Outline for Three-month TONA futures

ItemI. Trading
1． Definitions(1) Three-month
TONA futures

March 20 2023
Revised January 4 2024
Tokyo Financial Exchange Inc.
Remarks

Description

 A “Three-month TONA futures” is a market derivatives transaction, which quotes thefinancial index indicated as 100 minus the figure of an interest rate per annum as compoundeddaily Uncollateralized Overnight Call Rate (TONA) interest during the “Reference Quarter”;
TONA shall be published by the Bank of Japan (BOJ).

 A “market derivatives transaction” definedin Article 2(21) (ii) of Financial Instruments
and Exchange Act (Act No.25, 1948,
hereinafter called the “ACT”).

 “Reference Quarter” shall be, for a given contract month, the interval that ends on (butexcluding) the third Wednesday of the calendar month in which the last trading day falls(“delivery month”) and begins on (and including) the third Wednesday of the calendar month
preceding the delivery month by three months; provided however, that if the third Wednesdayof the delivery month is a Japanese bank holiday, the interval ends on (but excluding) theimmediate following Japanese bank business day and if the third Wednesday of the third
calendar month preceding the delivery month is a Japanese bank holiday, it begins on (andincluding) immediately following Japanese bank business day.
 “TONA” shall be the interest rate of Uncollateralized Overnight Call Rate for a business day
expressed as “average” in percentage and published by BOJ on the following business day as
the final result.
 In calculating compounded interest, for any holiday belonging to the Reference Quarter, theTONA for the immediately preceding business day shall be applied to each holiday as simple
interest rate (not compounded one).
 “An interest rate per annum” is a percentage value of the compounded daily interest divided
by the number of calendar days included in the Reference Quarter and multiplying by 365(example)
Reference Quarter for the contract month
June 2023 shall be:
From (and including) June 21 2023 (Wed) to(but excluding) September 20 (Wed)1 Please refer to Appendix for details.

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Description

Remarks(round off to the third decimal place).
2． Contract month(1) Listed ContractMonths

 20 contract months, each final settlement date being the business day immediately following
thebusiness day on which there occurs the day session of the last trading day.

(2) Period The period of 5 years shall be applied to the contract months for which their respective final
settlement dates fall in any of March, June, September and December (quarterly month).

(3) First Trading Day The first trading day of each contract month is the trading day immediately following the last
trading day for the then first expiring contract month, and such new contract month shallbecome available for trading from the opening of its first trading day’s day session.

 A “trading day” shall be a period
commencing on the opening of the evening
session that starts after the day session on thebusiness day immediately preceding aspecific business day and ending on the closeof the day session that starts on such specificbusiness day.

(4) Last Trading Day

 The last trading day shall be the trading day, the day session of which occurs on the third
Wednesday (if such day falls on a Japanese bank holiday, the day immediately following suchday which is a Japanese banking day) of March, June, September or December.

(example) Last Trading Day for the contract month
June 2023 shall be September 20 (Wed),traded until 9:30.

3． MatchingAlgorithm

 The matching of the trades is based on the auction method.

 The auction method means the trade shall be
executed on an individual auction basis.

4． Trading Hours

 Day session: 8:45-15:30 (no trade-matching between 11:30-12:30 on each trading day), savethat the last trading day’s Day session is 8:45-9:30.
 Evening session: 15:30-20:00 (no trade-matching on the last trading day of the contract month There is a pre-open session (session only forquote acceptance; no matching), which is 15
minutes prior to market open of the day2

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Remarks

which reaches the last trading day.)

5． Trading Unit, etc.
(1) Trading Unitsession.
 TFX may change trading hours on atemporary basis when it finds necessary.

 1 Basis point value (price fluctuation of 0.01) = 2,500 yen(2) Bid/Offer Order types are Limit Order and Market Order.
 Bid/Offer is quoted to the third decimal place (indicated by an integral multiple of 1/1000).
 Minimum price fluctuation of bids and offers is 0.001 (0.1 tick = 250 yen).

6． Trading Member An Entity that intends to trade Three-month TONA futures shall obtain the “Japanese Yen
Interest Rate Trading Membership” or “Japanese Yen Interest Rate Remote TradingMembership” as the case may be.

