaulting Clearing Participant Section 5. Miscellaneous Rules Article 98. Detailed Regulations Article 99. Forcible Termination of Clearing Contracts CHAPTER 10. MISCELLANEOUS RULES Article 100. Settlement Bank Article 101. Postponement of Settlement Cut-Off Times due to System Failures or Other Factors Article 102. Emergency Measures Upon Natural Disasters or Other Factors Article 103. Use of Excess Collateral Concerning the OTC Clearing Business in the Business of Assuming Commodity Transaction Debts Article 104. Non-Assignment of Claims Article 105. Outsourcing of Administrative Operations Article 106. Determination of Necessary Matters Concerning OTC Clearing Business Article 107. Ancillary Businesses Article 108. Amendments to these Rules Article 109. Nature of These Rules, Etc. Article 110. Standard Time Article 111. Notification Methods Article 112. Governing Law Article 113. Jurisdiction 4

5 Business Rules for Clearing of Over-the-Counter Commodity Derivatives CHAPTER 1. GENERAL PROVISIONS Article 1. Purpose 1. These (hereinafter, these Rules ) set forth the following matters concerning the Business of Assuming Commodity Transaction Debts conducted by the Japan Commodity Clearing House Co., Ltd. (hereinafter, JCCH ) based on over-the-counter commodity derivative transactions defined in Article 170, Paragraph 1 of the Commodity Derivatives Act (Law No. 239 of 1950; hereinafter the CDA ) and other businesses ancillary thereto (hereinafter, the OTC Clearing Business ) pursuant to the provisions of Article 1, Paragraph 2 of JCCH s Business Rules. (1) Necessary matters between JCCH and an OTC Clearing Participant concerning JCCH s Obligation Assumption and Clearing Contracts (2) Necessary matters between an OTC Clearing Participant and another OTC clearing participant concerning eligible OTC transactions for which the application for Obligation Assumption is made to JCCH (3) Necessary matters concerning a clearing intermediation-aimed transaction between a Clearing Intermediation Customer and an OTC Clearing Participant or another OTC clearing participant who is the counterparty to the clearing intermediation-aimed transaction (4) Necessary matters concerning clearing intermediation between JCCH, an OTC Clearing Participant, and a Clearing Intermediation Customer (5) In addition to the above, other necessary matters concerning JCCH s OTC Clearing Business between JCCH, an OTC Clearing Participant, and a Clearing Intermediation Customer (6) Other necessary matters 2. These Rules, etc. shall only apply to the OTC Clearing Business conducted by JCCH, and shall not apply to the Business of Assuming Commodity Transaction Debts (meaning the business defined in Article 2, Paragraph 17 of the CDA; the same shall apply hereinafter) as well as other businesses ancillary thereto. Article 2. Definitions 1. The terms used these Rules, etc. shall have the same meaning of the terms used in the CDA, the ISDA Definitions, and the ISDA Commodity Definitions as well as those defined in the following items. (1) The term these Rules, etc. means these Rules, their detailed regulations and ISDA-related documents. (2) The term detailed regulations means the regulations specified by JCCH in accordance with these Rules (including revised regulations, if any, and regardless of the title of regulations). (3) The term ISDA means the International Swaps and Derivatives Association, Inc. (4) The term ISDA-related documents means documents specified by notification or public announcement made by JCCH to OTC Clearing Participants concerning 5

6 necessary matters for applying the provisions of the ISDA Master Agreement, the ISDA Definitions and the ISDA Commodity Definitions to Clearing Contracts in accordance with the detailed regulations. (5) The term ISDA Master Agreement means the 2002 ISDA Master Agreement announced by ISDA in 2003 (including revised, amended, and extended versions announced by ISDA). (6) The term ISDA Definitions means the 2006 ISDA Definitions announced by ISDA in 2007 (including revised, amended, and extended versions announced by ISDA). (7) The term ISDA Commodity Definitions means the 2005 ISDA Commodity Definitions announced by ISDA in 2005 (including revised, amended, and extended versions announced by ISDA). (8) The term of Obligation Assumption means that JCCH accepts the application for Obligation Assumption by both (i) the OTC Clearing Participant who conducts an eligible OTC transaction on its own account, or the OTC Clearing Participant who is entrusted with clearing intermediation by the Clearing Intermediation Customer who conducts a clearing intermediation-aimed transaction; and (ii) the OTC Clearing Participant who is the counterparty to the said eligible OTC transaction, or the OTC Clearing Participant who is entrusted with clearing intermediation by the Clearing Intermediation Customer who is the counterparty to the said clearing intermediation-aimed transaction; and executes a Clearing Contract with the said OTC Clearing Participants. (9) The term OTC Transaction means any of the following transactions that are over-the-counter commodity derivative transactions defined in each item of Article 2, Paragraph 14 of the CDA and transactions conducted at facilities defined in each item of Article 331 of the CDA: A. RIM swap transactions B. TOCOM swap transactions (10) The term eligible OTC transaction means the OTC transactions defined in Article 4. (11) The term OTC clearing qualification means the qualification to become the counterparty to a Clearing Contract concluded with JCCH in accordance with these Rules, etc., for which JCCH may determine to grant or revoke. (12) The term OTC Clearing Participant means a person who holds