OVER-THE-COUNTER BINARY OPTION
TRANSACTION WITH INDIVIDUALS BUSINESSCONDUCT RULES
Adopted July 18, 2013

CHAPTER I.
GENERAL PROVISIONS
Article 1. － Purposes
The purposes of these Rules shall be, under Article 25-5 of the Financial Futures BusinessConduct Rules (hereinafter referred to as "Business Conduct Rules"), to provide for requirements
for specifications and other matters required for implementation of Members' business conduct
system regarding Members' over-the-counter binary option transactions with an individual
customer as the counterparty which have the structure to facilitate continuous and repeatedtransaction (hereinafter referred to as "over-the-counter binary option transaction withindividuals") in order to promote the protection of investors and appropriate business.
Article 2. － Definition
The term referred to in each of the following items, as used in these Rules, shall be definedas provided in such item:(1) over-the-counter binary option transaction – an option transaction, as defined in (3) or (4) of
Article 2.22 of the Financial Instruments and Exchange Act (hereinafter referred to as "Act"), in
which the parties agree that, if the exercise price and judgment price have satisfied a certain
predetermined conditions, one of the parties grants to the other party a right to receive a certain
amount of money, and the other party pay considerations therefor:(2) underlying assets – the following financial instruments or financial indices which are objectsof the rights under (3) or (4) of Article 2.22 of the Act:
① a claim, etc. under a money deposit contract (limited to those provided in Article 2.24 (2) ofthe Act);② a currency (Article 2.24 (3));③ an interest rate index (among financial indices (Article 2.25 of the Act), an interest rate, etc.
of a claim, etc. under a money deposit contract (Article 2.25 (1) of the Act) or a value
computed based on an interest rate, etc. of a claim, etc. under a money deposit contract (Article
2.25 (4) of the Act); limited, however, to an option transaction as defined in Article 2.22 (3)(b));④ a currency index (among financial indices, the price of a currency (Article 2.25 (1))) or avalue computed based on the price of a currency (Article 2.25 (4)).
(3) price of underlying assets – the price or value of underlying assets;(4) exercise price – at the time of the exercise by an acquirer of an over-the-counter binary
option traded with individuals, the price of underlying assets determined in advance as acondition for the exercise in order to fix the amount of payout;(5) judgment price – the price of underlying assets used for the judgment whether conditions forpayout are met after checking with the exercise price;(6) payout – payment of money from the grantor of an over-the-counter binary option tradedwith individuals to the acquirer if conditions for payout determined in advance have been met
under the contract of the over-the-counter binary option transaction with individuals;(7) payout amount – the amount of money paid for payout;(8) trading period – period from the time of the commencement of trading of an over-the-counterbinary option transaction with individuals between a Member and a customer until the judgment
time.

*

This English version is a translation of the original Japanese text.

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The original Japanese text will
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prevail should there be any difference in meaning between the English and Japanese versions.

