JSDA Guideline for When-Issued Transactions of Japanese Government Bonds

Transcription

1 Tentative Tanslation JSDA Guideline fo When-Issued Tansactions of Japanese Govenment Bonds Octobe 3 Vesion Japan Secuities Deales Association

2 The Table of Contents. Geneal. Pupose 2. Enfocement. Guideline fo When-Issued Tansactions of Japanese Govenment Bonds. Definitions and Legal Pespective () Definitions (a) WI tansactions of JGBs (JGB tansactions befoe an issue date) (b) JGB tansactions pio to the auction (2) Legal Pespective of WI tansactions of JGBs 2. Maket Pactices fo JGB tansactions pio to the auction () Eligible JGBs (2) Execution Methods (3) Fixing Methods, etc. of a taded pice (4) Change of an Execution Method on the auction date (5) Tansactions Statements (6) Timing of Settlement 3. Maket Pactices fo WI tansactions of JGBs afte the auction 4. Pocedues in the case of postponement etc. of the JGB auction o issuance () Pocedues in the case of cancellation o postponement of the issuance (2) Pocedues in the case of cancellation of the auction (3) Pocedues in the case of postponement of the auction (4) Pocedues in the case of a eopening of the JGB (Appendix) The calculation fomula fom a yield o a speadto a taded pice

3 I. Geneal. Pupose The Japanese govenment bond maket has been mioing active implementation of vaious maket efoms ecently, including the demateialization of Japanese Govenment Bonds (heeinafte efeed to as JGBs ) pusuant to the enfocement of the Law Concening the Establishment of Related Laws fo Impovement of the Secuities Maket though Refom of the Secuities Settlement System, etc. in Januay 3, and the divesification of issue type and the eduction of undewiting atio by the JGB undewiting syndicate goup to secue smooth and stable absoption amidst lage scale issuances. In addition, the Futue Vision on the Financial System and Administation (Repot pepaed by the Futue Vision Round Table Meeting on the Japanese Vesion of the Financial System and Administation) published in July 2 suggested that necessay delibeations should be made to intoduce so-called When-Issued ( WI ) tansactions of JGBs. Amidst these developments, the Ministy of Finance equested Japan Secuities Deales Association (JSDA) that maket paticipants should take the pincipal ole in delibeating and implementing the maket pactices equied to pepae a favoable envionment fo adopting WI tansactions and theeby to facilitate smoothe subsciption at JGB auctions. In esponse to this equest, JSDA fomed a Study goup fo Maket Pactices of WI Tansactions diectly unde the Fixed Income and New Business Committee in Novembe 2, and this Study goup had actively delibeated the natue and substance of maket pactices. Incidentally, we gave special consideation not to change the cuent maket pactices, which had been aleady developed by maket paticipants fo JGB tansactions between the auction and the issue date (fist settlement date). Based on the consensus of the Study goup, JSDA poduced the Guideline fo When-Issued Tansactions of Japanese Govenment Bonds ( Guideline ) pescibing maket pactices with which maket paticipants ae to comply, in ode to ensue the smooth intoduction of WI tansactions. We hope that the Guideline will be widely accepted and applied as established maket pactices by maket paticipants, and theeby contibute to the smooth intoduction of WI tansactions of JGBs. Please note that the Guideline will not impose any estictions on the statutoy ights of maket paticipants. 2. Enfocement The Guideline will take effect on Febuay 23, 4. *This Guideline will be eviewed and evised fom time to time when necessay.

4 II. Guideline fo When-Issued Tansactions of Japanese Govenment Bonds. Definitions and Legal Pespective () Definitions (a) WI tansactions of JGBs (JGB tansactions befoe an issue date (fist settlement date)) WI tansactions of JGBs epesent JGB tansactions executed by maket paticipants (mainly JSDA membe fims) fo a set peiod of days befoe the issue date unde the condition pecedent that the elevant JGB shall be issued on the oiginally planned issue date, and settled on o afte the issue date. The WI tansactions should be commenced fom the time when the pobability of issuance of the elevant JGB becomes consideably high (that is, when the Ministy of Finance announces the expected auction date of the elevant JGB, expected issue date, expected issue amount and expected matuity date ( auction announcement ), and when the tems theeof ae claified). (b) JGB tansactions pio to the auction Among WI tansactions of JGBs, JGB tansactions pio to the auction epesents JGB tansactions subject to an issuance of which an auction announcement is made by the Ministy of Finance, and executed by maket paticipants with the conditions pecedent duing the peiod fom the time of the auction announcement to the time of official elease of the seial numbe and coupon ate of the elevant JGB on the auction date. Howeve, even if the seial numbe and coupon ate ae known befoe the auction date, the tansactions executed pio to the auction date shall be deemed as JGB tansactions pio to the auction. the time of auction announcement the auction date the issue date (fist settlement date) JGB tansactions pio to the auction WI tansactions of JGBs (2) Legal Pespective of WI tansactions of JGBs WI tansactions of JGBs can be intepeted as legal action subject to the conditions pecedent pescibed in Aticle 27, Paagaph of the Civil Law, whee contacts ae concluded pio to the issue date, with conditions pecedent that the elevant JGB shall be issued on the scheduled issue date. In othe wods, they ae tansactions effected pio to the issue date of the elevant JGB, with conditions pecedent that the elevant JGB shall be issued on the oiginally planned issue date (completion of the issuance of JGB), and ae tansactions that the paties involved have ageed upon the settlement of the elevant JGB afte the completion of the issuance on the oiginally planned issue date. Please note that WI tansactions of JGBs that JSDA membe fims conduct as a pat of thei businesses ae tading of the secuities unde the Secuities and Exchange Law, and shall be executed in compliance with the pocedues as pescibed in the Law.