OTC clearing qualification. (13) The term Clearing Intermediation Customer means a person who concludes a clearing intermediation agreement with an OTC Clearing Participant and submits a letter of commitment, etc. defined in Article 39, Paragraph 2 to JCCH (and only those who satisfies the requirements specified by JCCH). (14) The term consignment of clearing intermediation means the consignment of the execution of a Clearing Contract between JCCH and an OTC Clearing Participant made by a Clearing Intermediation Customer concerning the clearing intermediation-aimed transaction, which is conducted by the Clearing Intermediation Customer based on a clearing intermediation agreement concluded with the OTC Clearing Participant. (15) The term OTC Clearing Participant Agreement means an agreement to be executed between JCCH and an OTC Clearing Participant based on these Rules, etc. and in the form specified by JCCH. (16) The term Clearing Intermediation Agreement means an agreement to be executed between a Clearing Intermediation Customer and an OTC Clearing Participant for the purpose of consignment of clearing intermediation for OTC transactions in the form specified by JCCH (including mutual consent between the OTC Clearing Participant and the Clearing Intermediation Customer based on the above 6

7 agreement). (17) The term clearing intermediation-aimed transaction means an OTC transaction to be conducted between a Clearing Intermediation Customer and an OTC Clearing Participant or another Clearing Intermediation Customer, which is subject to the consignment of clearing intermediation. (18) The term clearing intermediation account means an account for clearing intermediation defined in Article 54. (19) The term Clearing Contract means a contract to be executed between JCCH and an OTC Clearing Participant on condition that JCCH assumes obligations in accordance with these Rules, etc. (20) The term Clearing Contract (Own Account) means a Clearing Contract to be executed by an OTC Clearing Participant for its own account. (21) The term Clearing Contract (Customer Account) means a Clearing Contract to be executed by an OTC Clearing Participant on behalf of a Clearing Intermediation Customer based on the consignment of clearing intermediation made by the Clearing Intermediation Customer to the OTC Clearing Participant. (22) On the premise that an OTC Clearing Participant concluded a Clearing Contract for an eligible OTC transaction or a clearing intermediation-aimed transaction for which a Clearing Intermediation Customer consigned clearing intermediation to the OTC Clearing Participant, the term Reverse Clearing Contract means a Clearing Contract (or a Clearing Contract specified by JCCH based on these Rules, etc., if JCCH does so) to be executed between JCCH and an OTC Clearing Participant who is the counterparty to the said eligible OTC transactions, or who is entrusted with clearing intermediation by the said Clearing Intermediation Customer for the said clearing intermediation-aimed transaction. (23) The term substitute securities means the securities defined in Article 101, Paragraph 3 of the CDA, and those specified by JCCH to be deposited as OTC clearing funds, OTC clearing margins, or OTC clearing intermediation margins taking into consideration their liquidity and other conditions. (24) The term initial clearing margin means a margin to be deposited with JCCH by an OTC Clearing Participant or a Clearing Intermediation Customer for a Clearing Contract (Own Account) or a Clearing Contract (Customer Account), based on the conditions specified by JCCH. (25) The term variation margin means a margin to be deposited with JCCH by an OTC Clearing Participant or a Clearing Intermediation Customer, in the amount equivalent to the total of the absolute value of aggregated mark-to-market loss amount and the absolute value of aggregated negative settlement differentials for a Clearing Contract (Own Account) or a Clearing Contract (Customer Account). (26) The term OTC margin means an OTC clearing margin or an OTC clearing intermediation margin. (27) The term OTC clearing margin means the money or substitute securities to be deposited by the following persons with JCCH and managed by JCCH for a Clearing Contract according to the following categories. A. When an OTC Clearing Participant deposits the OTC clearing margin relating to a Clearing Contract (Own Account); or the OTC clearing intermediation margin relating to a Clearing Contract (Customer Account), which is received upon consignment in accordance with the provisions in the following item: the said OTC Clearing Participant B. When an OTC Clearing Participant deposits the OTC clearing margin relating to a Clearing Contract (Customer Account) as an agent: the Clearing Intermediation Customer of the said Clearing Contract (28) The term OTC clearing intermediation margin means the money and substitute securities to be deposited by an OTC Clearing Participant after obtaining consent of a Clearing Intermediation Customer concerning a Clearing Contract (Customer 7

