Interest Rate Swap Clearing Business Rules
Original Document Title: 金利スワップ取引清算業務に関する業務方法書

Note
1. JSCC hereby certifies that to the best of its knowledge, the foregoing is a fair andaccurate English translation of a document originally written in Japanese. In theevent of any inconsistency between the original Japanese document and thisreference English translation, the original Japanese document will prevail.
2. For convenience purposes, we have added certain explanatory footnotes that do
not appear in the Japanese original.
3. For convenience purposes, we have included Attachment 1, which provides an
English alphabetized list of the definitions set forth in Article 2.
4. For convenience purposes, we have included Attachment 2, which provides
definitions of certain Japanese concepts that are not defined in Article 2 of ourrules.

1

Table of Contents
Chapter 1 General Provisions (Articles 1 – 7) .............................................................................. 4
Chapter 2 Clearing Participant ................................................................................................... 25
Section 1 Acquisition of IRS Clearing Qualification (Articles 8 – 12)..................................... 25
Section 2 Client Clearing Authorization (Articles 12-2) ......................................................... 32
Section 3 Obligations of Clearing Participants (Articles 13 – 21) .......................................... 33
Section 4 Voluntary Renunciation of IRS Clearing Qualification (Article 22 – 27) ............... 38
Section 5 Discontinuance of Handling Client Clearing by a Clearing Participant (Articles 272 – 27-5) .................................................................................................................................. 40
Section 5-2 Notification concerning Eligible IRS Transactions Denominated in Currency
other than Japanese Yen (Article 27-6).................................................................................. 41
Section 5-3 Notification concerning Exchange of Mark-to-Market Difference And
Adjustment Amount (Article 27-7) ........................................................................................ 41
Section 6 Actions against Clearing Participants (Articles 28 – 39) ........................................ 41
Section 7 Miscellaneous (Articles 40 – 41) ............................................................................ 58
Chapter 3 Clearing Brokerage (Articles 42 – 47) ........................................................................ 61
Chapter 4 Clearing and Cleared Contracts ................................................................................. 66
Section 1 Clearing (Articles 48 – 50)....................................................................................... 66
Section 2 Cleared Contracts (Articles 51 – 53-4).................................................................... 70
Section 3 Special Provisions relating to Clearing Brokerage (Articles 54 – 58) .................... 81
Section 4 Position Transfer (Articles 58-2 – 58-7) ................................................................. 92
Chapter 5 Clearing Participant Account (Articles 59 – 60) ...................................................... 103
Chapter 6 Margin, etc. .............................................................................................................. 105
Section 1 General Provisions (Articles 61 – 62) ................................................................... 105
Section 2 Initial Margin and Intraday Margin (Articles 63 – 76) ......................................... 108
Section 3 Variation Margin, etc. (Articles 77 – 84) .............................................................. 117
Section 4 Cross Margining (Articles 84-2 – 84-5) .............................................................. 122
Section 5. Customer Buffer Framework............................................................................... 124
Chapter 7 Settlement (Articles 85 – 85-5) ............................................................................... 126
Chapter 8 Clearing Deposit (Articles 86 - 88) ........................................................................... 129
Chapter 9 Actions to be Taken in Case of Clearing Participant’s Failure of Settlement ........ 130
Section 1 Determination of Failure of Settlement and Default (Articles 89 – 90) ............. 131
Section 2 Compulsory Termination of Cleared Contracts of Defaulting Clearing Participant(Articles 91 – 99) ................................................................................................................... 131

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Section 3 Netting and Application of Collateral in respect of Obligation of Defaulting
Clearing Participant (Articles 100 – 101).............................................................................. 148
Section 4 Sharing of Losses by Other Clearing Participants (Articles 102 – 111) ............... 153
Section 5 Delegation to Subordinate Rules (Article 112) .................................................... 169
Chapter 10 Miscellaneous Provisions (Articles 113 – 127)...................................................... 170

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Chapter 1 General Provisions (Articles 1 – 7)
Article 1. Purpose
1

The purpose of these Interest Rate Swap Clearing Business Rules (hereinafterreferred to as “Business Rules”) is to set forth the matters necessary for the Clearing Service
and businesses incidental thereto including the matters set forth below, in which the Subject
Transactions are the IRS Transactions (hereinafter referred to as the “IRS Clearing
Business”) conducted by Japan Securities Clearing Corporation (hereinafter referred to as“JSCC”):(1)

Matters necessary between JSCC and the Clearing Participants in respect ofClearing by JSCC and the Cleared Contracts;(2)

Matters necessary between Clearing Participants in respect of Eligible IRS
Transactions in connection with which Clearing is applied for to JSCC;(3)

In respect of the Underlying Transaction of Clearing Brokerage, the mattersnecessary between a Customer and a Clearing Participant who is the counterparty
to such Underlying Transaction of Clearing Brokerage or with another Customer;(4)

Matters necessary among JSCC, a Clearing Participant and a Customer in respectof Clearing Brokerage;(4)-2

In respect of the Cross Margining, matters necessary among JSCC, a Clearing
Participant and a Customer; and(5)

In addition to those set forth in each item above, matters necessary among JSCC,
Clearing Participants and Customers in respect of IRS Clearing Businessconducted by JSCC.

2The Rules 1 shall apply only to the IRS Clearing Business conducted by JSCC.

Article 2. Definitions
1

The terms used in the Rules shall have definitions from the Financial Instruments

and Exchange Act (Act No. 25 of 1948), the ISDA Definitions and the following items shall be
1“Rules” is defined in Article 2.(65).
4defined as follows:(1)“Transfer” means any of the following:a.

a process to have a Clearing Brokerage Contract between a Transferring
Customer (as such term defined in Article 58-4.1; the same applies in thisitem) and the Clearing Broker for the Transferring Customer terminate andto have the claims and obligations thereunder cease to have future effectpursuant to the provisions of Article 58-5.4;b.

a process to have a Clearing Brokerage Contract between a Transferring
Customer and the Clearing Broker for the Transferring Customer
termninate and to have the claims and obligations thereunder cease tohave future effect pursuant to the provisions of Article 58-5.4, andsimultaneously to have a legal relationship with the same terms andconditions as the said Clearing Brokerage Contract come into effectbetween the Receiving Customer (as such term defined in Article 58-4.1)
and the Clearing Broker for the Receiving Customer; andc.

a process to have a legal relationship with the same economic effect as
the Proprietary Cleared Contract between JSCC and the Transferring
Clearing Participant (as such term defined in Article 58-6.1) come into
effect between a Receiving Customer (as such term defined in Article 586.1) and the Clearing Broker for the Receiving Customer;(1)-2“Customer Initial Margin” means any Japanese yen Cash or Eligible Securities
Collateral deposited with a Clearing Broker by a Customer and kept by the
Clearing Broker with the consent of the Customer for the purpose of securing theobligations of such Customer set forth in Article 61.1.(2);(2)“Customer Account” means a customer account set forth in Article 59.2;(2)-2“Vendor-Initiated Compression” means a process to conduct Compression of a
package of Cleared Contracts of multiple Clearing Participants as prescribed by
JSCC in accordance with the provisions of Article 53-2-2.

(2)-3“JPY Cleared Contract” means a Cleared Contract whose Notional Amount andsettlement currency are denominated in Japanese yen.

5

(3)

“Parent Company” means, with respect to a Legal Entity,
a. a parent company of such Legal Entity (meaning any other Legal Entity
controlling the financial and business policy of such Legal Entity)
b. a Legal Entity controlling the financial and business policy of a parent
company of such Legal Entity, if any;c. a subsidiary of a parent company of a Legal Entity (meaning any other
Legal Entity whose financial and business policy is controlled by a parent
company of such Legal Entity);d. a subsidiary of a Legal Entity described in c. above; ande. other persons deemed by JSCC as those equivalent to the foregoing;(4)“Parental Guarantee” means a guarantee extended by the Parent Company of aClearing Participant to secure the obligation of such Clearing Participant owing to
JSCC by submitting a letter of guarantee in the form prescribed by JSCC2, including
other documents deemed by JSCC to be equivalent to such letter of guarantee, to
JSCC;

(4)-2

“Unwind Fee” means, when Cleared Contracts terminate before its scheduled
Termination Date as a result of Vendor-Initiated Compression, Member-InitiatedCompression or JSCC-Initiated Compression, Cash to be paid or received
between JSCC and Clearing Participants which are parties to the relevant Cleared
Contracts;(4)-3“Foreign Currency Cleared Contract” means Cleared Contract whose Notional
Amount and settlement currency are denominated in any currency other thanJapanese yen;(4)-4“Foreign Currency Home Business Day” means Sydney Business Day for AUD
Cleared Contracts, New York Business Day for USD Cleared Contracts and
TARGET Settlement Day for EUR Cleared Contracts;2

cf. Handling Procedures of IRS Clearing Business, Article 3 as well as Exhibit Form 1.
6

(4)-5“Foreign Currency Home Holiday” means any day other than Foreign Currency
Home Business Day;(4)-6

“Customer Buffer” means Initial Margin a Clearing Broker deposits with or delivers
to JSCC for the purpose of allocation to a deficit pursuant to the provisions ofArticle 84-7 when a Customer has not deposited with or delivered to JSCC anamount sufficient to cover the Margin Required to Clear set forth in Article 49.1 or
the Required Intraday Margin set forth in Article 69.1;(4)-7“Customer Buffer Cap” means an upper allocation limit of the Customer Buffer foreach Customer Account, which a Clearing Broker sets as a cap on theaccumulated amount for one JSCC Business Day allowed to be allocated, andnotifies to JSCC pursuant to the provisions of Article 84-6;(4)-8“Customer Buffer Unallocated Balance” means the amount obtained bysubtracting the amount of Customer Buffer already allocated pursuant to theprovisions of Articles 84.7.1 and 84.7.2 to Customer Accounts of Customers who
have concluded the Clearing Brokerage Agreement with the relevant Clearing
Broker from the amount of the Customer Buffer deposited with JSCC by the
Clearing Broker.

(5)“Corporate Group” means a corporate group set forth in Article 5.1.(2) of the
Financial Instruments and Exchange Act;

(6)

“Early Termination” means a termination of a Cleared Contract before theTermination Date for any reason other than Compression;(7)“Early Termination Charge” means Cash received and paid between the parties toa Cleared Contract in the case of its Early Termination;(8)“Subordinate Rules” means the rules set by JSCC that are subordinate to theseBusiness Rules, in whatever name and including the amendments thereto, if any;

(9)“Business Holiday” means a holiday set forth in Article 5.1 or an extraordinary
holiday set forth in Article 5.2;

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(9)-2“Cash” means Japanese yen, Australian dollars, United States dollars and Euro;(10)“Funds” means Cash, securities, claims and any other property;(10)-2 “Interest Rate Futures Cleared Contract” means a Cleared Contract related toInterest Rate Futures Contract;(10)-3 “Interest Rate Futures Contract” means an Interest Rate Futures Contract set forthin Article 3.2.(4)-2 of the Securities and Similar Contracts Business Rules;(11)“IRS Clearing Fund” means Japanese yen Cash or Eligible Securities Collateraldeposited with JSCC by each Clearing Participant for the purpose set forth in Article
17.1;

(12)

“IRS Clearing Qualification” means a permission to become a JSCC’s counterparty
in a Cleared Contract in accordance with the Rules which may be granted orcancelled by JSCC;(13)“IRS Transaction” means an interest rate swap transaction which is an OTC
derivatives transaction prescribed in Article 2.22.(5) of the Financial Instruments
and Exchange Act;(13)-2 “Blended Rates Compression” means a process to conduct Compression in themanner prescribed by JSCC in accordance with the provisions of Article 53-2.
(13)-2-2 “Client Clearing” means a Clearing for a Customer which does not belong to thesame Corporate Group as its Clearing Broker;(13)-3 “Cross Margining Accepting Party” means a Clearing Participant which gives,
pursuant to the provisions of Article 84-2.2, to JSCC a notice of acceptance orrejection of an application for having Positions in JGB Futures Contracts or Interest
Rate Futures Contracts covered under Cross Margining submitted to JSCC
pursuant to the provisions of the Securities and Similar Contracts Business Rules(“Cross Margining Request”);

8

(13)-4 “Cross Margining Requestor” means a JGB Futures Clearing Participant whichmakes a Cross Margining Request to JSCC;(13)-5 “Cross Margining” means a scheme of calculating Required Initial Margin for
Positions in JGB Futures Contracts or Interest Rate Futures Contracts designatedby JSCC under the Rules3;(13)-6 “Cross Margined Interest Rate Futures Cleared Contract” means an Interest Rate
Futures Cleared Contract Positions in which are recorded on a Proprietary Accountor a Customer Account pursuant to the provisions of Article 84-4.3(13)-7 “Cross Margined JGB Futures Cleared Contract” means a JGB Futures Cleared
Contract Positions in which are recorded on a Proprietary Account or a Customer
Account pursuant to the provisions of Article 84-4.3;(13)-8 “Cross Margining Acceptance” means giving a notice of acceptance of Cross
Margining Request pursuant to the provisions of Article 84-4.2:(13)-9 “Cross Margining User” means a Clearing Participant or a Customer falling under
any of the items a. through d. below, and utilizing Cross Margining for its Positionsin JGB Futures Contracts or Interest Rate Futures Contracts on its book with respect
to whom the notification prescribed in Article 84-2 has been submitted to JSCC:a.

A JGB Futures Clearing Participant;b.

A Customer who requested brokerage of its JGB Futures Contracts or Interest
Rate Futures Contracts to a JGB Futures Clearing Participant;c.