CHAPTER II
SPECIFICATIONS FOR TRADING, ETC.
Article 3 － Trading Period
3.1 A Member shall, with respect to an over-the-counter binary option transaction withindividuals, determine the base hour for a trading period (hour) and ensure that trading periods forall over-the-counter binary option transactions with individuals shall not be shorter than the basehour.
3.2 A Member shall, if the Member conducts multiple over-the-counter binary option transactions
with individuals (limited, however, to transactions with the same underlying assets) with different
trading periods, establish the closing time of each trading period for each trade in a time span of atleast the base hour under Article 3.1.
Article 4 － Term of Trading
A Member shall, with respect to an over-the-counter binary option transaction withindividuals, endeavor to implement the execution system of trading to facilitate responding to acustomer's order placement of purchase or sale (including an order for transactions to establish
new position) from the commencement time of trading until the judgment time.
Article 5 － Trading Method
A Member shall, with respect to an over-the-counter binary option transaction withindividuals, implement the system to trade with a customer by at least one of the following
methods:(1) the method to provide a customer with an opportunity to conduct purchase transactions toestablish new positions and sale transactions to establish new positions simultaneously using
over-the-counter binary options traded with individuals with the same underlying assets, trading
period and exercise price;(2) other method to use the structure of deleting conditions that all customers suffer losses atonce and trade with a customers.
Article 6 － Quoting of Trade Price, etc.
6.1 A Member shall, with respect to an over-the-counter binary option transaction withindividuals, implement a structure to determine, based on the reasonable ground, the trade price toquote to a customer and conclude a transaction.
6.2 A Member shall implement a structure to facilitate that a customer can confirm
simultaneously the purchase price and the sale price quoted by the Member.
6.3 A Member shall implement a structure to fix the amount of payout and quote to a customer
trading prices reflecting a change of the value of an over-the-counter binary option traded withindividuals during the trading period.
Article 7 － Timing of Determination of Exercise Price
7.1 A Member shall, with respect to an over-the-counter binary option transaction withindividuals, determine the exercise price no later than the commencement of a trading period andquote the same exercise price to all customers.
7.2 A Member shall not add an exercise price during a trading period if:(1) a transaction can be made with a customer smoothly by any of exercise prices alreadyavailable for transactions during the remaining hour of the trading period;(2) the remaining hour of the trading period is shorter than the base hour provided in Article 3.1
as at the time of adding an exercise price; or(3) an explanation to the effect that an exercise price may be added has not been given to acustomer in advance.
Article 8 － Establishment of Exercise Prices
8.1 A Member shall, with respect to an over-the-counter binary option transaction withindividuals, set up establishment criteria of exercise prices and implement the system to facilitate
the determination of exercise prices which do not differ from the price of underlying assets as at
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the time of the commencement of a trading period.
8.2 In the case of adding an exercise price, "time of the commencement of a trading period" shallbe read as "time of addition of an exercise price".
CHAPTER III