8 Account) as specified in Article 64, Paragraph 1. Consequently, the OTC Clearing Participant shall deposit money and substitute securities equivalent to the above money and substitute securities or more with JCCH as the OTC clearing margin specified in Item B above, and those money and substitute securities shall be managed by JCCH. (29) The term contract price means a fixed price agreed between the parties to a Transaction Subject to Clearing defined in Article 3 for a product specified by the said parties. (30) The term clearing price means a price necessary for the calculation of mark-to-market differentials for each business day based on each Clearing Contract relating to the Transactions Subject to Clearing specified in each item of Article 3, Paragraph 2 based on the conditions specified by JCCH. (31) The term final clearing price means a clearing price necessary for the settlement of a Clearing Contract relating to the Transactions Subject to Clearing specified in each item of Article 3, Paragraph 2. (32) The term mark-to-market differential means the amount calculated by multiplying the difference between the contract price and the clearing price of each Clearing Contract, for which the application deadline is not yet due for the Obligation Assumption specified in each item of Article 4, Paragraph 4 relating to the contract months in each Clearing Contract, by a clearing unit multiplier and the volume of settlement for the relevant Clearing Contract. (33) The term aggregated mark-to-market profit and loss amount means the amount calculated by aggregating mark-to-market differentials in each Clearing Contract under the categories of Clearing Contract (Own Account) and Clearing Contract (Customer Account). (34) The term settlement differential means the amount calculated by multiplying the difference between the contract price and the final clearing price of each Clearing Contract, for which the application deadline is due for the Obligation Assumption specified in each item of Article 4, Paragraph 4 relating to the contract months in each Clearing Contract, by a clearing unit multiplier and the volume of settlement for the relevant Clearing Contract. (35) The term aggregated settlement differential means the amount calculated by aggregating settlement differentials in each Clearing Contract under the categories of Clearing Contract (Own Account) and Clearing Contract (Customer Account). (36) The term clearing unit multiplier means the value calculated by dividing the clearing unit defined in Article 3, Paragraph 3 by a price quotation unit defined in Article 3, Paragraph 4, Item 1. (37) The term OTC clearing funds means the OTC ordinary clearing funds and the OTC special clearing funds. (38) The term OTC ordinary clearing funds means money and substitute securities to be deposited by an OTC Clearing Participant with JCCH in accordance with the provisions of Article 71, Paragraph 1, Item 1. (39) The term OTC special clearing funds means money and substitute securities to be deposited by an OTC Clearing Participant with JCCH in accordance with the provisions of Article 71, Paragraph 1, Item 2. (40) The term agreed completion means the completion of a Clearing Contract or a Reverse Clearing Contract as described in Article 48, for which the application deadline is not yet due for the Obligation Assumption as specified in each item of Article 4, Paragraph 4, under mutual agreement between JCCH and an OTC Clearing Participant who is the party to the said Clearing Contract or the Reverse Clearing Contract (if the said Clearing Contract and/or the Reverse Clearing Contract is based on the consignment of clearing intermediation, a Clearing Intermediation Customer and an OTC Clearing Participant or another Clearing Intermediation Customer who are the parties to the clearing intermediation-aimed transaction) before the due date. (41) The term agreed cancellation means the retroactive cancellation of a Clearing Contract or a Reverse Clearing Contract as described in Article 49, for which the application deadline is not yet due for the Obligation Assumption as specified in 8

9 each item of Article 4, Paragraph 4, under mutual agreement between JCCH and an OTC Clearing Participant who is the party to the said Clearing Contract or the Reverse Clearing Contract (if the said Clearing Contract and/or the Reverse Clearing Contract is based on the consignment of clearing intermediation, a Clearing Intermediation Customer and an OTC Clearing Participant or another Clearing Intermediation Customer who are the parties to the clearing intermediation-aimed transaction) before the due date. (42) The term early termination means the termination of a Clearing Contract before the application deadline for the Obligation Assumption as specified in each item of Article 4, Paragraph 4 due to reasons other than agreed cancellation. (43) The term early termination fee means the amount of money paid/received between the parties to a Clearing Contract when the Clearing Contract terminates before the due date (except cases where a Clearing Contract is transferred). (44) The term default means the condition of an OTC Clearing Participant that falls under any of the conditions stated in each item of Article 83, Paragraph 1, or the condition deemed appropriate for reporting as specified in Article 83, Paragraph 2; and confirmed by JCCH. (45) The term defaulting OTC Clearing Participant means an OTC Clearing Participant in a state of default confirmed by JCCH. (46) The term "default confirmation date" means a date on which JCCH confirms the default of an OTC Clearing Participant. (47) The term default-related tender means a tender to handle default as specified in Article 90, Paragraph 1, Item 1. (48) The term OTC default compensation reserve means the amount of reserve specified by JCCH to compensate for losses incurred from the OTC Clearing Business due to the default of an OTC Clearing Participant. (49) The term business day" means a day other than a holiday. (50) The term holiday means any holidays defined in Article 6, Paragraph 1 and temporary holidays defined in Article 6, Paragraph 2. (51) The term amount of net assets mean the amount of net assets as specified in Article 99 of the CDA in the case where an OTC Clearing Participant is a commodity derivatives business operator, or the amount of net assets calculated based on generally accepted corporate accounting standards in the case where an OTC Clearing Participant is not a commodity derivatives business operator. (52) The term executive officer means an officer defined in Article 329 of the Companies Act (Act No. 86 of 2005) (in the case of a juridical person other than a corporation, those who have the same legal status of an officer of a corporation). 