A JGB Futures Non-Clearing Participant; ord.

A Customer who requested brokerage of its JGB Futures Contracts or Interest
Rate Futures Contracts to a JGB Futures Non-Clearing Participant.

(14)“Settlement Amount” means, in respect of a Cleared Contract, the amount of Cashto be paid or received between JSCC and a Clearing Participant (excluding thoseto be paid or received as IRS Clearing Fund, Initial Margin, Variation Margin andinterests on Variation Margin) or, if such Cash are paid or received on a net basis
pursuant to the provisions of Article 85.2 or Article 85-4.2 hereof among suchmonies, the amount so netted ;3

cf. Handling Procedures of IRS Clearing Business, Article 3-2.
9

(15)

“Failure of Settlement” means a default or anticipated default in the performance ofobligations arising as a result of a Cleared Contract or any other obligations under
the Rules in whole or in part by the due date thereof;(15)-2 “AUD Cleared Contract” means a Cleared Contract whose Notional Amount andsettlement currency are denominated in Australian dollars;(15)-3 “Listed Futures Position Transfer” means a process to have new claims andobligations related to JGB Futures Cleared Contracts and the like and new claims
and obligations related to Interest Rate Futures Cleared Contracts and the likeaccrue among JSCC, the JGB Futures Clearing Participant and the Cross
Margining User falling under the provisions of Article 2.1.(13)-9.b. to d. (and a JGB
Non-Clearing Participant which accepted a brokerage of JGB Futures Contracts fora person falling under Article 2.1.(13)-9.d.) and to pay or receive Cash and settle
claims and obligations in association therewith, in accordance with the provisionsof Article 94-3.

The claims and obligations related to JGB Futures Cleared

Contracts and the like means the claims and obligations related to JGB Futures
Cleared Contracts, a Clearing brokerage for JGB Futures Contracts and abrokerage for JGB Futures Contracts; and the same shall apply hereinafter, and theclaims and obligations related to Interest Rate Futures Cleared Contracts and thelike means the claims and obligations related to Interest Rate Futures Cleared
Contracts, a Clearing brokerage for Interest Rate Futures Contracts and abrokerage for Interest Rate Futures Contracts; and the same shall apply hereinafter;(15)-4“Listed Futures Successor Clearing Broker” means a JGB Futures Clearing
Participant that has assumed the claims and obligations arising as a result of the
Listed Futures Position Transfer.

(15)-5“JGB Futures Cleared Contract” means a Cleared Contract related to JGB Futures
Contract;(15)-6“JGB Futures Clearing Participant” means a JGB Futures Clearing Participant set
forth in Article 5.3 of the Securities and Similar Contracts Business Rules;(15)-7“JGB Futures Non-Clearing Participant” means a JGB Futures Non-Clearing

10

Participant set forth in Article 73-6.2 of the Securities and Similar Contracts
Business Rules;(15)-8“Listed Futures Backup Clearing Broker” means a JGB Futures Clearing Participant
who has been designated by a Cross Margining User in advance in accordancewith the provisions of Article 45-3 as a JGB Futures Clearing Participant to accept
Listed Futures Position Transfer in respect of the claims and obligations related to
the JGB Futures Cleared Contracts and the like and the claims and obligations
related to the Interest Rate Futures Cleared Contracts and the like when the claims
and obligations come into existence in accordance with the provisions of Article 845.1.

(15)-9“JGB Futures Contract” means a JGB Futures Contract set forth in Article 3.2.(3) of
the Securities and Similar Contracts Business Rules;(16)“Uniform International Standard” means the uniform international standard set forthin Article 1.4 of “Order Providing for the Categories, etc. Prescribed in Article 26,
Paragraph 2 of the Banking Act” (Ordinance of the General Administrative Agencyof the Cabinet and the Ministry of Finance No. 39, 2000), Article 1.4 of “Order
Providing for the Categories, etc. Prescribed in Article 26, Paragraph 2 of the
Banking Act Applied mutatis mutandis pursuant to Article 17 of the Long Term Credit
Bank Act” (Ordinance of the General Administrative Agency of the Cabinet and theMinistry of Finance No. 40, 2000), or Article 3.5 of “Order Providing for theCategories, etc. Prescribed in Article 26, Paragraph 2 of the Banking Act Appliedmutatis mutandis pursuant to Article 89, Paragraph 1 of Shinkin Bank Act”
(Ordinance of the General Administrative Agency of the Cabinet and the Ministry of
Finance No. 41, 2000);4(17)“Japanese Standard” means the standard in Japan set forth in Article 1.5 of “Order
Providing for the Categories, etc. Prescribed in Article 26, Paragraph 2 of the
Banking Act”, Article 1.5 of “Order Providing for the Categories, etc. Prescribed in
Article 26, Paragraph 2 of the Banking Act Applied mutatis mutandis pursuant to
Article 17 of the Long Term Credit Bank Act”, or Article 3.4 of “Order Providing for
the Categories, etc. Prescribed in Article 26, Paragraph 2 of the Banking Act
Applied mutatis mutandis pursuant to Article 89, Paragraph 1 of the Shinkin Bank

4

Uniform International Standard is a standard prescribed in Japan under Basel III.
11

Act”;(18)“Fixed Resources for Loss Recovery” means the First Tier IRS Settlement
Guarantee Reserve, the Second Tier IRS Settlement Guarantee Reserve and the
IRS Clearing Fund deposited with JSCC by each Clearing Participant, up to theSecond Tier Clearing Participant Cap, other than the Defaulting Clearing
Participant;(18)-2 “Compression” means a process to have Cleared Contract(s) terminated before itsscheduled Termination Date and have new Cleared Contract(s) simultaneously
established;(19)“Clearing” means execution of an IRS Transaction between JSCC as a principal
and each Clearing Participant who is a party to an Eligible IRS Transaction
pursuant to Article 49;(19)-2 “Shortfall in Margin Required to Clear” means, when the sum of the Initial Margin
Deposited Amount set forth in Article 66 and the amount of the Customer Buffer
allocated to the relevant Customer Account as of the time at which the notification
set forth in Article 54.1 related to the request for brokerage for clearing (including
the case where such provisions apply mutatis mutandis under Article 54-2.1) isgiven is less than the Margin Required to Clear set forth in Article 49, the amountequal to the difference between the Margin Required to Clear and the said sum.

(20)

“Substituted Initial Margin” means an Initial Margin deposited with JSCC by a
Clearing Broker from its own funds for and on behalf of itself and its Customers in
respect of a Customer’s Cleared Contract for which they act as the Clearing Broker;(20)-2“Member-Initiated Compression” means a process to conduct Compression in themanner prescribed by JSCC in accordance with the provisions of Article 53-2-3.

(21)“Net Capital” means,
for a Financial Instrument Business Operator, the amount of unfixed equity capitalset forth in Article 1,4,(2) of the Cabinet Office Ordinance Concerning Financial
Instruments Business Operator etc. (Cabinet Office Ordinance No. 52 of 2007);

12

for a Registered Financial Institution other than insurance company or shinkin bankhaving one or more overseas office, the amount of gross equity capital used for the
calculation of the non-consolidated gross capital adequacy ratio based on the
Uniform International Standard (in the case of a foreign bank, the amount of equity
capital used for the calculation of the non-consolidated capital adequacy ratio
under the applicable laws and regulations in its home country);
for a Registered Financial Institution other than insurance company having nooverseas office and a Registered Financial Institution which is a shinkin bankhaving one or more overseas office, the amount of equity capital used for the
calculation of the non-consolidated capital adequacy ratio based on the JapaneseStandard; andfor a Registered Financial Institution which is an insurance company, the amountof net assets;(22)“Capital-to-Risk Ratio” means the capital-to-risk ratio set forth in Article 46-6.1 of
the Financial Instruments and Exchange Act;

(23)

“Proprietary Account” means a proprietary transaction account set forth in Article
59.2;(23)-2 “Designated Market Operator” means a designated market operator set forth in
Article 3.2.(1) of the Securities and Similar Contracts Business Rules designated by
JSCC5;(23)-3 “Sydney Business Day” means a day on which banks are open for business in
Sydney, Australia and fund settlement in Australian dollars is performed;(24)“Clearing Broker” means a Clearing Participant who has entered into a Clearing
Brokerage Agreement with a Customer;(24)-2 “Position Transfer” means a process to have new claims and obligations related toa Proprietary Cleared Contract accrue between JSCC and the Clearing Participant
5cf. Handling Procedures of IRS Clearing Business, Article 3-3.
13and to pay or receive Cash and settle claims and obligations in association
therewith, in accordance with the provisions of Article 53-4.4 or a process to havenew claims and obligations related to Customer’s Cleared Contracts and Clearing
Brokerage Contracts accrue among JSCC, a Clearing Participant and a Customer,
and to pay or receive Cash and settle claims and obligations in association
therewith, in accordance with the provisions of Article 58-3.4, Article 94.6 or Article
94-2.2;(24)-3 “Successor Clearing Broker” means a Clearing Broker that has assumed the claims
and obligations arising as a result of the Position Transfer.
(24)-4 “Securities and Similar Contracts Business Rules” means the business rules
prescribed by JSCC for its securities and similar contracts clearing business;(25)“Margin” collectively means Initial Margin, Customer Initial Margin and Variation
Margin;(26)“Net Present Value” means the value calculated by discounting the future cashflows arising from an IRS Transaction to the present value according to the method
prescribed by JSCC6;(26)-2“Available Customer Buffer Amount at New Clearing” means an amount of the
Customer Buffer made available to a Customer intending to request a Clearing
Broker to act on its behalf, which is equal to the amount obtained by subtracting
the amount of the Customer Buffer already allocated to the relevant Customer
Account as of the time at which the notification set forth in Article 54.1 related to
the relevant request (including the case where such provisions apply mutatis
mutandis under Article 54-2.1) is given from the Customer Buffer Cap, or, if suchamount is more than the Customer Buffer Unallocated Balance, the amount ofsuch Customer Buffer Unallocated Balance;(27)“Customer” means a person who has entered into a Clearing Brokerage Agreementwith a Clearing Participant and submitted a letter of undertaking as prescribed in
Article 43.2 to JSCC, and who satisfies the requirements prescribed by JSCC7;67cf. Handling Procedures of IRS Clearing Business, Article 4.
cf. Handling Procedures of IRS Clearing Business, Article 5.
14

(28)

“Clearing Brokerage Contract” means a legal relationship between a Clearing
Broker and a Customer coming into effect as a result of each Clearing Brokeragein accordance with the Clearing Brokerage Agreement, which has the same
economic effect as the Customer’s Cleared Contract coming into effect as a resultof the said brokerage;(28)-2 “Clearing Brokerage Contract (Settlement Type)” means a contract for which
Variation Margin shall not be paid or received, but Mark-to-Market Difference shallbe paid or received pursuant to these Business Rules;(28)-3 “Clearing Brokerage Contract (Collateral Type)” means a contract for which Variation
Margin shall be paid or received pursuant to these Business Rules;(29)“Clearing Participant” means a person who holds an IRS Clearing Qualification;(30)“Clearing Participant Agreement” means an agreement between JSCC and a
Clearing Participant

in the form prescribed by JSCC 8 , which incorporates theterms of the Rules;(31)“Clearing Brokerage Agreement” means an agreement entered into between a
Customer and a Clearing Broker in the form prescribed by JSCC9, including any
agreements entered into between the Clearing Broker and a Customer inaccordance with such agreement, under which the Clearing Broker may accept theCustomer’s IRS Transactions for Clearing;(32)“Clearing Brokerage Original Transaction” means the original IRS Transaction thatexisted between a Customer and a Clearing Participant or another Customer forwhich the Customer requested Clearing via their Clearing Broker;(33)“Clearing Brokerage Account” means a clearing brokerage account as set forth in
Article 60.1;

(34)
8
9

“Cleared Contract” means an IRS Transaction between JSCC and a Clearing

cf. Handling Procedures of IRS Clearing Business, Article 6, as well as Exhibit Form 2.
cf. Handling Procedures of IRS Clearing Business, Article 7, as well as Exhibit Form 3.
15

Participant that comes into effect as a result of Clearing;(35)“Customer’s Cleared Contract” means a Cleared Contract on the Customer’s book
executed by a Clearing Broker according to a request of a Customer for Clearing
Brokerage;(35)-2 “Cleared Contract (Settlement Type)” means a Cleared Contract for which Variation
Margin shall not be paid or received, but Mark-to-Market Difference shall be paidor received pursuant to these Business Rules;(36)“Proprietary Cleared Contract” means a Cleared Contract executed by a Clearing
Participant on its proprietary book;(36)-2 “Cleared Contract (Collateral Type)” means a Cleared Contract for which Variation
Margin shall be paid or received pursuant to these Business Rules;(36)-3 “Mark-to-Market Difference” shall collectively refer to the Cash listed in the following
items:a.

Cash paid or received between JSCC and a Clearing Participant on each
JSCC Business Day to settle exposure related to the change in present
value prescribed in Article 61-2.1. (1);b.

Cash paid or received between JSCC and a Clearing Broker on each
JSCC Business Day to settle exposure related to the change in present
value prescribed in Article 61-2.1. (2); andc.