Business Control

Article 9 － Publication of Summary of Specifications
9.1 A Member shall, with respect to an over-the-counter binary option transaction withindividuals, publish the summary of specifications required to be stated in a trading guide andother matters for a customer to understand in advance in order to conduct transactions
appropriately.
9.2 A Member shall inform all customers of explanation of matters published pursuant to Article
9.1 and information to contribute to customers' understanding and endeavor to promote customers'
understanding.
Article 10 － Advertisement Examination
10.1 In making an advertisement for an over-the-counter binary option transaction withindividuals, the Member shall confirm that such advertisement provides customers withknowledge required for conducting such transaction and that the advertisement is made in amanner to contribute to customers' appropriate investment.
10.2 In using an affiliate advertisement for an over-the-counter binary option transaction withindividuals, the Member shall implement the system to confirm fully contents used by theMember based on advertisement examination criteria under Article 10.1 and endeavor to use anaffiliate advertisement appropriately.
10.3 A Member shall restrain from an advertisement attitude such as offering premiums to acustomer for conducting an over-the-counter binary option transaction with individuals which may
cause preventing such customer from making self-controlled investment judgment.
Article 11 － Criteria for Commencement of Trading
11.1. A Member shall include the following matters in criteria for the commencement of trading(which mean criteria provided in Article 7 of the Business Conduct Rules) for customers ofover-the-counter binary option transactions with individuals:(1) years of investment experience regarding derivatives transactions;(2) knowledge of the customer regarding over-the-counter binary option transactions;(3) the holding amount of financial assets and revenue;(4) purpose of investment;(5) the limit of trade and limit of loss declared by the customer; and(6) other matters necessary for a Member to judge the suitability of a customer forover-the-counter binary option transactions with individuals.
11.2 A Member shall collect information of a customer referred to in the items of Article 11.1
from each customer who offers the commencement of trading and judge whether it is suitable tocommence trading.
11.3 A Member shall establish criteria specifically such as using values for judgment in respect ofthe matters referred to in the items of Article 11.1, and ensure that the Member shall not conducttransactions with a customer if the customer fails to meet the criteria.
11.4 In confirming the knowledge of a customer as provided in Article 11.1 (2), the Member shalluse the specific method of conducting a question-and-answer session with the customer.
11.5 A Member shall include information of a customer referred to in the items of Article 11.1 ina customer card (which means a card provided in Article 6.1 of the Business Conduct Rules).
11.6 A Member shall control information registered in the customer card under Article 11.5 inaccordance with the following items:(1) when a customer demands a change in information registered by the customer, the Member
shall accept it as needed and make a change necessary;(2) the Member shall fix a period to demand a customer to reconfirm the registered informationand enforce it.
11.7 A Member shall establish procedures for establishing and amending the criteria related to theitems of Article 11.1 and retain the established criteria in writing.
Article 12 － Confirmation of Basic Knowledge
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12.1 A Member shall, with respect to an over-the-counter binary option transaction withindividuals, establish the following matters and the details thereof specifically as knowledge levelof each customer to be confirmed pursuant to the provisions of Article 11.4 and provide thecustomer with an opportunity to learn such knowledge prior to the customer's placing an order fortransactions:(1) matters provided in Article 9 and explanation, etc.;(2) matters regarding risks associated with an over-the-counter binary option transaction withindividuals;(3) matters equivalent to basic knowledge of option transactions; and(4) matters equivalent to basic knowledge necessary for a customer to conduct anover-the-counter binary option transaction with individuals appropriately.
12.2 A Member shall, if the Member has determined that the customer lacks knowledge orunderstanding for matters referred to in the items of Article 12.1, not continue the procedures foran order placed by the customer of an over-the-counter binary option transaction with individuals.
Article 13 － Trading Guide
A Member shall, with respect to an over-the-counter binary option transaction withindividuals, include the following matters in a trading guide furnished to a customer or materials
attached to said guide:(1) explanation provided in Article 9.2; and(2) explanation regarding matters stated in the acknowledgment as provided in Article 14.1.
Article 14 － Collection of Acknowledgment
14.1 The provisions of Article 8-2.1 of the Business Conduct Rules shall apply to an
over-the-counter binary option transaction with individuals: For this purpose, "over-the-counter
financial futures transactions" in said Article 8-2.1 shall be read as "over-the-counter binary option
transaction with individuals".
14.2 A Member may, with respect to an acknowledgment to be collected from a customer
pursuant to the provisions of Article 14.1, keep from collecting an acknowledgment for the same
type of transactions conducted with the customer within one year from the day of collecting an
acknowledgment.
14.3 A Member shall include the following matters in an acknowledgment collected from acustomer pursuant to the provisions of Article 14.1: Provided, That matters which do notcorrespond to an over-the-counter binary option transaction with individuals offered by theMember shall be excluded:(1) there is a due date;(2) if a customer holds a long position and the prediction goes wrong as of the judgment time,the invested principal amount will become zero value;(3) if a customer holds a short position and the prediction goes wrong as of the judgment time,