2. If there is any inconsistency between the meaning of any term used in the CDA, the ISDA Definitions or the ISDA Commodity Definitions and that of the corresponding term used in these Rules, etc., the meaning of the term used in these Rules, etc. shall take precedence. Article 3. Transactions Subject to Clearing 1. The scope of transactions subject to the Obligation Assumption in JCCH s OTC Clearing Business (hereinafter, Transactions Subject to Clearing ) shall be transactions defined in this article that are also eligible OTC transactions defined in the following article. 2. Transactions Subject to Clearing shall be the transactions to be executed in accordance with the mutual agreement between the parties under which the buying party pays to the selling party the amount of money calculated based on the agreed contract price and the transaction volume regarding the eligible products defined in the following items, and the selling party pays to the buying party the amount of money calculated based on the final clearing price and the transaction volume. Transactions Subject to Clearing shall be executed on the settlement date specified in Article 4, Paragraph 5 by paying and receiving the settlement differential between the 9

10 parties (hereinafter, the swap transaction ). (1) RIM Swap Transaction A. A swap transaction based on the prices announced by Rim Intelligence Co. regarding the products specified in the following items (i) through (v) on condition that the transaction should be a transaction traded on an ex-refinery, ex-primary terminal, or ex-secondary terminal basis by barge and ex-pipe delivery in Tokyo Bay (i) Gasoline (ii) Kerosene (iii) Gas oil (iv) A fuel oil (v) LSA fuel oil B. A swap transaction based on the prices announced by Rim Intelligence Co. regarding the products specified in the following items (i) through (v) on condition that the transaction should be a transaction traded on an ex-refinery, ex-primary terminal, or ex-secondary terminal basis by barge and ex-pipe delivery in western Japan (meaning the area including Osaka Bay, Wakayama Prefecture, and western regions starting from the Setouchi region and including Oita Prefecture; the same shall apply hereinafter) (i) Gasoline (ii) Kerosene (iii) Gas oil (iv) A fuel oil (v) LSA fuel oil (2) TOCOM Swap Transactions A swap transaction based on the prices announced by Tokyo Commodity Exchange, Inc. regarding the products underlying an exchange-listed commodity index in the following markets operated by Tokyo Commodity Exchange, Inc. as eligible products. A. Gasoline, Kerosene, Gas Oil and Crude Oil for the Oil Market B. Gasoline and Kerosene for the Chukyo-oil Market 3. The clearing unit for Transactions Subject to Clearing shall be 50 kiloliters per unit. 4. The price quotation unit and the price increment for Transactions Subject to Clearing shall be as follows. (1) Price quotation unit: one kiloliter (2) Price increment: 10 yen Article 4. Requirements for Eligible OTC Transactions 1. An eligible OTC transaction shall be an OTC transaction based on an ISDA Master Agreement or other master agreements (only those specified by JCCH) which sets forth basic matters regarding OTC transactions and satisfies all requirements specified in the following paragraphs 2 through The first trading day of a new contract month for each type of eligible OTC transactions shall be the date specified in the following items; provided, however, that if the date falls on a holiday, the first trading day shall be extended to the business day following the holiday. (1) RIM Swap Transaction: the 11th day of each month (2) TOCOM Swap Transaction (excluding crude oil): the 26th day of each month 10

11 (3) TOCOM Swap Transaction (limited to crude oil): the 1st day of each month 3. The contract month for each eligible OTC transaction shall be the month specified in the following items. (1) RIM Swap Transaction: the contract month within a four-month period starting from the month containing the first trading day of a new contract month (2) TOCOM Swap Transaction (excluding crude oil): the contract month within a six-month period starting from the second month following the month containing the first trading day of a new contract month (3) TOCOM Swap Transaction (limited to crude oil): the contract month within a six-month period starting from the month containing the first trading day of a new contract month 4. The starting date and the application deadline for the Obligation Assumption for each eligible OTC transaction shall be the following dates; provided, however, that if the application deadline falls on a holiday, the deadline shall be the closest business day prior to the holiday. (1) RIM Swap Transaction The starting date for the Obligation Assumption shall be the first trading day of a new contract month, and the application deadline for the Obligation Assumption shall be the last business day of the current contract month; provided, however, that the application deadline for December contract month shall be December 27. (2) TOCOM Swap Transaction (excluding crude oil) The starting date for the Obligation Assumption shall be the first trading day of a new contract month, and the application deadline for the Obligation Assumption shall be the 25th day of the month prior to the current contract month. (3) TOCOM Swap Transaction (limited to crude oil) The starting date for the Obligation Assumption shall be the first trading day of a new contract month, and the application deadline for the Obligation Assumption shall be the last business day of the current contract month. 