Cash paid or received between a Clearing Broker and its Customer oneach JSCC Business Day to settle exposure related to the change inpresent value prescribed in Article 61-2.1. (3);(36)-4 “Mark-to-Market Difference And Adjustment Amount” collectively means the Markto-Market Difference,and Adjustment Amount related to Mark-to-Market Difference;(36)-5 “Adjustment Amount related to Mark-to-Market Difference” means Cash as set forthin Article 83.2.1;(37)“Resources for Loss Recovery” means the Fixed Resources for Loss Recovery andthe Liquid Resources for Loss Recovery to be used in accordance with the Rules

16to recover the losses which JSCC may incur upon the Default of any Clearing
Participant.
(38)“First Tier IRS Settlement Guarantee Reserve” means an amount set aside by
JSCC in accordance with the Subordinate Rules 10 for the purpose of covering
losses arising from the Default of a Clearing Participant;(39)“Second Tier IRS Settlement Guarantee Reserve” means an amount set aside by
JSCC in accordance with the Subordinate Rules 11 for the purpose of covering
losses arising from the Default of a Clearing Participant;(40)“Second Tier Clearing Participant Cap” means the Required IRS Clearing Fundcontribution of each Clearing Participant as of the JSCC Business Day immediately
preceding the start date of the Default Settlement Period in which the Default
Determination Date in respect of the Defaulting Clearing Participant set forth in
Article 103.1 falls.

(41)“Third Tier Special Clearing Charge” means Japanese yen Cash paid by a Clearing
Participant to JSCC in accordance with the provisions of Article 105;

(42)

“Third Tier Special Clearing Charge Collateral” means Japanese yen Cashdeposited by a Clearing Participant with JSCC for the purpose described in Article
107.1.(1);(43)“Fourth Tier Special Clearing Charge” means Cash paid by a Clearing Participant
to JSCC in accordance with the provisions of Article 106;(44)

“Fourth Tier Special Clearing Charge Collateral” means Cash deposited by a
Clearing Participant with JSCC for the purpose described in Article 107.1.(2);(45)“Eligible Securities Collateral” mean the securities specified by JSCC12 that may
be deposited as the IRS Clearing Fund, Initial Margin, Customer Initial Margin or

10

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 3.
11
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 4.
12cf. Handling Procedures of IRS Clearing Business, Article 8.
17

Default Contingent Margin;(45)-2 “Position” means “Position” as defined in Article 45-2.2 of the Securities and Similar
Contracts Business Rules;(46)“Other Clearing Business” means the Clearing Service and businesses incidental
thereto carried out by JSCC excluding the IRS Clearing Businesses;(47)“Eligible IRS Transaction” means an IRS Transaction between Clearing
Participants which satisfies the requirements prescribed by JSCC13;(48)

Deleted;(49)“JSCC Business Day” means any day other than a Business Holiday14;(50)“Initial Margin” means Japanese yen Cash or Eligible Securities Collateraldeposited with JSCC by a Clearing Participant or a Customer for the purpose of
securing the obligations prescribed in Article 61.1.(1);(51)“Special Clearing Charge” collectively refers to the Third Tier Special Clearing
Charge and the Fourth Tier Special Clearing Charge;(52)“Special Clearing Charge Collateral” collectively refers to the Third Tier Special
Clearing Charge Collateral and the Fourth Tier Special Clearing Charge Collateral;(52)-2 “Per Trade Compression” means a process of conducting Compression through amethod prescribed by JSCC in accordance with the provisions of Article 53;(53)”Transaction Side” means a distinction of a leg under an IRS Transaction set forth
in a. or b. below in accordance with the classification of IRS Transactions set forthin each such item:a.

IRS Transaction in which both parties are obliged to pay Floating Rates: distinctionof each side under such IRS transaction in which both parties are obliged to pay

1314

cf. Handling Procedures of IRS Clearing Business, Article 9.
cf. IRS Clearing Business Rules, Article 5.
18

Floating Rates pursuant to Confirmation or the Rules, orb.

IRS Transaction other than the above: distinction between Floating Rate Payer orFixed Rate Payer(54)“Intraday Margin” means Initial Margin to be deposited pursuant to Article 67
through Article 70 hereof.

(54)-2“Available Customer Buffer Amount at Intraday Margin Calculation” means anamount of the Customer Buffer made available for an allocation to the relevant
Customer Account at the time of calculation of the Required Intraday Margin for
the Customer set forth in Article 69.1, which is equal to the amount obtained bysubtracting the amount of the Customer Buffer already allocated to the relevant
Customer Account as of the time of the Intraday Margin calculation from theCustomer Buffer Cap, or, if such amount is more than the Customer Buffer
Unallocated Balance, the amount of such Customer Buffer Unallocated Balance;(54)-2-2 “New York Business Day” means any day on which banks are open for business in
New York City, U.S.A. and fund settlement in United States dollars is performed:(54)-3 (Deleted)(54)-4 “Non-hedge Account” means a classification of Customer Account designated as
non-hedge account pursuant to the provisions of Article 59.7.
(55)“Default Contingent Margin” means Japanese yen Cash or Eligible Securities
Collateral to be deposited with JSCC by a Clearing Participant for the purpose of
securing the obligations set forth in Article 108.1 hereof.

(56)“Default Settlement Period” means a period of 30 days from the Default
Determination Date with respect to the Default of such Clearing Participant, except
in the case where another Default is determined during an existing Default
Settlement Period, in which case, the Default Settlement Period shall be extended
to the day 30 days after the Default Determination Date for such subsequently
occurred Default;

19

(57)

“Default Auction” means the Default Auction prescribed in Article 95;(58)“Defaulting Clearing Participant” means a Clearing Participant determined by JSCC
to be in Default, and when Defaulting Clearing Participant is acting for a Customer,
it may also be referred to as “Defaulting Clearing Broker”;(59)“Default” means any of the following events and actions:a.

Become, or be likely to become, unable to pay (as prescribed in Article 2.11 of the
Bankruptcy Act (Act No. 75 of 2004)) or to become insolvent with excess liabilities(as prescribed in Article 16.1 of the Bankruptcy Act);b.

Become subject to suspension of transactions by a clearinghouse or an Electronic
Monetary Claim Recording Institution defined in Article 2.2 of the Electronically
Recorded Monetary Claims Act (Act No. 102 of 2007);c.

Suspend its payment (meaning suspension of payment by which insolvency ispresumed pursuant to the provisions of Article 15.2 of the Bankruptcy Act) or
occurrence of similar events;d.

Dissolve itself (excluding dissolution due to a merger);e.

Petition for commencement of bankruptcy proceedings, commencement of
rehabilitation proceedings, commencement of reorganisation proceedings orcommencement of special liquidation or acknowledgement of foreign insolvency
proceedings is filed (including the petitions equivalent thereto under any foreignlaws and regulations);f.

An event which causes commencement of bankruptcy proceedings, rehabilitation
proceedings, reorganisation proceedings or special liquidation (including thatequivalent thereto under any foreign laws and regulations) has occurred; org.

Only with respect to Clearing Participants whose Cross Margined JGB Futures
Cleared Contracts or Cross Margined Interest Rate Futures Cleared Contracts arerecorded on their Clearing Participant Accounts (other than those which also are
JGB Futures Clearing Participants), an acceleration of obligations under an20

Agreement for Setting up Futures/Options Trading Account prescribed by the
Designated Market Operator for brokerage of JGB Futures Contracts or under aContract for Commissioning Clearance Relating to JGB Futures, Etc. Contracts
concluded for brokerage of Clearing pursuant to the provisions of Article 39 of the
Securities and Similar Contracts Business Rules;(60)“Default Determination Date” means the day on which JSCC determines theDefault of a Clearing Participant;(60)-2 “Backup Clearing Broker” means a Clearing Broker (limited to the one who has
obtained an approval set forth in Article 12-2) who has been designated by a
Customer in advance in accordance with the provisions of Article 45-2 as a Clearing
Broker to succeed to the claims and obligations related to the Cleared Contracts(Customer Account) and the Customer Clearing Contracts executed on the accountof the relevant Customer when a Default is acknowledged with respect to theClearing Broker who then is providing the Customer Clearing to the relevant
Customer.
(61)(Deleted);(62)“Non-resident” means a non-resident prescribed in Article 6.1.(6) of the Foreign
Exchange and Foreign Trade Act (Act No. 228 of 1949);(62)-2 “USD Cleared Contract” means a Cleared Contract whose Notional Amount andsettlement currency are denominated in United States dollars;(62)-3 “Hedge Account” means a classification of Customer Account notified as hedge
account pursuant to the provisions of Article 59.7.
(63)“Variation Margin” shall collectively refer to the Cash listed in the following items:a.

The Cash received and paid between a Clearing Participant and JSCC on each
JSCC Business Day for the purpose of securing the obligations listed in Article
61.1.(3);b.

The Cash received and paid between a Clearing Broker and JSCC on each JSCC

21

Business Day for the purpose of securing the obligations listed in Article 61.1.(4);andc.

The Cash received and paid between a Clearing Broker and a Customer on each
JSCC Business Day for the purpose of securing the obligations listed in Article
61.1.(5).

(63)-2 “Cash Settlement Amount” means Variation Margin, interest on Variation Margin,amount to be settled and other Cash to be paid or received under Cleared
Contracts.
(64)“Legal Entity” means a corporate body, an association or any other entities
equivalent thereto (including overseas entities equivalent thereto);(65)“Rules” shall collectively refer to the Business Rules, the Subordinate Rules andDocuments Setting Forth Handling of ISDA-Based Documents;(66)“Liquid Resources for Loss Recovery” means the Third Tier Special Clearing
Charge and the Fourth Tier Special Clearing Charge.

(67)“Consolidated Capital-to-Risk Ratio” means the consolidated capital-to-risk ratio
set forth in the Article 2 of “Establishment of Criteria for Judgment on the Adequacyof Equity Capital of a Special Financial Instruments Business Operator and its
Subsidiary Entities in Light of Assets, etc. Held by Such Special Financial
Instruments Business Operator and its Subsidiary Entities”(Financial Services
Agency Public Notice No. 128 of 2010);(68)“Officer” means an officer prescribed in Article 329 of the Company Act (Act No.86
of 2005) (in respect of a Legal Entity other than a limited company15, a person who
is treated as equivalent to an officer of a limited company under the applicable laws
and regulations);(68)-2 “EUR Cleared Contract” means a Cleared Contract whose Notional Amount andsettlement currency are denominated in Euro.

15

Kabushiki Kaisha under the Company Act.
22

(69)

“ISDA” means International Swaps and Derivatives Association, Inc.;(70)“Documents Setting Forth Handling of ISDA-Based Documents” mean the
documents prescribed by JSCC by notification to Clearing Participants or public
notice in connection with the matters necessary to apply the ISDA Master
Agreement and the ISDA Definitions to a Cleared Contract and any other mattersin accordance with the provisions of the Subordinate Rules16;(71)“ISDA Master Agreement” means the 2002 ISDA Master Agreement published by
ISDA in 2003 (including any changes, amendments or supplements in writing
published by ISDA and specified by JSCC) which shall be applied to Cleared
Contracts;(72)“ISDA Definitions” means the 2021 ISDA Interest Rate Derivatives Definitions
published by ISDA in 2021 (including any changes, amendments or supplements
published by ISDA and specified by JSCC17);(72)-2 “JSCC-Initiated Compression” means a process to conduct Compression of a
package of Cleared Contracts related to two or more Clearing Participants or
Customers as prescribed by JSCC in accordance with the provisions of Article 532-4;(73)“TARGET Settlement Day” means any day on which Trans-European AutomatedReal-Time Gross Settlement Express Transfer System, a Euro fund settlement
system, is in operation and a fund settlement in Euro is performed.

2

The terms listed in the “Term” column in the table attached hereto as the Annex

among the terms used in the Rules, shall refer to the corresponding terms listed in the “ISDADefinitions” column as defined in the relevant section of the “ISDA Definitions” stated in the“Section” column.
3

If there is a discrepancy between the meaning of any term used in the Financial

Instruments and Exchange Act or the ISDA Definitions and the Rules, the meaning in theRules shall prevail.
16
17

cf. Handling Procedures of IRS Clearing Business, Article 10.
cf. Handling Procedures of IRS Clearing Business, Article 11.
23Article 3. Clearing Service.
The businesses to be carried out by JSCC shall be the Financial Instruments
Obligation Assumption Service for IRS Transactions under the Rules as well as

thebusinesses related thereto as prescribed in Article 156-6.1 of the Financial Instruments
and Exchange Act.
Article 4. Subject Transaction for Clearing
The transactions subject to IRS Clearing Business carried out by JSCC (“Subject
Transaction for Clearing”) shall be Eligible IRS Transactions.
Article 5. Business Holiday
1

The Business Holidays of JSCC shall be as follows:(1)

Sundays;(2)

National holidays prescribed by the Act on National Holidays (Act No. 178 of

1948);(3)

Saturdays; and(4)

2 January, 3 January and 31 December.

2

JSCC may establish extraordinary holidays, only when and to the extent that

JSCC deems it necessary to suspend the entire IRS Clearing Business for one full day
or longer due to Acts of God, social turmoil such as war or riot, complete outage ofinfrastructure such as electricity or telecommunications, an order of a court or otherpublic institutions, or any other unavoidable reason.
3

JSCC may temporarily suspend all or a part of the IRS Clearing Business, or

carry out all or a part of the IRS Clearing Business outside of its ordinary businesshours, only when and to the extent that JSCC deems it necessary to secure proper
execution of the IRS Clearing Business.
4

In the cases of the Paragraphs 2 and 3, JSCC shall notify all Clearing

Participants to that effect in advance.
Article 6. Notification to Other Clearing Participant or Other Customer

24

1

When JSCC receives from a Clearing Participant or a Customer any

notification that is to be given to other Clearing Participant or other Customer inaccordance with the Rules, such notification shall be deemed to have been received by
JSCC on behalf of the Clearing Participant or Customer intended to receive such
notification.
2

JSCC shall, by the method prescribed by JSCC18, take measures to let the

Clearing Participant or the Customer know the existence of the declaration described in
Paragraph 1 and the details thereof.
Article 7. Eligible Securities Collateral1

The prices used to determine the value of Eligible Securities Collateral shall be

specified by JSCC19; provided that JSCC may change such prices temporarily when
JSCC deems it necessary for proper valuation, including without limitation in the eventof a significant change to market price.
2

JSCC shall determine how the Eligible Securities Collateral shall be depositedand other necessary matters in respect of Eligible Securities Collateral.20

Chapter 2 Clearing Participant
Section 1 Acquisition of IRS Clearing Qualification (Articles 8 – 12)
Article 8. Application for and Approval of IRS Clearing Qualification
1

A person listed below may apply to JSCC for an IRS Clearing Qualificationaccording to the procedures as prescribed by JSCC21:(1)

Financial Instruments Business Operator registered to engage in the businessin respect of the acts listed in Article 28.1.(2) of the Financial Instruments andExchange Act; or(2)Registered Financial Institution.