II. Clearing
1． Margin The amount of margin requirement for customer trades and member’s proprietary trade arecalculated using SPAN®.
 The margin for Three-month TONA futures using SPAN® may be reduced by netting of risk
arising from other Interest Rate Futures contracts on TFX.

3 During the Pre-open period, a Market ordershall always be submitted with “On-Open”
modifier.
 TFX may reject any bid or offer when TFX
finds such reject necessary to ensure a fairmarket and the trading system’s stable
operation.
 Maximum order volume Trading Member
can submit in a single order is 99,999 lots.

 SPAN® used herein is a registeredtrademark of Chicago Mercantile ExchangeInc. and used herein under license. Chicago
Mercantile Exchange Inc. assumes noliability in connection with the use ofSPAN® by any person or entity.

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Remarks

2． Mark-to-market

 The cash amount of the mark-to-market is calculated based on the daily settlement price oneach trading day, and such amount is exchanged between TFX and Clearing Members on thenext trading day.
 Mark-to-market between Non-Clearing Members and Clearing Members are to follow themethod used between Clearing Members and TFX.

 The mark-to-market amount is the amountcalculated comparing the daily settlement
price and the matched price for trades madeon that day, and the amount calculatedcomparing the daily settlement price of theday and the previous day’s daily settlement
price for open interest.

3． Daily
PriceSettlement

 The daily settlement price is the volume-weighted average of the contract prices and tradedvolumes (excluding the contracts executed by strategy trades) executed by auction method
during a specific time period.

 The “Indicative Period” shall be a specificperiod determined by the Exchange fromtime to time as necessary, which shall fallwithin the period from the opening of therelevant trading day’s evening session to theclose of the same trading day’s day session.
 In case there is no contract price for acontract month during the Indicative Period,or, in case the Exchange deems the Daily
Settlement Price calculated as aforesaid tobe inappropriate, the Exchange shalldetermineanotherfigure
deemedappropriate by the Exchange as the Daily
Settlement Price.

4． Cash SettlementVariation

 For settlement relating mark-to-market between Clearing Members and TFX, Clearing
Members to pay due to cash settlement variation must pay the amount to TFX by 11AM of
the next business day; recipient of cash settlement variation receives the amount from TFX
after 2PM of the next business day.

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 Cash settlement variation for mark-to-market between Non-Clearing Members and Clearing
Members are to perform the equal process according to the mark-to-market between Clearing
Members and TFX.
5． Open Interest

 Unsettled positions by the execution of orders are recognized as open interest.

6． Offset Trades When a Trading Member makes a purchase contract (hereinafter called “Repurchase”) inorder to close out a short position or makes a sale contract (hereinafter called “Resale”) inorder to close out a long position, that Member is to notify TFX of the classification of Resaleor Repurchase and its volume by 5PM of the business day (by 4PM as to the last trading dayof a contract month). TFX will reduce the notified quantity from the Member’s open interest(in the case of a Non-Clearing Member, the open interest of its designated Clearing Member)for settlement.

7． Final Settlement

 For each contract month, open interest not offset by the last trading day will be processed by
final settlement using a determined cash settlement value (“final settlement price”
hereinafter) for settlement.

(1) Final Settlement
Price The figure calculated by “Financial Index Calculation Methodologies for Three-month
TONA futures” in Appendix.

(2) Cash SettlementofFinalSettlement

 For trades matched on the last trading day, when there is a difference between the final
settlement price and the matched price of the trade; and for open interest, when there is adifference between the final settlement price and the previous day’s settlement price, theClearing Member is to pay to (or receive from) TFX the amount difference on the last
settlement day.
 The method of final settlement between Non-Clearing Members and Clearing Members areto follow the method used between Clearing Members and TFX.

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 There are 2 ways to notify offset trades:(1) Individual notification (make separate
notifications for each trade)(2) Bulk notification (make collective
notifications by contract month andproprietary/customer account) The final settlement price is announced at
1PM in principle.