5. The day for the payment and receipt of settlement differential regarding eligible OTC transactions (hereinafter, the settlement date ) shall be the 14th day of the month following the month containing the application deadline for the Obligation Assumption as described above; provided, however, that if the date falls on a holiday, the settlement date shall be extended to the business day following the holiday. 6. Other requirements for eligible OTC transactions besides those specified in this Article shall be determined by JCCH. Article 5. Application Period for Obligation Assumption Concerning Eligible OTC Transactions 1. JCCH shall set the period for accepting the application for Obligation Assumption as the period from the first trading day of a new contract month for each eligible OTC transaction until the application deadline for the Obligation Assumption for the contract month, and determine the hours to accept the said application separately. 2. Notwithstanding the above, JCCH shall not accept the application for Obligation Assumption on holidays and break days specified by JCCH (with respect to break days, only those applications for RIM swap transactions defined in Article 3, Paragraph 2, Item 1). Article 6. Holidays 1. JCCH shall observe the following holidays. (1) Sundays; (2) National Holidays as provided for by the Act on National Holidays (Act No. 178 of 1948); (3) Saturdays; (4) First three days of each year; and 11

12 (5) December JCCH may, when deemed necessary, set additional unscheduled holidays. 3. JCCH may, when deemed necessary, suspend all or part of business operations concerning the OTC Clearing Business on a temporary basis, or conduct such business on an unscheduled basis. 4. In the cases of the above two paragraphs, JCCH shall notify the matter to all OTC Clearing Participants in advance. Article 7. Break Days In addition to holidays as described in Article 6, JCCH shall set break days with respect to RIM swap transactions defined in Article 3, Paragraph 2, Item 1, on which the acceptance of applications for Obligation Assumption and the calculation of mark-to-market differentials based on the clearing price relating to the relevant Clearing Contract shall not take place. Article 8. Temporary Suspension, Etc. of Accepting Applications for Obligation Assumption 1. JCCH may, when deemed necessary to avoid the problem or potential problem in continuing its OTC Clearing Business, change the hours to accept the applications for Obligation Assumption, and suspend or restrict all or part of the said acceptance on a temporary basis. 2. In the case of the above, JCCH shall promptly notify the matter to all other OTC Clearing Participants and make a public announcement. Article 9. Substitute Securities 1. The applied value of substitute securities shall be determined by JCCH; provided, however, that JCCH may change the type or applied value of substitute securities when deemed especially necessary in order to appropriately evaluate the collateral price of the substitute securities due to significant fluctuations in the stock market, etc. 2. Other matters necessary for substitute securities such as the deposit method of the securities shall be determined separately by JCCH. 12

13 CHAPTER 2. OTC CLEARING PARTICIPANT Section 1. Acquisition of OTC Clearing Qualification Article 10. Application and Approval for OTC Clearing Qualification 1. A party who obtains or intends to obtain clearing qualification as specified in JCCH s Business Rules may submit an application to JCCH for acquisition of OTC clearing qualification in the manner specified by JCCH. 2. JCCH shall, upon receiving an application for acquisition of OTC clearing qualification from a party as described above (hereinafter the applicant ), approve the acquisition of such OTC clearing qualification after conducting screening procedures for the applicant thereof and making a determination that the applicant is suitable for such OTC clearing qualification. 3. JCCH shall grant approval as described above by designating a date on which OTC clearing qualification is granted to the applicant (hereinafter, the planned qualification acquisition date in this Section). Article 11. Requirements for OTC Clearing Qualification 1. Screening procedures as defined in Article 10, Paragraph 2 for the applications as defined in Article 10, Paragraph 1 shall be conducted to confirm the satisfaction of the requirements to the applicants specified in each item of the following paragraph and other matters deemed necessary in order to ensure the appropriate execution of JCCH s OTC Clearing Business. 