18

cf. Handling Procedures of IRS Clearing Business, Article 12.
cf. Handling Procedures of IRS Clearing Business, Article 13.1.
20
Method of determination is specified in Handling Procedures, Article 13.2.
21
cf. Handling Procedures of IRS Clearing Business Article 14.
19

25

2

When an applicant (“Applicant”) files an application for IRS Clearing

Qualification in accordance with Paragraph 1 and, as a result of the examination set
forth in Article 9 below, JSCC deems that the Applicant is sufficiently qualified forsound operation of the Clearing Business, JSCC shall approve the Applicant’s IRS
Clearing Qualification.
3

Notwithstanding the provisions of Paragraph 1, a Specified Successor

Financial Institution (as defined in Article 126-34.3.(5) of the Deposit Insurance Act (ActNo. 34 of 1971)) may apply to JSCC for an IRS Clearing Qualification according to theprocedures as prescribed by JSCC. If such application is made, JSCC may grant IRS
Clearing Qualification to such Applicant.
4

In the approval described in Paragraphs 2 and 3, the date of the IRS Clearing

Qualification (referred to as the “Qualification Date” in this Section) shall be stated.
5

An Applicant intending to rely on a Parental Guarantee (referred to as“Guaranteed Applicant” in this Section) shall submit the documentation relating to such
Parental Guarantee in the form prescribed by JSCC22 or, at JSCC’s discretion, asubstitute form that is substantially the same, when filing the application for IRS
Clearing Qualification in accordance with Paragraph 1.
Article 9. Requirements for IRS Clearing Qualification
1

An examination shall cover the below listed matters pertaining to Applicant,examination viewpoints that are prescribed by JSCC in a separate notification or apublic notice and other related matters as deemed necessary by JSCC for thecontinued security of the IRS Clearing Business shall be conducted on examination
review points and confirmation points:(1)

Management Structure

Applicant must have a sound management structure, including not being controlled or
influenced by a person deemed inappropriate by JSCC from the viewpoint of thecontinued operation and good reputation of the IRS Clearing Business;(2)
22

Financial Basiscf. Handling Procedures of IRS Clearing Business, Article 3, as well as Exhibit Form 1.
26

Depending upon the category into which Applicant falls, Applicant shall satisfy therequirements prescribed in a. or b. below and demonstrate adequate continuing
financial stability from the Qualification Date:a.

Financial Instruments Business Operator:(a)Applicant’s Net Capital is not less than USD 50 million(50,000,000) or JPY 5 billion (5,000,000,000), whichever is lower;(b)

Applicant’s Capital-to-Risk Ratio is more than 200% or 250% if
JSCC deems it necessary in light of its creditworthiness;(c)

If Applicant is a Special Financial Instrument Business Operator
that has filed the notification prescribed in Article 57-5.2 of the
Financial Instruments and Exchange Act ( “Special Operator”),
Applicant’s Consolidated Capital-to-Risk Ratio is more than
200% or 250% if JSCC deems it necessary in light of Applicant’s
creditworthiness; and(d)b.

Applicant is sufficiently creditworthy23.

Registered Financial Institution:(a)Applicant’s Net Capital is not less than USD 50 million(50,000,000) or JPY 5 billion (5,000,000,000), whichever is lower;(b)

If Applicant is a Registered Financial Institution subject toUniform International Standards, it must fulfil the conditions
specified in (i) to (iii) below or, in the case of a foreign bank,equivalent conditions under the applicable laws and regulationsin its country of incorporation:

23

Sufficiency of creditworthiness will be judged based on criteria set by JSCC in a notification
or a public notice. It is available at; http://www.jscc.co.jp/en/data/en/2013/08/1GuidelinesConcerning-Credit-Standing-of-Clearing-Participants-etc.-in-IRS-Clearing-Business1.pdf
27

(i)

Applicant’s non-consolidated or consolidated Common
Equity Tier 1 ratio (or non-consolidated or consolidated
common investment Tier 1 ratio for an institution which
operates with investments from its members) is more than
4.5% (or 5.625% if JSCC deems it necessary in light of its
creditworthiness);(ii)

Applicant’s non-consolidated or consolidated Tier 1 ratio is
more than 6% (or 7.5% if JSCC deems it necessary in lightof its creditworthiness); and(iii)

Applicant’s non-consolidated or consolidated Total Capitalratio is more than 8% (or 10% if JSCC deems it necessary
in light of its creditworthiness);(c)

If Applicant is a Registered Financial Institution other than thosesubject to Uniform International Standards, foreign banks andinsurance companies (“Financial Institution subject to JapaneseStandard”), its non-consolidated or consolidated capital
adequacy ratio is more than 4% (or 5% if JSCC deems it
necessary in light of its creditworthiness) under the JapaneseStandard;(d)

If Applicant is an insurance company which is a Registered
Financial Institution, its non-consolidated or consolidated
Solvency Margin Ratio is more than 400% (or 500% if JSCC
deems it necessary in light of its creditworthiness); and

(e)
(3)

Applicant is sufficiently creditworthy24.

Business Capability:

24

Sufficiency of creditworthiness will be judged based on criteria set by JSCC in a notification
or a public notice. It is available at; http://www.jscc.co.jp/en/data/en/2013/08/1GuidelinesConcerning-Credit-Standing-of-Clearing-Participants-etc.-in-IRS-Clearing-Business1.pdf
28

a.

Applicant has capability to settle Cleared Contracts, manage risk,
comply with laws and regulations, sanctions imposed by administrative
agencies in accordance with laws and regulations, and the Rules; andb.

Applicant maintains a business capability which enables it to participate
in the procedures for the liquidation of a defaulting Clearing Participant’s
Cleared Contracts. Applicant shall be deemed to fulfil this requirement if
another person meeting the qualifications prescribed by JSCC25 shallact on its behalf in the liquidation of such Cleared Contracts asprescribed by JSCC26.

2

For a Guaranteed Applicant, an examination shall be conducted, depending

upon the category into which the Guaranteed Applicant falls, in lieu of Paragraph 1.(2),
to determine whether the Guaranteed Applicant satisfies the requirements prescribedin the below items and demonstrates adequate financial stability from the Qualification
Date:
(1)

Financial Instruments Business Operatora.

The Net Capital of the Guaranteed Applicant is not less than USD 50
million (50,000,000) or JPY 5 billion (5,000,000,000), whichever is lower,
and the Net Capital of its Parent Company providing Guaranteed
Applicant’s Parental Guarantee, or its equivalent if the Parent Company
providing Parental Guarantee is neither a Financial Instruments
Business Operator nor a Registered Financial Institution, is not less than
USD 50 million (50,000,000) or JPY 5 billion (5,000,000,000), whicheveris lower;If the Parent Company providing the Guaranteed Applicant’s Parental
Guarantee also provides Parental Guarantee to one or more other
Clearing Participants, the Parent Company’s Net Capital must not beless than the amount obtained by multiplying USD 50 million(50,000,000) or JPY 5 billion (5,000,000,000), whichever is lower, by the
number of the Clearing Participants guaranteed by that Parent Company

25
26

cf. Handling Procedures of IRS Clearing Business, Article 5-2.1.
cf. Handling Procedures of IRS Clearing Business, Article 5-2.2.
29

or, if the Parent Company itself is a Clearing Participant, the number ofthe guaranteed Clearing Participants plus one;b.

The Guaranteed Applicant satisfies the requirements of Paragraph 1.(2).
a.(b) and (c) or,
Its Parent Company satisfies the requirements of Paragraph 1.(2).a.(b)and (c) or Paragraph 1.(2).b.(b) to (d), or equivalent requirements, if the
Parent Company providing Parental Guarantee is neither a Financial
Instruments Business Operators nor a Registered Financial Institution.
For this purpose, the satisfaction of the requirements related tocreditworthiness shall be judged by reference to the creditworthiness of
the Parent Company; andc.
(2)

The Parent Company is sufficiently creditworthy.

Registered Financial Institutiona.

Applicant’s Net Capital is not less than USD 50 million (50,000,000) or
JPY 5 billion (5,000,000,000), whichever is lower, and the Net Capital of
its Parent Company providing Parental Guarantee, or its equivalent if the
Parent Company providing Parental Guarantee is neither a Financial
Instruments Business Operator nor a Registered Financial Institution, is
not less than USD 50 million (50,000,000) or JPY 5 billion(5,000,000,000), whichever is lower;
If a Parent Company provides Parental Guarantee to one or more other
Clearing Participants, the Parent Company’s Net Capital must not beless than the amount obtained by multiplying USD 50 million(50,000,000) or JPY 5 billion (5,000,000,000), whichever is lower, by the
number of the Clearing Participants guaranteed by that Parent Company
or, if the Parent Company itself is a Clearing Participant, the number ofthe guaranteed Clearing Participants plus one;b.

Guaranteed Applicant satisfies the requirements of Paragraph1.(2).b.(b), or,30

Its Parent Company providing Parental Guarantee satisfies therequirements of Paragraph 1.(2).a.(b) and (c) or Paragraph 1.(2).b.(b) to(d) of, or equivalent requirements if the Parent Company providing
Parental Guarantee is neither a Financial Instruments Business Operator
nor a Registered Financial Institution.
For this purpose, the satisfaction of the requirements related tocreditworthiness shall be judged by reference to the creditworthiness of
the Parent Company; andc.
3

The Parent Company must be sufficiently creditworthy.

Any changes and other necessary matters in relation to the outsourcing set

forth in Article9.1.(3).b. shall be prescribed by JSCC27.
Article 10. Completion of IRS Clearing Qualification Application
1

When JSCC has approved an Applicant’s IRS Clearing Qualification pursuant

to the provisions of Article 8.2, the Applicant shall deposit IRS Clearing Funds andfollow the other procedures as required by JSCC28 on or before the JSCC Business
Day immediately preceding the Qualification Date.
2

When the Applicant described in Paragraph 1 fails to complete the proceduresprescribed in Paragraph 1 on or before the JSCC Business Day immediately preceding
the Qualification Date, its application for IRS Clearing Qualification shall be deemed tohave been withdrawn.
3

When JSCC grants IRS Clearing Qualification pursuant to Article 8.3, theApplicant shall deposit IRS Clearing Funds and follow other procedures as required by
JSCC on or before the date designated by JSCC.
Article 11. Execution of Clearing Participant Agreement27
28

cf. Handling Procedures of IRS Clearing Business, Article 5-3.
cf. Handling Procedures of IRS Clearing Business, Article 15
31

The Applicant prescribed in Article 10.1 or 10.3 shall enter into the Clearing Participant
Agreement with JSCC in the form prescribed by JSCC29 on or before the Qualification
Date.
Article 12. Date of IRS Clearing Qualification
1

When an Applicant has completed the procedures set forth in Article 10.1 orthose procedures set forth in Article 10.3 and entered into the Clearing Participant
Agreement pursuant to Article 11, JSCC shall grant the IRS Clearing Qualification to
the Applicant on the Qualification Date. When the Applicant is granted the IRS
Clearing Qualification pursuant to Article 10.3, the provisions of this paragraph shallapply only for the procedures which JSCC requires the Applicant to follow by the
Qualification Date.
2

When JSCC grants the IRS Clearing Qualification to Applicant in accordancewith Paragraph 1, JSCC shall promptly notify other Clearing Participants and make apublic announcement to that effect.
Section 2 Client Clearing Authorization (Articles 12-2)
Article 12-2.
1

Client Clearing Authorization

When a Clearing Participant or an Applicant intends to undertake Client

Clearing, it must apply to JSCC through the application procedures prescribed by
JSCC30 and obtain an authorization from JSCC in advance.
2

Upon receipt of the application set forth in Paragraph 1, JSCC shall determine

whether the applicant has the capability to settle Cleared Contracts, manage risk andavoid conflicts of interest related to Client Clearing by checking points separately
prescribed by JSCC in a notification or a public notice. JSCC shall give an
authorization to handle Client Clearing if it determines that such Clearing Participant
has the requisite business capability.