5 2. Maket Pactices fo JGB tansactions pio to the auction () Eligible JGBs Among JGBs issued though auctions, JGBs eligible fo tansactions pio to the auction shall be, in pinciple, the JGBs fo which the expected auction date, expected issue date, expected issue amount and expected matuity date ae announced by the Ministy of Finance pio to the auction date. (2) Execution Methods JGB tansactions pio to the auction shall be executed in the following mannes: (a) Fo the fixed coupon JGBs, tansactions shall be concluded on a semi-annual compound yield basis. (b) Fo the floating-ate JGBs, tansactions shall be concluded with the spead fom the efeence ate (spead). Please note that the execution method fo the discount JGBs, such as Teasuy Bills, etc, shall be in accodance with the maket pactices fo tansactions on and afte the auction date. (3) Fixing Methods, etc. of a taded pice In the case mentioned in (2) (a) and (b) above, a taded pice shall be detemined by the following manne: (a) When a contact is fomed on a semi annual compound yield o a speadetc. and a taded pice is fixed afte the auction, the taded pice shall be calculated in accodance with the fomula descibed in the Appendix immediately afte the official elease of the coupon ate o spead, and such a taded pice must be confimed pomptly by the selle and the buye. (b) The contact date (tade date) is not the date when the taded pice is fixed, but the date when the tansaction is initially concluded. (4) Change of an Execution Method on the auction date Fo the inteest-beaing JGBs eligible fo JGB tansactions pio to the auction, an execution method mentioned in (2) (a) and (b) above should be changed, in pinciple, to a simple yield basis o a pice basis at the time when the seial numbe and coupon ate o speadae eleased on the auction day, (5) Tansactions Statements Tansactions statements and othe statutoy books shall be pepaed and kept in accodance with the elevant laws and egulations. (6) Timing of Settlement The taded JGBs shall be settled on the oiginally planned issue date in pinciple. Howeve, this does not peclude the sepaate ageement between paties to the tansaction.

6 3. Maket Pactices fo WI tansactions of JGBs afte the auction The execution methods of WI tansactions afte the auction should be povided in the same manne as those of JGB seconday tansactions on and afte the issue date. 4. Pocedues in the case of postponement etc. of the JGB auction o issuance () Pocedues in the case of cancellation o postponement of the issuance When the issuance of JGB is cancelled o postponed, the contacts of WI tansactions shall be deemed to be cancelled because the condition pecedent pescibing the issuance on the oiginally planned date is not finally attained at that time. Howeve, this does not peclude the sepaate ageement between paties to the tansaction. (2) Pocedues in the case of cancellation of the auction When the Ministy of Finance announces the cancellation of the JGB auction and in addition that the issuance will not be implemented on the oiginally planned date, the contacts of the JGB tansactions pio to the auction shall be deemed to be cancelled because the condition pecedent pescibing the issuance on the oiginally planned date is not finally attained at that time. (3) Pocedues in the case of postponement of the auction In case the Ministy of Finance announces the postponement of the JGB auction and does not hold the auction by one business day pio to the oiginally planned issue date, the contacts of the JGB tansactions pio to the auction shall be deemed to be cancelled because such condition pecedent pescibing the issuance on the oiginally planned date could not be fulfilled at that time. Howeve, this does not peclude the sepaate ageement between paties to the tansaction. (4) Pocedues in the case of a eopening of the JGB Note Once the Ministy of Finance announces a eopening of the JGB, even if the issuance of the new JGB is cancelled o postponed aftewads, the condition pecedent shall be deemed to be accomplished on and as of the oiginally planned issue date (completion of the issuance) and the settlement shall be caied out by the existing elevant JGB based on the contents of contacts of the WI tansactions. Howeve, this does not peclude the sepaate ageement between paties to the tansaction. (Supplementay Povision) Establishment of the Guideline: July 3, 3. Amendment of the Guideline: Octobe 28, 3. Enfocement of the Guideline: Febuay 23, 4. Note Reopening efes to the method of JGB issuance that the Ministy of Finance additionally issues the exact same JGB as an existing one.

7 Appendix Fixed Coupon Japanese Govenment Bonds C 2 P = + ( + ) 2F C x 00 x + ( ) 2F - + ( ) 2F + N - 00 C + - x + N - 2 ( + ) 2F 2A Pice Nominal Coupon Rate (In % on Annual Basis) Semi Annual Compound Yield (%) Days fom the Fist Accual Date to the Issue Date Numbe of Inteest Payments to the Matuity Date A In the calculation pocess, each calculation esults shall be ounded to ten (0) decimal places. shall be ounded down to thee (3) decimal places. Floating Rate Japanese Govenment Bonds K- f 2 P = + K - t ( + ) 2F (K -f) x 00 K -t x K - t ( + ) 2F - K - t ( + ) 2F + N - 00 K -f 2A + - x K - t 2F + N - 2 ( + ) Pice Refeence Rate (%, Calculated fom the Result of the Latest0-Yea JGB Auction by the Issue) fixed though the Auction (%) taded between countepats in WI Tansaction (%) Days fom the Fist Accual Date to the Issue Date (Days) Numbe of Inteest Payments to the Matuity Date A In the calculation pocess, each calculation esults shall be ounded to ten (0) decimal places. shall be ounded down to thee (3) decimal places. Howeve, In case of, shall be 00.