2. The applicant shall be a party who obtains or intends to obtain clearing qualification as specified in JCCH s Business Rules and satisfies all requirements specified in the following items. (1) Management system The applicant has a sound management system so as to assure adequate safeguarding of the public trust with respect to JCCH s OTC Clearing Business such as the absence of parties deemed inappropriate for such business who control or influence the applicant s management system. (2) Office location The applicant has a business office(s) or administrative office(s) in Japan. (3) Financial conditions The applicant is expected to satisfy all requirements specified in the following items A through C on the planned qualification acquisition date. A. Stable profitability is expected. B. The amount of net assets is one billion yen or more. C. The amount of capital or the total amount of contributions (if the applicant is a mutual company, the total amount of funds including reserve for redemption of funds) is 300 million yen or more. (4) Business operation system A. The applicant has a proper business operation system for the settlement of Clearing Contracts for Transactions Subject to Clearing and the management of the risk of loss, as well as the compliance with laws and regulations (meaning the CDA and other applicable laws and regulations; the same shall apply hereinafter), dispositions made by government agencies pursuant to laws and regulations, and the provisions of these Rules, etc. B. The applicant has a business operation system that allows the applicant to participate in the arrangements of a Clearing Contract of the Defaulting OTC Clearing Participant. 13

14 Article 12. Procedures Upon Acquisition of OTC Clearing Qualification 1. After granting approval for OTC clearing qualification to the applicant under the provisions of Article 10, Paragraph 2 hereof, JCCH shall cause the applicant to deposit OTC ordinary clearing funds and to take necessary procedures for the acquisition of OTC clearing qualification specified by JCCH no later than one business day prior to the planned qualification acquisition date. 2. If the applicant as described above intends to obtain clearing qualification as specified in JCCH s Business Rules, and at the same time, intends to obtain OTC clearing qualification, the applicant shall take necessary procedures for the acquisition of clearing qualification relating to the Business of Assuming Commodity Transaction Debts as specified in JCCH s Business Rules no later than one business day prior to the planned qualification acquisition date. 3. If the applicant as described in Paragraph 1 above fails to take procedures as specified in the same paragraph (if the applicant intends to obtain clearing qualification as specified in JCCH s Business Rules, the procedures as described in Paragraph 2 above shall be included; the same shall apply to Article 13, Paragraph 1 hereof) by the business day prior to the planned qualification acquisition date, the applicant s application for OTC clearing qualification shall be deemed to have been cancelled. 4. In the case of Paragraph 1 above, when the applicant assumes part of business (meaning the business relating to OTC transactions or OTC clearing intermediation; the same shall apply hereinafter) of an OTC Clearing Participant by company split or the entire business thereof, and obtains OTC clearing qualification at the same time when the OTC Clearing Participant loses its OTC clearing qualification, and when JCCH admits that the condition of the applicant and that of the OTC Clearing Participant are virtually the same, the existing OTC ordinary clearing funds deposited by the OTC Clearing Participant may be appropriated for OTC ordinary clearing funds that should be deposited by the applicant. Article 13. Acquisition Date of OTC Clearing Qualification 1. When the applicant has taken necessary procedures as specified in Article 12, Paragraph 1 hereof, JCCH shall grant OTC clearing qualification to the applicant on the planned qualification acquisition date. 2. After granting OTC clearing qualification to the applicant as described above, JCCH shall notify the matter to all other OTC Clearing Participants who obtain OTC clearing qualification, make public announcement, and report to the competent minister. Section 2. Obligations of OTC Clearing Participant Article 14. Execution of OTC Clearing Participant Agreement An OTC Clearing Participant shall conclude with JCCH an OTC Clearing Participant Agreement specified by JCCH. Article 15. Representatives of Clearing Participant 1. An OTC Clearing Participant shall appoint one suitable person from among its representative directors or representative executive officers (if the OTC Clearing Participant is a corporation established under the laws of a foreign country, such party shall be its representative in Japan with a rank of director/executive officer or above) to act as its representative in relation to JCCH, and notify the matter to JCCH in advance in the manner specified by JCCH. 14

15 2. Only the representative of an OTC Clearing Participant shall act in the capacity of its Representative in matters concerning the relationship between the OTC Clearing Participant and JCCH; provided, however, that another person may be permitted to perform daily business operations by giving prior notice to JCCH in which the scope of such daily business operations is explicitly defined. Article 16. Person Responsible for Default Arrangements An OTC Clearing Participant shall appoint one suitable person with expertise in OTC transactions from among its executive officers or employees as the person responsible for default arrangements who represents or acts on behalf of the defaulting OTC Clearing Participant, and notify the matter to JCCH in the manner specified by JCCH. Article 17. Person Responsible for Settlement Operations An OTC Clearing Participant shall appoint one suitable person from among its executive officers or employees as the person responsible for settlement operations relating to Clearing Contracts, and notify the matter to JCCH in the manner specified by JCCH. Article 18. Mutual Relationship or Controlling Relationship with Officers or Other Persons 1. If a mutual relationship or controlling relationship existing with an executive officer or other person of an OTC Clearing Participant is deemed to be inappropriate for JCCH s OTC Clearing Business, JCCH may conduct an inquiry with the OTC Clearing Participant and request the OTC Clearing Participant to change such a relationship by providing reasons; provided, however, that a written statement submitted by the OTC Clearing Participant may be made in lieu of the above inquiry. 