29
30

cf. Handling Procedures of IRS Clearing Business, Article 6, as well as Exhibit Form 2.
cf. Handling Procedures of IRS Clearing Business, Article 15-2.
32

3

Notwithstanding the provisions of Paragraph 2, when a Specified Successor

Financial Institution applies for the authorization under Paragraph 1, JSCC may grant
the authorization to handle Client Clearing to such Applicant.
4

If JSCC grants the authorization set forth in Paragraphs 2 and 3, it shallpromptly notify other Clearing Participants and make a public announcement to that
effect.
Section 3 Obligations of Clearing Participants (Articles 13 – 21)
Article 13. Clearing Participant Representative
1

A Clearing Participant shall designate its representative director or

representative executive officer31, or in case of a foreign Clearing Participant its
representative in Japan, as its IRS Clearing Business representative and notify JSCC
of such designation in advance in the manner prescribed by JSCC32.
2

Only the Clearing Participant representative of whom JSCC is so notified may

represent the Clearing Participant to JSCC; provided, however, that for routine
operations, a Clearing Participant may register a person(s) to act within a limited scope
defined by said Clearing Participant in advance.
Article 14. Person in Charge of Settlement Operation
A Clearing Participant shall appoint a person in charge of supervising the settlement ofCleared Contracts from among its Officers and employees, and notify JSCC of such
person pursuant to the Subordinate Rules33.
Article 15. Control or Influence by Officers or Other Persons
1

When JSCC regards an Officer or other person as having Control or Influence

over a Clearing Participant that is inappropriate for a sound operation of Clearing
Business from JSCC’s perspective, following consultation with the Clearing Participant,
JSCC may request changes to the relationship by providing the Clearing Participant
with an explanation of its view; provided, however, that the Clearing Participant may
submit a written statement in lieu of such consultation.
31

The officer who represents a company under the Companies Act of Japan.
cf. Handling Procedures of IRS Clearing Business, Article 16.
33
cf. Handling Procedures of IRS Clearing Business, Article 16.
32

33

2

The procedures for the consultation described in Paragraph 1 shall beseparately prescribed by JSCC34.
3

When the Clearing Participant refuses to respond to the consultation

described in Paragraph 1 without justifiable grounds, JSCC may request changes
prescribed in Paragraph 1 without consultation.
4

When the Clearing Participant considers that the request for changes as set

forth in Paragraph 1 is unreasonable, the Clearing Participant may raise an objection inwriting to JSCC by presenting the reason therefor within 10 days after the receipt of thenotice of the request for changes.
5Upon receipt of the objection set forth in Paragraph 4, JSCC shall convene aboard meeting as soon as possible.
6

If at the board meeting held in accordance with the provisions of Paragraph 5,

it is considered appropriate to modify or withdraw the request for changes set forth inParagraph 1, said request for changes shall be immediately modified or withdrawn.
Article 16. Payment of Fees by Clearing Participant
A Clearing Participant shall pay the fees prescribed in the Subordinate Rules35 to
JSCC pursuant to such Subordinate Rules.
Article 17. Deposit of IRS Clearing Fund
1

A Clearing Participant shall deposit its IRS Clearing Fund with JSCC pursuant

to the Subordinate Rules36 in order to secure any and all obligations owed by such
Clearing Participant to JSCC in respect of the IRS Clearing Business, including theobligations to be borne by such Clearing Participant to recover losses incurred by
JSCC due to a Default of one or more other Clearing Participants and the losses
arising upon such Default in relation to claims and obligations which come into

34

cf. Handling Procedures of IRS Clearing Business, Article 17.
Rules on Fees for IRS Clearing Business.
36
Rules on Required IRS Clearing Fund. For method of deposit, see also Handling Proceduresof IRS Clearing Business, Article 18.
35

34

existence between JSCC and the Clearing Participant pursuant to the provisions ofArticle 84-5.1.
2

When the deposited balance of the IRS Clearing Fund, or, if all or a part of thedeposited IRS Clearing Fund has been used to recover losses incurred by JSCC in
accordance with the Rules following the Default of another Clearing Participant, thebalance of the IRS Clearing Fund remaining thereafter is less than the required amountof such IRS Clearing Fund prescribed in the Subordinate Rules37 ( “Required IRS
Clearing Fund”), the Clearing Participant shall deposit with JSCC an amount at least
equal to such shortfall by 2:00 p.m. on the JSCC Business Day immediately following
the day on which such shortfall occurs.
3

When the deposited balance of the IRS Clearing Fund, or, if all or a part of thedeposited IRS Clearing Fund has been used to recover losses incurred by JSCC in
accordance with the Rules upon a Default of another Clearing Participant, thedeposited balance of the IRS Clearing Fund remaining thereafter, exceeds theRequired IRS Clearing Fund, the Clearing Participant may claim the return of anamount up to the excess amount.
4

JSCC may apply the IRS Clearing Fund, remaining after deducting costs

required for conversion of Cash into another currency and after the payment of cost ofa liquidation of Eligible Securities Collateral, to the performance of the obligations set
forth in Paragraph 1 hereof in accordance with the Rules
5

Deposits of IRS Clearing Fund shall be deemed to be deposits for

consumption (shohi kitaku) for collateral purpose in the case of the IRS Clearing Fundin the form of Cash; and loans for consumption (shohi taishaku) free of charge forcollateral purpose in the case of the IRS Clearing Fund in the form of Eligible Securities
Collateral.
6

Notwithstanding the provisions of the Civil Code (Act No. 89 of 1986) and theCommercial Code (Act No. 48 of 1899), a Clearing Participant may request return of
the IRS Clearing Fund or make any other request only as prescribed in the Rules
Article 18. Limits of Liability
37

Rules on Required IRS Clearing Fund, Article 2.
35

JSCC shall not be liable to indemnify a Clearing Participant or a Customer for damages
suffered by it in the course of its business operation in relation to JSCC’s IRS Clearing
Business, other than damages caused by a failure to perform obligations arising from
Cleared Contracts and other damages separately prescribed by JSCC38, unless there
is wilful misconduct or gross negligence on the part of JSCC.
Article 19. Notifiable Matters
When a Clearing Participant or its Parent Company providing a Parental Guarantee tosaid Clearing Participant intends to carry out any of the following actions, the Clearing
Participant shall notify JSCC in advance pursuant to the Subordinate Rules39, provided
that if prior notification is impracticable or extremely difficult for legal, regulatory orother reasons, such notification shall be submitted promptly following the action:(1)

Discontinuance of its business, which is in the case of a Financial Instruments
Business Operator, the business set forth in Article 28.1.(2) of the Financial
Instruments and Exchange Act; and in the case of a Registered Financial
Institution, is the business which required registration under the Financial
Instruments and Exchange Act;

(2)

A merger in which the Clearing Participant is merged into another company
and ceases to exist, or a merger in which the Clearing Participant merges withanother company and establishes a new company;(3)

Dissolution of the Clearing Participant for any reason other than merger or
decision to commence bankruptcy proceedings;(4)

Succession of all or a part of the business of the Clearing Participant toanother company due to a demerger, only if such demerger involves thebusinesses related to IRS Transactions: the same shall apply in this Article19,
Article 24, Article 27-4, Article 28.7, Article 40, Article 40-2, Article 40-3 andArticle 40-4;

(5)

38
39

Transfer of all or a part of its business;cf. Handling Procedures of IRS Clearing Business, Article 19.
cf. Handling Procedures of IRS Clearing Business, Article 16.
36

(6)

A merger in which the Clearing Participant becomes a surviving company but
only if such a merger involves the businesses related to IRS Transactions;(7)

Succession of all or a part of the business from another company resulting
from a demerger;(8)

Acquisition of all or a part of business;(9)

Change in the trading name or company name, including changes to the
trading name or company name in English; and(10)

Change of address of its headquarters or principal office.

Article 20. Matters to be Reported
When any other events relating to Clearing Participants and prescribed by JSCC40
occur, the Clearing Participant shall immediately report the details thereof to JSCC.
Article 21. Inspection of Clearing Participant
1

To the extent that JSCC considers necessary for the continued operation of

the IRS Clearing Business considering the impact of the below listed items relating to a
Clearing Participant on IRS Clearing Business and other factors, JSCC may requestthat the Clearing Participant file a report or submit documents to which JSCC may referin order to gain an understanding of the status of the business or assets of the Clearing
Participant or guaranteed Clearing Participant’s Parent Company providing Parental
Guarantee, or may have its employees inspect the Clearing Participant’s business,
assets, books, documents, or other evidences:(1)

Status of a Clearing Participant’s compliance with the Rules;(2)

Financial conditions of a Clearing Participant; and(3)

Certainty of the performance of the Clearing Participant’s obligations owed to
JSCC.

40

cf. Handling Procedures of IRS Clearing Business, Article 20.
37

For the purpose of Items (2) and (3) above, the reference to the Clearing Participant
shall include a Parent Company providing a Parental Guarantee, if any.
2

Matters necessary for the inspection set forth in Paragraph 1 shall beprescribed in the Subordinate Rules41.
Section 4 Voluntary Renunciation of IRS Clearing Qualification (Article 22 – 27)
Article 22. Application to Renounce IRS Clearing Qualification
1

In order to renounce its IRS Clearing Qualification, a Clearing Participant shalladvise JSCC of the intended renunciation in the manner prescribed by JSCC42.
2

When JSCC receives the advice pursuant to Paragraph 1, JSCC shall notify

other Clearing Participants and promptly make a public announcement to that effect.
Article 23. Renunciation of IRS Clearing Qualification
1

If a Clearing Participant advises JSCC of its intention to renounce its IRS

Clearing Qualification pursuant to Article 22.1, such renunciation shall become effectiveat the later of the time designated by JSCC43 on the 30th day after such advice and thetime by which all outstanding Cleared Contracts to which such Clearing Participant is aparty have been cancelled; provided that if the advice of intent to renounce its IRS
Clearing Qualification is in the course of a Default Settlement Period or a Default
Settlement Period commences during the period between the date of such advice andthe date of renunciation of the IRS Clearing Qualification that would otherwise become
effective, such renunciation shall become effective at the later of the time designatedby JSCC on the last day of the Default Settlement Period and the time by which all
outstanding Cleared Contracts to which such Clearing Participant is a party have beencancelled.
2

When a Clearing Participant renounces its IRS Clearing Qualification pursuant

to the provisions of Paragraph 1, JSCC shall notify other Clearing Participants andmake a public announcement of such renunciation.

41

cf. Rules on Inspection of Clearing Participant in relation to IRS Clearing Business.
cf. Handling Procedures of IRS Clearing Business, Article 21.
43
cf. Handling Procedures of IRS Clearing Business, Article 22.
4238

Article 24. Special Provisions for Merger of Clearing Participant Renouncing IRS
Clearing Qualification
Notwithstanding the provisions of Article 23.1, in a case where JSCC deems it
unnecessary for the Clearing Participant requesting renunciation of its IRS Clearing
Qualification to cancel all outstanding Cleared Contracts, or in the case of a Clearing
Broker, for the Clearing Broker to terminate all the relevant Clearing Brokerage
Agreements, the renunciation of the IRS Clearing Qualification shall become effective
as of such time as designated by JSCC. Such cases include where simultaneously withthe renunciation of IRS Clearing Qualification, such Clearing Participant is merged into,
through a demerger causes its business to be succeeded to by, or transfer its business
to, another company that is to acquire or has already acquired an IRS Clearing
Qualification.
Article 25. Return of IRS Clearing Fund upon Renunciation of IRS Clearing
Qualification
Upon a renunciation or a revocation of a Clearing Participant’s IRS Clearing
Qualification, JSCC shall return its IRS Clearing Fund without delay; provided,
however, that if and to the extent that there remain any obligations owed by such
Clearing Participant to JSCC as a result of the IRS Clearing Business or otherwise
JSCC considers it necessary to use the IRS Clearing Fund pursuant to the Rules,
JSCC may retain the IRS Clearing Fund to the extent necessary.
Article 26. Performance of Obligation upon Renunciation of IRS Clearing Qualification
1

Upon a renunciation or a revocation of its IRS Clearing Qualification, theperson whose IRS Clearing Qualification is so renounced shall use the Cash andsecurities, of which it has the right to claim a return by JSCC in relation to JSCC’s IRS
Clearing Business, to satisfy all of its outstanding obligations to JSCC as Clearing
Participant.
2

If the Cash and securities referred to in Paragraph 1 are insufficient to satisfy

all of the outstanding obligations described in Paragraph 1, such person shall satisfy
the outstanding obligations in their entirety by the date specified by JSCC which shallbe determined on a case-by-case basis.
Article 27. Application of the Rules in Case of Renunciation of IRS Clearing
Qualification39

If any claim or obligation arises due to any cause prior to the renunciation of IRS
Clearing Qualification of a Clearing Participant, the Rules shall remain effective withregard to such claim or obligation.
Section 5 Discontinuance of Handling Client Clearing by a Clearing Participant(Articles 27-2 – 27-5)
Article 27-2.

Request for Cancellation of Client Clearing Authorization

If a Clearing Participant intends to discontinue Client Clearing, it must request
cancellation of its authorization to handle Client Clearing through the procedures
separately prescribed by JSCC44.
Article 27-3.

Handling of Outstanding Contracts of Clearing Participant Requesting

Cancellation of Client Clearing Authorization
When a Clearing Participant requests cancellation of its authorization to handle Client
Clearing, it must close all outstanding Customer’s Cleared Contracts by Position
Transfer of Customer’s Cleared Contracts pursuant to the provisions of Chapter 4,
Section 4, or otherwise, and terminate all Clearing Brokerage Agreements, in advance.
Article 27-4.