the customer is required to pay the payout amount, and further, such payout amount will exceed
the trade price that the customer has received and will cause loss;(4) a firm takes, as a source of earnings, the difference between the total amount of all customers'
payment and the total amount of all customers' receipt;(5) a customer needs professional knowledge such as theoretical ground of option transactions
in order to make reasonable investment judgment;(6) matters referred to in the items of Article 8-2.1 of the Business Conduct Rules; and(7) other matters particularly to be kept in mind.
14.4 A Member shall clarify in an acknowledgment the place in respect of the items of Article 13
where the specific details regarding the matters under Article 14.3 are stated in a trading guide ormaterials attached to such guide in order to ensure that a customer can easily find them.
Article 15 － Establishment and Control of Criteria for Trading
15.1 A Member shall, with respect to an over-the-counter binary option transaction withindividuals, establish criteria under Article 19 of the Business Conduct Rules (hereinafter referred
to as "house criteria") specifically.
15.2 A Member shall classify customer attributes based on matters referred to in Article 11.1 andother information regarding customers required for the Member to conduct transactions with thecustomers and establish criteria under Article 15.1
15.3 Criteria under Article 15.1 shall be established to contribute to the prevention of excessively
speculative transaction by customers and excessive loss of customers.
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15.4 A Member shall use the amount determined pursuant to the house criteria in the case where
the amount declared by a customer pursuant to Article 11.1 (5) (hereinafter referred to as"customer declared amount") is larger than the amount determined pursuant to the house criteria
and use the customer declared amount in the case where the customer declared amount is smaller
than the amount determined pursuant to the house criteria, and implement the system to control
transactions with such customer appropriately.
15.5 A Member shall, if the amount of trading or the amount of loss exceeds the amount usedpursuant to Article 15.4, give an alert to such customer regarding trading conditions in a timely
manner and implement the system to take measures necessary for the customer protection
appropriately such as dissolving transactions if trading conditions of such customer fails toimprove.
15.6 An officer, etc. in charge of internal control of a Member shall review whether the control
system of transactions with customers under Article 15.5 is implemented appropriately.
Article 16 － Execution of Transactions
16.1 A Member shall not, with respect to an over-the-counter binary option transaction withindividuals, suspend or delay transactions with customers without special reasons.
16.2 A Member shall simulate the reason under Article 16.1 and explain the summary thereof tocustomers in advance.
16.3 In the event of suspension or delay of an over-the-counter binary option transaction withindividuals, the Member shall publish the fact and the reason for the occurrence in order to informall customers concerned in a timely manner and assess the trading conditions as at the occurrence
and endeavor to prevent reoccurrence.
16.4 A Member shall retain the result of assessment under Article 16.3 in writing.
16.5 An officer, etc. in charge of internal control of a Member shall implement the system tomake assessment under Article 16.3.
16.6 An internal audit division of a Member shall confirm the structure of assessment under
Article 16.3 and the appropriateness thereof, and supervise the effort to prevent reoccurrence.
Article 17 － Review of Price, etc.
17.1 A Member shall, with respect to an over-the-counter binary option transaction withindividuals, review whether the trade prices quoted to customers and concluded are appropriate
under Article 6.1.
17.2 A Member shall review that values distributed in error or fraudulent values as a result ofarbitrary manipulation are not used to determine the judgment price of an over-the-counter binary
option transaction with individuals
17.3 A Member shall retain the result of review under Articles 17.1 and 17.2 in writing.
17.4 An officer, etc. in charge of internal control of a Member shall implement the system toreview pursuant to the provisions of Article 17.1 and 17.2 appropriately.
17.5 An internal audit division of a Member shall confirm the appropriateness of the structure ofreview under Article 17.1 and 17.2 and the details thereof.
Article 18 － Publication of Trading Result
A Member shall, with respect to an over-the-counter binary option transaction withindividuals, endeavor to publish the following matters for each type of an over-the-counter binary
option transaction with individuals regarding the overall state of trading with customers conductedwithin a certain period:(1) the ratio of the total amount that customers have received to the total amount that customer
have paid;(2) the ratio of the number of customers who suffered losses to the number of customers who
traded.
CHAPTER IV MISCELLANEOUS PROVISIONS
Article 19 － Mutatis Mutandis Application
The provisions of Articles 25-2 to 25-4 of the Business Conduct Rules shall apply to an
over-the-counter binary option transaction with individuals: For this purpose, "foreign exchange
margin transaction" shall be read as "an over-the-counter binary option transaction with
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individuals".
Supplementary Provisions
These Rules shall take effect on August 1, 2013.
Notwithstanding the provisions of these Rules (excluding Articles 9, 10 and 18) , these Rules
shall become applicable to a Member who is engaged in business of over-the-counter binary option
transactions effectively as of the enforcement of these Rules on and after December 1, 2013.
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