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Description

8． Settlement
between Trading
MemberandCustomer

 The cash amount to be settled between Trading Members and their customers are as follows:(1) Settlement by Offset
The cash amount calculated from the difference between the matched price of sales
contracts or the matched price of purchase contracts.
(2) Final Settlement Price
The cash amount calculated from the difference between the final settlement price andthe matched price of long or short position
 When a customer’s settlement results in overall loss, the cash amount of such loss is to be
paid by the Customer to the Trading Member within the timeframe specified below.
(1) Settlement by Offset
Date and time specified by the Trading Member which falls before the second business
day which the day session the offset trade was executed belongs.
(2) Final Settlement
Date and time specified by the Trading Member which falls before the business day
subsequent to the Final Settlement Day of each contract month.

9． Clearing Member An entity that intends to act as a counterparty in the financial futures obligation assumption
business for Three-month TONA futures shall obtain Interest Rate Futures ClearingMembership.

III. Fees
1． Per-contract
Exchange fee
2． Brokerage
Commission

Remarks Per-contract Exchange Fee is 100 yen in principle.

 Consumption tax, etc. is charged in addition.

 The amount and method of payment of brokerage commission charged to a customer by a
Trading Member shall be negotiated and agreed beforehand between such customer and suchMember.

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IV. Others
1． Strategy Trades

DescriptionRemarks

 Calendar Spread is allowed as strategy trade.

 Strategy trade is a trade whereby themultiple sale contract(s) and/or purchase
contract(s) are all simultaneously executed,
each type of combination of the multiple
contracts being separately specified by TFX.
 Calendar Spread: Sell (Purchase) one
contract for a near month, and purchase(sell)
one contract for a far month.
 How to calculate Calendar Spread price：Thetraded price of the contract for the nearmonth, minus the traded price of the contract
for the far month.

2． Block Trades

 Block trades are available.
 Trading Members who intend to execute a block trade shall make an application to TFX
during trading hours excluding the last 15 minutes of each session (i.e. prior to the close of
the day session and the close of the evening session) and the period between 11:30-12:30.
 Minimum volume for an application of a block trade is 1 contract.

 Block trades are, with prior application toTFX, having buy and sell orders of the same
contract month simultaneously executed
outside competitive auction.

3． Give-up Trades Give-up trades are available.

 Give-up means that Executing Member(Trading Member who has executed a tradeof Three-month TONA futures) have anotherTrading Member clear such trade.
 Take-up means that Trading Member
undertake clearing of Three-month TONAfutures.

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4． Market
ProgramDescription
Maker

Remarks

 Three-month TONA futures is included as the designated products under the Market-Making
program.

 The originals of this outline of rules have been prepared in the Japanese language only and the Japanese language texts shall govern for all purposes and in all respects.
Accordingly, all questions that may arise within or without courts of law in regard to the meaning of the words, provisions and stipulations of the rules, regulations andagreements shall be decided in accordance with the Japanese language texts. Whilst reasonable care has been taken to ensure that these translations are accurate and freefrom errors, no liability is accepted by TFX in any circumstances.

8(Appendix)

Financial Index Calculation Methodologies for Three-month TONA futuresFinancial Index = 100 – R
R = [ ∏ｎ{1 +（ri/100）x（di/365）}– 1 ] x (365/D) x 100
ⅰ=1n : The number of business days in the Reference Quarteri : As for each business day in Reference Quarter (“reference business day”), a series of whole numbers, each representing “i”th reference business day in chronological orderfrom the first reference business day in the Reference Quarter”.
Π :Capital pi (Π) indicates the terms to be compounded.
(example) ∏ｎαi = α1×α2×α3×…αni=１ri : The value of Uncollateralized Overnight Call Rate (TONA) for “i”th reference business day, which is expressed as “average” in percentage and published by the Bank ofJapan (BOJ) on the following business day as the final result(example)

If the value of TONA for an applicable reference business day is 0.019%, then ri ＝ 0.019

di : The number of calendar days during Reference Quarter to which ri applies.
Any calendar day that is not a business day (i.e., weekend days, holidays) shall be included in “di ”and for such days, ri for the reference business day immediately preceding
the calendar day shall apply.
(examples)

If “i”th reference business day is a Monday, a Tuesday, a Wednesday, or a Thursday, and the following calendar day is a business day, then d i = 1.
(i.e. ri applies for 1 calendar day)If “i”th reference business day is a Friday and the following Monday is a business day, then di = 3.
(i.e. ri applies for 3 calendar days.)ｎD : The number of calendar days in Reference Quarter Σⅰ=1 diThe value of R is rounded to 3rd decimal place.

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