Special Provisions for Merger of Clearing Participant Requesting

Cancellation of Authorization to Handle Client Clearing
Notwithstanding the provisions of Article 27-3, in the cases JSCC deems it
unnecessary, the Clearing Participant requesting cancellation of the authorization tohandle Client Clearing will not be required to close all outstanding Customer’s Cleared
Contracts, or to terminate all of its Clearing Brokerage Agreements. Such cases
include where simultaneously with the cancellation of the authorization to handle Client
Clearing, such Clearing Participant is merged into, through a demerger causes its
business to be succeeded to by, or transfer its business to, another company that is toacquire or has already acquired the authorization to handle Client Clearing.
Article 27-5.

Cancellation of Client Clearing Authorization

When JSCC approves the cancellation of the authorization to handle Client Clearing, it
will promptly notify other Clearing Participants and make a public announcement to that
effect.

44

cf. Handling Procedures of IRS Clearing Business, Article 22-2.
40

Section 5-2 Notification concerning Eligible IRS Transactions Denominated in
Currency other than Japanese Yen (Article 27-6)
Article 27-6.

Notification concerning Eligible IRS Transactions Denominated in

Currency other than Japanese Yen
When a Clearing Participant intends to apply for Clearing of Eligible IRS Transactions
whose Notional Amount is denominated in, and settlement currency is, any currency
other than Japanese yen for the first time, it must notify, in advance, the denomination
currency of the Notional Amount of, and the settlement currency of, the Eligible IRS
Transaction for which it intends to apply for Clearing.
Section 5-3 Notification concerning Exchange of Mark-to-Market Difference And
Adjustment Amount (Article 27-7)
Article 27-7.

Notification concerning Exchange of Mark-to-Market Difference And

Adjustment Amount

When a Clearing Participant intends to apply for exchanging Mark-to-Market Difference
And Adjustment Amount for Cleared Contracts pursuant to the Rules for the first time, it
must notify, in advance, such effect to JSCC in the manner prescribed by JSCC45.
Section 6 Actions against Clearing Participants (Articles 28 – 39)
Article 28. Actions against Clearing Participant
1

If a Clearing Participant or its Parent Company providing a Parent Guarantee,

if any, is subject to any of the below listed events and where JSCC deems it necessary
in order to protect the IRS Clearing Business taking into account the cause, likelihoodof recurrence, impact on the IRS Clearing Business and other factors, JSCC may at its
discretion, following consultation with the Clearing Participant, (a) instruct such
Clearing Participant to make improvements to its business and procedures, to theextent deemed necessary and appropriate by JSCC ( “Instruction to Improve”), (b)suspend Clearing for the Clearing Participant entirely or in part, (c) suspend
acceptance of cross margining by the Clearing Participant (“Suspension of Cross
Margining” or “Suspend Cross Margining”), (d) revoke the Clearing Participant’s IRS
Clearing Qualification, or (e) cancel the authorization to handle Client Clearing,45

cf. Handling Procedures of IRS Clearing Business, Article 16.
41

providing the reason for such action; provided that a revocation of the IRS Clearing
Qualification requires a resolution of the board of directors of JSCC:(1)

When the Clearing Participant fails to submit the notification prescribed in
Article 19 or the report prescribed in Article 20, or submits any false
notification or report;(2)

When the Clearing Participant refuses, obstructs or evades inspection asprescribed in Article 21, or fails to submit the report or documents required tobe submitted under Article 21 or submits any false report or document;(3)

When its business capability is deemed to be inadequate; or(4)

Otherwise, when the Clearing Participant violates the Rules or fails to comply
with actions taken by JSCC in accordance therewith, or when the Clearing
Participant damages the reputation of JSCC or the Clearing Participants, and
JSCC deems it necessary to take such action to protect the continued
operation of the IRS Clearing Business.

2

If JSCC considers that a Clearing Participant is subject to any of the below

listed events, and where JSCC deems it necessary taking into account the cause,
likelihood of recurrence, impact on the IRS Clearing Business and other factors, JSCC
may, following consultation with the Clearing Participant, (a) suspend Clearing entirely
or in part or (b) take such other action as JSCC deems necessary and appropriate:(1)

When the Clearing Participant rejects a request for change with respect toOfficers or other persons controlling or influencing the Clearing Participant inaccordance with Article 15;(2)

When a majority of the voting rights of shareholders, partners, members, union
members, or equity holders, or in the case of a company limited by shares46 ,the voting rights attached to shares excluding the voting rights that may only
be exercised with respect to limited matters to be resolved at general meetingsof shareholders, but including the voting rights attached to shares which are
deemed to have voting rights pursuant to Article 879.3 of the Companies Act

46

Kabushiki Kaisha under the Companies Act.
42

(Act No. 86 of 2005) are held by persons who are considered to beinappropriate to hold such voting rights for the continued good operation of the
IRS Clearing Business; or(3)

When any person holding the same or a greater control over the Clearing
Participant than that held by a director or an executive officer is consideredinappropriate for the continued good operation of the IRS Clearing Business,regardless of title, whether referred to as a consultant, advisor or otherwise.

3

If JSCC determines that a Clearing Participant is subject to any of the below

listed events, JSCC may, following consultation with the Clearing Participant, (a)suspend Clearing for the Clearing Participant entirely or in part until such event ceases
to exist, or (b) revoke the Clearing Participant’s IRS Clearing Qualification, providing
the reason for such action; provided that a revocation of the IRS Clearing Qualification
requires a resolution of the board of directors of JSCC:(1)

Where the Clearing Participant has no Parental Guarantee:a.

If the Clearing Participant is a Financial Instruments Business Operator,
when its Capital-to-Risk Ratio becomes, or, in the case of a Special
Operator its Capital-to-Risk Ratio and Consolidated Capital-to-Risk Ratio
become, less than 250%, and JSCC determines that its creditworthinessis likely to worsen significantly;b.

If the Clearing Participant is a Registered Financial Institution subject toUniform International Standard.:(a)when its non-consolidated or consolidated Common Equity Tier
1 ratio becomes less than 5.625%;(b)when its non-consolidated or consolidated Tier 1 ratio becomesless than 7.5%; or(c)when its non-consolidated or consolidated Total Capital ratio
becomes less than 10%;43

and when JSCC determines that its creditworthiness is likely to worsen
significantly (or, in the case of a foreign bank, when any similar event
occurs );If the Clearing Participant is a Registered Financial Institution subject toJapanese Standard, when its non-consolidated or consolidated capital
adequacy ratio under the Japanese Standard becomes less than 5%
and JSCC determines that its creditworthiness is likely to worsen
significantly;c.

If the Clearing Participant is an insurance company which is a
Registered Financial Institution, when its non-consolidated orconsolidated Solvency Margin Ratio becomes less than 500%, andwhen JSCC determines that its creditworthiness is likely to worsen
significantly; ord.

When JSCC determines that the Clearing Participant’s creditworthinesshas worsened significantly47.

(2)

Where the Clearing Participant has Parental Guarantee from its Parent
Company:a.

If the Clearing Participant is a Financial Instruments Business Operator,
when the Clearing Participant’s Capital-to-Risk Ratio becomes, or, in thecase of a Special Operator its Capital-to-Risk Ratio and Consolidated
Capital-to-Risk Ratio become, less than 250%, its Parent Company issubject to the declining creditworthiness defined in Paragraph 4 below,
and JSCC considers that the creditworthiness of the Parent Company islikely to worsen significantly;b.

If the Clearing Participant is a Registered Financial Institution subject toUniform International Standard:

47

Deterioration of creditworthiness will be judged based on criteria set by JSCC in a
notification or a public notice. It is available at;
http://www.jscc.co.jp/en/data/en/2013/08/1Guidelines-Concerning-Credit-Standing-ofClearing-Participants-etc.-in-IRS-Clearing-Business1.pdf
44

(a)

when its non-consolidated or consolidated Common Equity Tier
1 ratio becomes less than 5.625%;or(b)when its non-consolidated or consolidated Tier 1 ratio becomesless than 7.5%; or(c)when its non-consolidated or consolidated Total Capital ratio
becomes less than 10%;and its Parent Company is subject to the declining creditworthiness
defined in Paragraph 4 below, and JSCC considers that thecreditworthiness of the Parent Company is likely to worsen significantly,
or, in the case of a foreign bank, when any similar event occurs:
If the Clearing Participant is a Registered Financial Institution subject toJapanese Standard, when its non-consolidated or consolidated capital
adequacy ratio under the Japanese Standard becomes less than 5%
and its Parent Company is subject to the declining creditworthiness
defined in Paragraph 4 below, and JSCC considers that thecreditworthiness of the Parent Company is likely to worsen significantly;c.

If the Clearing Participant is an insurance company which is a
Registered Financial Institution, when its non-consolidated orconsolidated Solvency Margin Ratio becomes less than 500% and its
Parent Company is subject to the declining creditworthiness defined in
Paragraph 4 below, and JSCC considers that the creditworthiness of the
Parent Company is likely to worsen significantly; ord.

When JSCC determines that the creditworthiness of its Parent Company
has worsened significantly48.

48

Deterioration of creditworthiness will be judged based on criteria set by JSCC in a
notification or a public notice. It is available at;
http://www.jscc.co.jp/en/data/en/2013/08/1Guidelines-Concerning-Credit-Standing-ofClearing-Participants-etc.-in-IRS-Clearing-Business1.pdf
45

4The “declining creditworthiness” of a Parent Company as set forth inParagraph 3.(2) shall be, depending upon the category into which the Parent Company
falls, the event set forth below:(1)

If a Parent Company is a Financial Instruments Business Operator:
When its Capital-to-Risk Ratio becomes, or, in the case of a Special Operator
its Capital-to-Risk Ratio and Consolidated Capital-to-Risk Ratio become, lessthan 250%.

(2)

If a Parent Company is a Registered Financial Institution subject to Uniform
International Standard:a.

when its non-consolidated or consolidated Common Equity Tier 1 ratio
becomes less than 5.625%;orb.

when its non-consolidated or consolidated Tier 1 ratio becomes lessthan 7.5%; orc.

when its non-consolidated or consolidated Total Capital ratio becomesless than 10%;or, in the case of a foreign bank, when an equivalent event occurs.
(3)

If a Parent Company is a Registered Financial Institution subject to JapaneseStandard, when its non-consolidated or consolidated capital adequacy ratio
under the Japanese Standard becomes less than 5%.

(4)

If a Parent Company is an insurance company which is a Registered Financial
Institution:
When its non-consolidated or consolidated Solvency Margin Ratio becomesless than 500%.

(5)

For a Parent Company other than above:
When any equivalent event occurs on the part of such Parent Company

46

5

When JSCC determines that, according to the below listed classifications, a

Clearing Participant is subject to any of the below listed events, JSCC may, following
consultation with the Clearing Participant, suspend Clearing entirely or in part, until
such event ceases to exist:(1)

Where the Clearing Participant has no Parental Guarantee:a.

When the Clearing Participant’s Net Capital becomes less than USD 50
million (50,000,000) or JPY 5 billion (5,000,000,000), whichever is lower,
and prompt recovery from such condition cannot be expected;b.

If the Clearing Participant is a Financial Instruments Business Operator,
when its Capital-to-Risk Ratio becomes less than 200% and prompt
recovery from such condition cannot be expected;

c.

If the Clearing Participant is a Special Operator, when its Consolidated
Capital-to-Risk Ratio becomes less than 200% and prompt recovery
from such condition cannot be expected;d.

If the Clearing Participant is a Registered Financial Institution subject toUniform International Standard:(a)when its non-consolidated or consolidated Common Equity Tier
1 ratio becomes less than 4.5% and prompt recovery from suchcondition cannot be expected; or(b)when its non-consolidated or consolidated Tier 1 ratio becomesless than 6% and prompt recovery from such condition cannot
be expected; or(c)when its non-consolidated or consolidated Total Capital ratio
becomes less than 8% and prompt recovery from suchcondition cannot be expected;

or, in the case of a foreign bank, when any equivalent event occurs.

47

e.

If the Clearing Participant is a Registered Financial Institution subject toJapanese Standard, when its non-consolidated or consolidated capital
adequacy ratio under the Japanese Standard becomes less than 4%, andprompt recovery from such condition cannot be expected; andf.

If the Clearing Participant is an insurance company, when its nonconsolidated or consolidated Solvency Margin Ratio becomes less than
400% and prompt recovery from such condition cannot be expected.

(2)

Where the Clearing Participant has Parental Guarantee:a.

When the Clearing Participant’s Net Capital becomes less than USD 50
million (50,000,000) or JPY 5 billion (5,000,000,000), whichever is lower,
and prompt recovery from such condition cannot be expected; orb.

When the Net Capital of the Clearing Participant’s Parent Company, or,if such Parent Company is neither a Financial Instruments Business
Operator nor a Registered Financial Institution, the amount equivalent
thereto, becomes less than USD 50 million (50,000,000) or JPY 5 billion(5,000,000,000), whichever is lower; or, if the Parent Company provides
Parental Guarantee to one or more other Clearing Participants, the Net
Capital or its equivalent becomes less than the amount equal to the
product of USD 50 million (50,000,000) or JPY 5 billion (5,000,000,000),
whichever is lower, and the number of the Clearing Participants
guaranteed by that Parent Company, or, if the Parent Company itself isa Clearing Participant, the number of the guaranteed Clearing
Participants plus one; and prompt recovery from such condition cannot
be expected; orc.

If the Clearing Participant is a Financial Instruments Business Operator,
when any of the events set forth in b. or c. of Item (1) occurs and at thesame time its Parent Company is subject to the declining
creditworthiness as defined in Paragraph 6 below, and prompt recovery
from such condition cannot be expected; and

48

d.