2. Procedures for the above inquiry as described above shall be determined by JCCH. 3. If the OTC Clearing Participant fails to respond to the inquiry as described in Paragraph 1 above without due reason, JCCH may request the change as specified in the same paragraph without conducting the inquiry. 4. The OTC Clearing Participant may make an objection to the request for change as described in Paragraph 1 above, by submitting a written statement stating reasons to JCCH within 10 days after the receipt of such request. 5. JCCH shall, after receiving an objection from the OTC Clearing Participant as described above, promptly convene a meeting of its Board of Directors. 6. When the Board of Directors as described above determines that it is appropriate to amend or cancel the request for change as described in Paragraph 1 above, JCCH shall promptly amend or cancel such request. Article 19. Payment of Fees by OTC Clearing Participant An OTC Clearing Participant shall pay fees to JCCH in the manner specified by JCCH. Article 20. Responsibilities Concerning the OTC Clearing Business JCCH shall have no liability to compensate for damage incurred by an OTC Clearing Participant or a Clearing Intermediation Customer in the course of its operations in connection with JCCH s OTC Clearing Business, unless the damage is caused by a 15

16 willful act or gross negligence of JCCH. Article 21. Notification Requirements An OTC Clearing Participant shall, when conducting any of the following acts, notify the matter to JCCH in advance (or immediately after the conduct if giving prior notice is impossible or extremely difficult due to laws and regulations or other unavoidable reasons) in the manner specified by JCCH. (1) Discountenance of its business; (2) Merger with another company to cease its existence, or merger with another company to establish a new company; (3) Dissolution due to reasons other than the decision to merge or commence bankruptcy proceedings; (4) Transfer of all or part of its business operations to another company by company split; (5) Transfer of all or part of its business operations; (6) Merger with another company as a surviving company; (7) Assumption of all or part of business operations from another company by company split; (8) Assumption of all or part of business operations; (9) Change of its name, trade name or appellation (including the same in English); and (10) Change of its head office, business office, or principal administrative office or other administrative office. Article 22. Reporting Requirements An OTC Clearing Participant shall, when any of the following events occurs, promptly report the matter to JCCH. (1) When the content or methodology of the procedures for managing the risk of loss, procedures relating to the division of work responsibilities, or other business operations is newly established or amended; (2) When a petition for the commencement of bankruptcy proceedings, rehabilitation proceedings, reorganization proceedings, or special liquidation proceedings (including those corresponding to foreign laws and regulations) is filed, liquidation is commenced, or the above fact is informed (including those corresponding to foreign laws and regulations); (3) When the OTC Clearing Participant becomes insolvent or is likely to become insolvent; (4) When any change occurs to the top 10 major shareholders (meaning the ten largest shareholders in terms of the number of shares held in their own name or the name of other person); (5) When any change occurs to its executive officers, or when any of its executive officers assumes or retires from the position of executive officer of other company or corporation; (6) When the OTC Clearing Participant becomes the subject of disposition under the Financial Instruments and Exchange Act or other similar laws or regulations of a foreign country, or is given an opportunity for a hearing or to present defense with respect to such disposition; (7) When the OTC Clearing Participant becomes the subject of disposition imposed by a commodity exchange (meaning the commodity exchange under Article 2, Paragraph 4 of CDA; the same shall apply hereinafter), a financial instruments exchange established under the Financial Instruments and Exchange Act (hereinafter the Financial Instruments Exchange ), a financial instruments clearing organization (hereinafter the Financial Instruments Clearing Organization ), or an exchange of foreign country corresponding to the above exchanges, or is given an opportunity for a hearing or to present defense with 16

17 respect to such disposition; (8) When an executive officer of the OTC Clearing Participant falls under any of the categories specified in Article 15.2(1)(i) through (xi) of the CDA; (9) When the OTC Clearing Participant becomes the subject of civil lawsuit (excluding those where the amount at issue is under 300 million yen), or the subject of judicial ruling in such a civil lawsuit, or the subject of petition for conciliation under the Civil Conciliation Act (excluding those where the amount at issue is under 300 million yen); or when such a civil lawsuit or conciliation ends; (10) When the amount of capital or the total amount of contributions (in case of a mutual company, the total amount of funds including reserve for redemption of funds) decreases to less than 300 million yen, or when the amount of net assets decreases to less than one billion yen; (11) When the OTC Clearing Participant becomes subject