If the Clearing Participant is a Registered Financial Institution, when anyof the events set forth in Item (1). d. to f. occurs and at the same time its
Parent Company is subject to the declining creditworthiness as definedin Paragraph 6 below, and prompt recovery from such condition cannot
be expected.

6

The “declining creditworthiness” of a Parent Company as set forth inParagraph 5.(c).c. and d. shall be, depending upon the category into which the Parent
Company falls, the event set forth below:(1)

If the Parent Company is a Financial Instruments Business Operator:
When its Capital-to-Risk Ratio becomes, or, in the case of a Special Operator,
its Capital-to-Risk Ratio and Consolidated Capital-to-Risk Ratio become, lessthan 200%.

(2)

If the Parent Company is a Registered Financial Institution subject to Uniform
International Standard:a.

when its non-consolidated or consolidated Common Equity Tier 1 ratio
becomes less than 4.5%;orb.

when its non-consolidated or consolidated Tier 1 ratio becomes lessthan 6%; orc.

when its non-consolidated or consolidated Total Capital ratio becomesless than 8%;

or, in the case of a foreign bank, when any equivalent event occurs.
(3)

If the Parent Company is a Registered Financial Institution subject toJapanese Standard:
When its non-consolidated or consolidated capital adequacy ratio under theJapanese Standard becomes less than 4%.

(4)

If the Parent Company is an insurance company that is a Registered Financial
Institution:
49

When its non-consolidated or consolidated Solvency Margin Ratio becomesless than 400%.
(5)For Parent Company other than above:
When any equivalent event occurs on the part of such Parent Company

7

In the event that a Clearing Participant gave a notification to JSCC under

Article 19.(1) or made a public announcement under any of Article 19. (2) through (5),and does not advise the renunciation of its IRS Clearing Qualification, JSCC may,following consultation with the Clearing Participant, suspend Clearing entirely or in part.
If such public announcement is made under Article 19.(4), this provision shall apply
only when such succession occurs in respect of the entire business, and if such publicannouncement is made under Article 19.(5), this provision shall apply only when the
Clearing Participant transfers the entire business.
Article 29. Increase in Required Initial Margin where Risk is High1

A Clearing Participant shall manage its Cleared Contracts giving due

consideration to its IRS Transaction portfolio, its creditworthiness, its Customers’
creditworthiness and other factors in order to avoid JSCC or other Clearing Participants
suffering any loss.
2

In the event that the risk, as measured by JSCC49, posed by Cleared

Contracts held in a Proprietary Account or a Customer Account becomes greater than
the threshold set by JSCC50, JSCC may increase the Required Initial Margin for such
Clearing Participant in the manner prescribed by JSCC51.
Article 29-2.
1

Limiting Risk by AccountIn the event that the Required Initial Margin for the Proprietary Account or a

Customer Account of a Clearing Participant exceeds 50% of the Net Capital of said
Clearing Participant, JSCC may increase the Required Initial Margin for said Clearing
Participant in the manner separately prescribed by JSCC52.

49

cf. Handling Procedures of IRS Clearing Business, Article 23.1.
cf. Handling Procedures of IRS Clearing Business, Article 23.1.
51
cf. Handling Procedures of IRS Clearing Business, Article 23.2.
52
cf. Handling Procedures of IRS Clearing Business, Article 23-2.
50

50

In this Article 29-2 and Article 29-3 below, if the Clearing Participant is subject to a
Parental Guarantee, “Net Capital” shall mean the Net Capital of its Parent Company
providing the Parental Guarantee, and if its Parent Company is neither a Financial
Instruments Business Operator nor a Registered Financial Institution, shall be an
equivalent appropriate to that type of Parent Company.
2

In the event that the Required Initial Margin for the Proprietary Account or a

Customer Account of a Clearing Participant exceeds 100% of the Net Capital of said
Clearing Participant, JSCC may, following consultation with the Clearing Participant,suspend Clearing of additional Clearing Contracts for that account entirely or in part,
and, subject to a resolution of the board of directors of JSCC, may instruct said
Clearing Participant to take actions to manage the risk of the account.
3

The Clearing Participant in receipt of the instruction as set forth in Paragraph 2

shall improve its capital adequacy ratio or take such other measures which may include
those relating to Cross Margined JGB Futures Cleared Contracts and Cross MarginedInterest Rate Futures Cleared Contracts and requesting that a Customer takenecessary measures, in order to manage risks of the cleared positions in the account,on or before the deadline date set by JSCC for each occurrence.
4

In addition to the matters prescribed in these Business Rules, any matter that

becomes necessary in connection with the instructions to manage risk shall be set by
JSCC.
Article 29-3.
1

Actions that may be taken to Limit Risk depending on Net CapitalIn the event that, with respect to each classification of accounts listed in the

below items, the aggregate of the Required Initial Margins exceeds the thresholdprescribed in the respective item, JSCC may, following consultation with the Clearing
Participant, suspend Clearing for the Clearing Participant entirely or in part, and,subject to a resolution of the board of directors of JSCC, may instruct such Clearing
Participant to manage the risk of its positions.
(1)

Proprietary Account of a Clearing Participant and Customer Accounts
established for the Customers in the same Corporate Group as the relevant
Clearing Participant:51

200% of the Net Capital of said Clearing Participant;(2)

Proprietary Account and all Customer Acounts of a Clearing Participant:
400% of the Net Capital of said Clearing Participant.

2

The provisions of Article 29-2.3 and 4 shall apply mutatis mutandis when

JSCC instructs the Clearing Participant to manage risks in its position as prescribed in
Paragraph 1.
Article 30. Instruction to Manage Risk
1

In the event and to the extent that JSCC deems it necessary due to concernsthat a Clearing Participant may not be able to meet its obligations to JSCC, JSCC,
following consultation with the Clearing Participant, may suspend Clearing for the
Clearing Participant entirely or in part, or, subject to a resolution of the board of
directors of JSCC, may instruct such Clearing Participant to manage the risk of its
positions.
2

The Clearing Participant in receipt of the instruction set forth in Paragraph 1

shall take necessary measures, which may include those related to Cross Margined
JGB Futures Cleared Contracts and Cross Margined Interest Rate Futures Cleared
Contracts, in order to manage risks of its Cleared Contracts on or before the deadline
date set by JSCC on each occurrence.
3

In addition to the matters prescribed in these Business Rules, any matter that

becomes necessary in connection with the instructions to manage risk shall be set by
JSCC.
Article 31. Actions that may be taken in respect of Eligible Securities Collateral
If JSCC deems it necessary in order to ensure a Clearing Participant’s continued
performance of its obligations with respect to its Cleared Contracts or Clearing
Brokerage Contracts and obligations arising in connection with the Cross Margined
JGB Futures Cleared Contracts and Cross Margined Interest Rate Futures Cleared
Contracts related to such Clearing Participant upon JSCC’s determination of the
Clearing Participant Default, taking into consideration the creditworthiness of a Clearing
Participant, and to the extent necessary, JSCC may increase the haircut applied to thevaluation of Eligible Securities Collateral.
52Article 32. Increasing Clearing Participant Required Initial Margin Due to its
Creditworthiness
1

When JSCC considers that a Clearing Participant meets any of the below

listed criteria, JSCC may increase the Required Initial Margin for the Clearing
Participant’s Proprietary Cleared Contracts in the manner prescribed by JSCC53:(1)

Where the Clearing Participant does not have a Parental Guarantee:a.

If the Clearing Participant is a Financial Instruments Business Operator,
when its Capital-to-Risk Ratio, or in the case of a Special Operator, its
Capital-to-Risk Ratio and Consolidated Capital-to-Risk Ratio (the same
shall apply in this Article), falls below the level separately set by JSCC54
and its creditworthiness has deteriorated in the manner specified by
JSCC55;b.

If the Clearing Participant is a Registered Financial Institution other thanan insurance company, when its non-consolidated or consolidated
capital adequacy ratio falls below the level set by JSCC56, and its
creditworthiness has deteriorated in the manner specified by JSCC57;

c.

If the Clearing Participant is an insurance company which is a
Registered Financial Institution, when its non-consolidated orconsolidated solvency margin ratio falls below the level set by JSCC58,
and its creditworthiness has deteriorated in the manner specified by
JSCC59; andd.

When the Clearing Participant’s creditworthiness is judged inadequate
based on criteria set by JSCC in a notification or a public notice60.

53

cf. Handling Procedures of IRS Clearing Business, Article 24.1.
cf. Handling Procedures of IRS Clearing Business, Article 24.2.
55
cf. Handling Procedures of IRS Clearing Business, Article 24.2.
56
cf. Handling Procedures of IRS Clearing Business, Article 24.3.
57
cf. Handling Procedures of IRS Clearing Business, Article 24.3.
58
cf. Handling Procedures of IRS Clearing Business, Article 24.4.
59
cf. Handling Procedures of IRS Clearing Business, Article 24.4.
60
Deterioration of creditworthiness will be judged based on criteria set by JSCC in a
notification or a public notice. It is available at;
54

53

(2)

Where the Clearing Participant has a Parental Guarantee:a.

If the Clearing Participant is a Financial Instruments Business Operator,
when its Capital-to-Risk Ratio falls below the level set by JSCC61, and its
Parent Company is subject to an event specified by JSCC62, and thecreditworthiness of its Parent Company deteriorates in the manner
specified by JSCC63;b.

If the Clearing Participant is a Registered Financial Institution other thanan insurance company, when its non-consolidated or consolidated
capital adequacy ratio falls below the level set by JSCC64, and its Parent
Company is subject to an event specified by JSCC65, and thecreditworthiness of its Parent Company deteriorates in the manner
specified by JSCC66;c.

If the Clearing Participant is an insurance company which is a
Registered Financial Institution, when its non-consolidated orconsolidated Solvency Margin Ratio falls below the level set by JSCC67,
and its Parent Company is subject to an event specified by JSCC68, andthe creditworthiness of its Parent Company deteriorates in the manner
specified by JSCC69; andd.

When the Parent Company’s creditworthiness is judged inadequate
based on criteria set by JSCC in a notification or a public notice70.

http://www.jscc.co.jp/en/data/en/2013/08/1Guidelines-Concerning-Credit-Standing-ofClearing-Participants-etc.-in-IRS-Clearing-Business1.pdf
61
cf. Handling Procedures of IRS Clearing Business, Article 24.5.
62
cf. Handling Procedures of IRS Clearing Business, Article 24.8.
63
cf. Handling Procedures of IRS Clearing Business, Article 24.5.
64
cf. Handling Procedures of IRS Clearing Business, Article 24.6.
65
cf. Handling Procedures of IRS Clearing Business, Article 24.8.
66
cf. Handling Procedures of IRS Clearing Business, Article 24.6.
67
cf. Handling Procedures of IRS Clearing Business, Article 24.7.
68
cf. Handling Procedures of IRS Clearing Business, Article 24.8.
69
cf. Handling Procedures of IRS Clearing Business, Article 24.7.
70
Deterioration of creditworthiness will be judged based on criteria set by JSCC in a
notification or a public notice. It is available at;
54

2

The Required Initial Margin arising from Customer’s Cleared Contracts shallalso be subject to the increase set forth in Paragraph 1; provided that the Required
Initial Margin arising from Customer’s Cleared Contracts will not be raised for a
Customer that has designated one or more Backup Clearing Broker (or, if the
Customer also is a Cross Margining User, for a Customer that has designated a
Backup Clearing Broker and a Listed Futures Backup Clearing Broker). However, if
the Required Initial Margin applicable to such Backup Clearing Broker, or all of the
Customer’s Backup Clearing Brokers when the Customer has designated multiple
Backup Clearing Brokers, is raised pursuant to the provisions set forth in Paragraph 1,
the Required Initial Margin arising from such Customer’s Cleared Contracts shall be
subject to increase set forth in Paragraph 1.
Article 33. Actions taken upon Default of Clearing Participant
When JSCC determines that a Clearing Participant is subject to either of the following
events, it may revoke the IRS Clearing Qualification of such Clearing Participant:(1)

If JSCC determines the Default of such Clearing Participant to have occurred;or(2)

If the Clearing Participant ceases to be either Financial Instruments Business
Operator or Registered Financial Institution.

Article 34. Lifting Suspension of Clearing or Other Action
1

In the event that JSCC has suspended Clearing for a Clearing Participant or

Suspended Cross Margining pursuant to Article 28 for an indefinite period, theClearing Participant subject to such suspension may request that JSCC lift suchsuspension by submitting written explanation in the form prescribed by JSCC, when
the cause of such suspension has ceased to exist.
2

When JSCC deems it appropriate considering the IRS Clearing Business,

JSCC will lift the suspension based on the above request.

http://www.jscc.co.jp/en/data/en/2013/08/1Guidelines-Concerning-Credit-Standing-ofClearing-Participants-etc.-in-IRS-Clearing-Business1.pdf
55

3If the suspension of Clearing set forth in in Paragraph 1 has not been liftedpursuant to the provisions set forth in Paragraph 2 within six (6) months from the dateof commencement of such suspension, JSCC may revoke such Clearing Participant’s
IRS Clearing Qualification subject to a resolution of the board of directors of JSCC.
4

The provisions of Paragraphs 1 and 2 above shall apply mutatis mutandis withrespect to the actions taken by JSCC in accordance with Articles 29 through 30 and
Article 32.
Article 35. Objection
The proviso to Article 15.1, and the provisions of Article 15.2 and 3 shall apply mutatis
mutandis when a consultation is held under Articles 28 and 30, and the provisions ofArticle 15.4 through 6 shall apply mutatis mutandis when the actions set forth in Article
28 and Articles 29-2 through Article 30 are taken.
Article 36. Disciplinary Measures Assessment Committee
1

When JSCC intends to take any of the actions set forth in Article 28, Article

29-2.2 and Articles 29-3 through 30 and Article 31 against a Clearing Participant, JSCC
shall consult with the Disciplinary Measures Assessment Committee in advanceregarding the appropriateness of such actions, and consider their opinion.
2

Notwithstanding the provisions of Paragraph 1, when urgent action is required,

JSCC may take such actions without consultation with the Disciplinary Measures
Assessment Committee.
3

In addition to the provisions prescribed in Paragraphs 1 and 2, other mattersconcerning the Disciplinary Measures Assessment Committee shall be prescribed in
the Subordinate Rules71.
Article 37. Notice of Actions
1

When JSCC is to completely or partially suspend Clearing, to Suspend Cross

Margining, to revoke an IRS Clearing Qualification or to cancel the authorization tohandle Client Clearing pursuant to these Business Rules, JSCC shall give notice ofsuch suspension or revocation to the relevant Clearing Participant in advance.