to disposition or exemplary attachment for late payment of taxes, or subject to attachment, provisional action or other preservative action ordered by the court; (12) When the OTC Clearing Participant (including its executive officers) is sued for criminal acts; (13) When the OTC Clearing Participant prepares its business report (for a company setting up accounting auditors, an accounting report prepared by the accounting auditors relating to the financial statements and attached to the business report); or (14) When the OTC Clearing Participant prepares documents specified by JCCH such as the statement of net assets (meaning a record concerning the amount of the net assets defined in the Ordinance for Enforcement of the Commodity Derivatives Act (Ordinance of the Ministry of Agriculture, Forestry and Fisheries and the Ministry of Economy, Trade and Industry No. 3 of 2005)). Article 23. Audit of OTC Clearing Participant 1. JCCH may, in the case of the following events or when deemed necessary for its OTC Clearing Business, request an OTC Clearing Participant to submit reports or materials necessary to ascertain its condition of business operations or financial conditions, or cause an OTC Clearing Participant to permit JCCH's employees to conduct an audit on its business operations, financial conditions, ledgers, documents, or other articles. (1) When conducting an investigation on the status of compliance by the OTC Clearing Participant with these Rules, etc.; (2) When conducting an investigation on the status of financial conditions of the OTC Clearing Participant. 2. Other matters necessary for the above audits shall be determined by JCCH in the detailed regulations. Section 3. Loss of OTC Clearing Qualification Through Application by OTC Clearing Participant Article 24. Application for the Relinquishment of OTC Clearing Qualification 1. An OTC Clearing Participant wishing to relinquish OTC clearing qualification shall submit an application to JCCH to obtain approval for such relinquishment in the manner specified by JCCH. 2. JCCH shall, when receiving the application for relinquishment of OTC clearing qualification from the OTC Clearing Participant as described above, promptly notify the matter to all other OTC Clearing Participants and make a public announcement. 17

18 Article 25. Loss of OTC Clearing Qualification 1. After submitting an application to relinquish OTC clearing qualification as specified in Article 24, Paragraph 1 hereof, an OTC Clearing Participant shall relinquish OTC clearing qualification on the 30th day from the day following the application date at the timing specified by JCCH, or on any other day specified by JCCH after the closing out of all Clearing Contracts to which the OTC Clearing Participant is the party, whichever is later. 2. An OTC Clearing Participant shall, when relinquishing all clearing qualifications relating to the Business of Assuming Commodity Transaction Debts, automatically relinquish OTC clearing qualification on the date on which the OTC Clearing Participant relinquish all clearing qualifications. 3. The OTC Clearing Participant as described above shall be treated as OTC Clearing Participant to the extent deemed necessary by JCCH in order to carry out the arrangements for unsettled Clearing Contracts of the OTC Clearing Participant. 4. JCCH shall, when approving the relinquishment of OTC clearing qualification of the OTC Clearing Participant, notify the matter to all other OTC Clearing Participants who obtain OTC clearing qualification, make public announcement, and report to the competent minister. Article 26. Special Measures in Cases Involving Merger, Etc. of Parties Applying to Relinquish OTC Clearing Qualification Notwithstanding the provisions of Article 25, Paragraph 1 hereof, when JCCH deems that an OTC Clearing Participant who applied to relinquish OTC clearing qualification needs not close out all of its unsettled Clearing Contracts due to reasons such as where the OTC Clearing Participant is merged by a party who obtains or intends to obtain OTC clearing qualification, or transfers its business to such a party by company split at the same time of its relinquishment of OTC clearing qualification (or when JCCH deems that an OTC Clearing Participant who applied to relinquish OTC clearing qualification needs not close out all of its clearing intermediation agreements when the OTC Clearing Participant concluded the clearing intermediation agreements with a Clearing Intermediation Customer), the said OTC Clearing Participant shall relinquish OTC clearing qualification at the timing determined by JCCH on a case-by-case basis. Article 27. Repayment of Obligations Upon Relinquishment of OTC Clearing Qualification 1. An OTC Clearing Participant who lost OTC clearing qualification shall repay all obligations owing to JCCH using money or substitute securities, to which the OTC Clearing Participant has the right to claim for return relating to JCCH's OTC Clearing Business. 2. When the money or substitute securities as described above are insufficient to repay all obligations under the same paragraph, the OTC Clearing Participant who lost OTC clearing qualification under the same paragraph shall repay the shortfall by the date specified by JCCH on a case-by-case basis. Article 28. Application of These Rules, Etc. Upon Relinquishment of OTC Clearing Qualification When an OTC Clearing Participant who lost OTC clearing qualification has rights and obligations incurred due to reasons that exist before the relinquishment of OTC clearing qualification, the provisions of these Rules, etc. shall apply to such rights and obligations. Section 4. Measures to Be Taken for OTC Clearing Participant 18