71

Disciplinary Measures Assessment Committee Rules.
56

2

When JSCC has completely or partially suspended Clearing for a Clearing

Broker, Suspended Cross Margining, revoked its IRS Clearing Qualification orcancelled the authorization to handle Client Clearing, such Clearing Broker shallimmediately give notice of such suspension or revocation to all Customers with which
they have Clearing Brokerage Agreements.
3

When JSCC took measures of Suspension of Cross Margining against a

Clearing Participant, such Clearing Participant must immediately notify such effect to
the JGB Futures Clearing Participant it notified to JSCC as Cross Margining Requestor
pursuant to the provisions of Article 84-2.
4

When JSCC has instructed a Clearing Participant to make improvements,

completely or partially suspended Clearing for a Clearing Participant, Suspended Cross
Margining, revoked an IRS Clearing Qualification, instructed a Clearing Participant tomanage the risk of its cleared positions or cancelled the authorization to handle Client
Clearing pursuant to these Business Rules, after taking such action, JSCC shallpromptly notify other Clearing Participants and make a public announcement to that
effect; provided that if JSCC deems it necessary and appropriate in light of the impact
of such notification on the market, and other factors, JSCC may make such notification
and announcement when JSCC deems it appropriate.
5

When making the notification and public announcement prescribed in

Paragraph 3, JSCC shall decide the scope of such notification and publicannouncement separately for each occurrence, in light of the significance of the action,market impact and other related factors.
Article 38. Handling of Cleared Contracts in the Event of Revocation of IRS Clearing
Qualification
1

In the event of a revocation of IRS Clearing Qualification of a Clearing

Participant other than the revocation caused by the event listed in Article 33. (1), such
Clearing Participant shall terminate all of its outstanding Cleared Contracts within the
period specified by JSCC.
2

In the case set forth in Paragraph 1, if the Clearing Participant fails toterminate all outstanding Cleared Contracts within the period specified according to theprovisions of Paragraph 1, such Cleared Contracts were treated in the same manner57

as the provisions set forth in in Chapter 9, Section 2 of these Business Rules,
excluding Articles 96 through 98,. In such case, JSCC shall decide on such othermatters as become necessary.
Article 39. Recommendation to Clearing Participant
1

When JSCC determines that the business capability or financial condition of aClearing Participant is not satisfactory when considering its impact on the IRS Clearing
Business, JSCC’s operation of the IRS Clearing Business and other factors, JSCC may
recommend that such Clearing Participant take appropriate action.
2

When a recommendation set forth in Paragraph 1 has been issued, JSCC may

require that the Clearing Participant inform JSCC of the actions it has taken in such
regard.
Section 7 Miscellaneous (Articles 40 – 41)
Article 40.

Take-over by Clearing Participant of Outstanding Contracts from Another

Clearing Participant resulting from Demerger or Business Transfer
1

A Clearing Participant causing its business to be succeeded by another Clearing

Participant through a demerger, or transferring its business to another Clearing
Participant (referred to as “Demerged Participant” in this Article) may, when it does notrenounce its IRS Clearing Qualification simultaneously with such succession or transfer,with JSCC’s approval, have such other Clearing Participant (referred to as “Taking-overParticipant” in this Article) take over the outstanding Cleared Contracts involved in the
succession or transfer of such business (referred to as “Taken-over Contracts” in this
Article).
2

In the event of business transfer set forth in Paragraph 1, when the Taken-overContracts were Customer’s Cleared Contracts, the Demerged Participant shall obtainthe consent of the Customer, for whom it is acting as Clearing Broker in respect of the
Taken-over Contracts, to such take-over.
3

Costs required for taking over the Taken-over Contracts under this Article shallbe borne by the Demerged Participant or Taking-over Participant.
Article 40-2.

Take-over by Customer of Outstanding Contracts from Clearing
58

Participant resulting from Merger, Demerger or Business Transfer
1

A Clearing Participant merged into a Customer, causing its business to be

succeeded by a Customer through a demerger, or transferring its business to a Customer(referred to as “Merged Participant” in this Article) may, with JSCC’s approval, have such
Customer (referred to as “Taking-over Customer” in this Article) take over the outstanding
Proprietary Cleared Contracts involved in the merger, succession or transfer of suchbusiness (referred to as “Taken-over Contracts” in this Article).

In this case, the Taken-

over Contracts shall be deemed to be the Clearing Brokerage Contracts between the
Taking-over Customer and its Clearing Broker and the Customer’s Cleared Contracts
corresponding to the Clearing Brokerage Contracts between such Clearing Broker and
JSCC for the purpose of the application of the Rules.
2

In the case of Paragraph 1, the Taking-over Customer shall obtain the consent

of the Clearing Broker mentioned in Paragraph 1 on the take-over of the Taken-overContracts in advance.
3

When JSCC considers that acquisition by the Taking-over Customer of theconsent set forth in Paragraph 2 cannot be expected, notwithstanding the provisions ofParagraph 1, JSCC may have the Merged Participant and the Taking-over Customer
terminate the Taken-over Contracts or make other arrangements deemed necessary.
4

Costs required for taking over the Taken-over Contracts under this Article shallbe borne by the Merged Participant or the Taking-over Customer.
Article 40-3. Take-over by Clearing Participant of Clearing Brokerage Contracts from
Customer resulting from Merger, Demerger or Business Transfer
1

A Customer merged into a Clearing Participant, causing its business to be

succeeded by a Clearing Participant through a demerger, or transferring its business toa Clearing Participant (referred to as “Merged Customer” in this Article) may, with JSCC’s
approval, have such Clearing Participant (referred to as “Taking-over Participant” in this
Article) take over the outstanding Clearing Brokerage Contracts involved in the merger,
succession or transfer of such business (referred to as “Taken-over Contracts” in this
Article). In this case, the Taken-over Contracts shall be deemed to be the Proprietary
Cleared Contracts between such Taking-over Participant and JSCC for the purpose of
the application of the Rules.

59

2

When the taking over set forth in Paragraph 1 occurs, the Customer’s Cleared

Contracts corresponding to the Taken-over Contracts between the Clearing Broker for
the Merged Customer and JSCC shall terminate as a matter of course.
3

In the case of Paragraph 1, the Merged Customer shall obtain the consent of

the Clearing Broker mentioned in Paragraph 2 on the take-over of the Taken-overContracts in advance.
4

When JSCC considers that acquisition by the Merged Customer of the consent

set forth in Paragraph 3 cannot be expected, notwithstanding the provisions ofParagraphs 1 and 2, JSCC may have the Merged Customer and the Taking-overParticipant terminate the Taken-over Contracts or make other arrangements deemednecessary.
5

Costs required for taking over the Taken-over Contracts under this Article shallbe borne by the Merged Customer or the Taking-over Participant.
Article 40-4.

Take-over by Customer of Clearing Brokerage Contracts from Another

Customer resulting from Merger, Demerger or Business Transfer
1

A Customer merged into another Customer, causing its business to be

succeeded by another Customer through a demerger, or transferring its business toanother Customer (referred to as “Merged Customer” in this Article) may, with JSCC’s
approval, have such other Customer (referred to as “Taking-over Customer” in this
Article) take over the outstanding Clearing Brokerage Contracts involved in the merger,
succession or transfer of such business (referred to as “Taken-over Contracts” in this
Article).

In this case, the Taken-over Contracts shall be deemed to be the Clearing

Brokerage Contracts between the Taking-over Customer and its Clearing Broker and theCustomer’s Cleared Contracts corresponding to the Clearing Brokerage Contracts
between such Clearing Broker and JSCC for the purpose of the application of the Rules.
2

When the taking over set forth in Paragraph 1 occurs, the Customer’s Cleared

Contracts corresponding to the Taken-over Contracts between the Clearing Broker for
the Merged Customer and JSCC shall terminate as a matter of course.
3

In the case of Paragraph 1, the Merged Customer and the Taking-over Customer

shall obtain the consent of their respective Clearing Broker on the take-over of the Taken60

over Contracts in advance.
4

When JSCC considers that acquisition by the Merged Customer or the Taking-over Customer of the consent set forth in Paragraph 3 cannot be expected,
notwithstanding the provisions of Paragraphs 1 and 2, JSCC may have the Merged
Customer and the Taking-over Customer terminate the Taken-over Contracts or makeother arrangements deemed necessary.
5

Costs required for taking over the Taken-over Contracts under this Article shallbe borne by the Merged Customer or the Taking-over Customer.

Article 41. Foreign Entity Having Branch Registered as Registered Financial Institution
A foreign entity having a branch which has been registered under Article 33-2 of the
Financial Instruments and Exchange Act shall be deemed a Registered Financial
Institution for the purpose of this Chapter.

Chapter 3 Clearing Brokerage (Articles 42 – 47)
Article 42. Subject Transaction for Clearing Brokerage
The Subject Transactions that may be cleared for the account of a Customer by a
Clearing Participant providing Clearing Brokerage shall be Eligible IRS Transactions.
Article 43. Conclusion of Clearing Brokerage Agreement
1

A Clearing Participant shall enter into a Clearing Brokerage Agreement with apotential Customer before acting as a Clearing Broker.
2

If a potential Customer requests a Clearing Participant to act as its Clearing

Broker, the potential Customer shall enter into a Clearing Brokerage Agreement withsuch Clearing Participant and submit to JSCC via the Clearing Participant a letter ofundertaking in the form prescribed by JSCC 72 stating that it shall comply with such
Clearing Brokerage Agreement and the Rules
3

The Clearing Broker receiving a letter of undertaking described in Paragraph 2

from a potential Customer shall immediately submit such letter of undertaking to JSCC.
72

cf. Handling Procedures of IRS Clearing Business, Article 26, as well as Exhibit Form 4.
61

Article 44. Notification of Conclusion of Clearing Brokerage Agreement
1

When a Clearing Participant intends to enter into a Clearing Brokerage

Agreement, it shall notify JSCC of the details thereof in advance in the manner separately
prescribed by JSCC73.

2

Upon receipt of the notification set forth in Paragraph 1 from a Clearing

Participant, unless the notification set forth in Paragraph 1 has already been given byanother Clearing Participant in respect of the same Customer, JSCC shall promptly notify
other Clearing Participants, and give public notice, of the trade name of and other mattersrelated to such Customer according to the notification given by the Clearing Participant.
Article 45. Notification of Termination of Clearing Brokerage Agreement
1

When a Clearing Brokerage Agreement is terminated, the relevant Clearing

Broker shall notify JSCC of the details of such termination in the manner set forth below
according to the cause of termination, as well as items as separately prescribed by
JSCC74:(1)

Termination by agreement:
A Clearing Broker shall submit a notification at least three (3) JSCC Business
Days before the scheduled termination date.

(2)

Termination by a prior written notice of intention to terminate the Clearing
Brokerage Agreement given by a Clearing Broker to a Customer (excluding thetermination set forth in Item (4)):
The Clearing Broker shall submit a notification without delay after it gives such
notice of its intention to terminate.

(3)

Termination by a Customer by giving a prior written notice of its intention toterminate the Clearing Brokerage Agreement to a Clearing Broker:
The Clearing Broker shall submit a notification without delay after it receives
such notice of the intention to terminate.

73
74

cf. Handling Procedures of IRS Clearing Business, Article 16.
cf. Handling Procedures of IRS Clearing Business, Article 16.1.
62

(4)

Other termination in accordance with the provisions of the Clearing Brokerage
Agreement:
The Clearing Broker shall submit a notification in advance or without delay after
the termination of such Clearing Brokerage Agreement.

2

Clearing Brokerage Contracts concluded before the termination of the Clearing

Brokerage Agreement mentioned in Paragraph 1 shall continue to be governed by such
Clearing Brokerage Agreement.
3

No termination of a Clearing Brokerage Agreement shall become effective until

JSCC receives the notification pursuant to the provisions of Paragraph 1.
4Upon receipt of the notification set forth in Paragraph 1 from a Clearing

Participant, if, due to the termination of the Clearing Brokerage Agreement subject tosuch notification, the Customer ceases to have any Clearing Brokerage Agreement with
any Clearing Participant, or otherwise when JSCC deems appropriate, JSCC shallpromptly notify other Clearing Participants, and give public notice, of the trade name ofand other matters related to such Customer.
Article 45-2.
1

Designation of Backup Clearing Broker

A Customer may designate in advance another Clearing Broker as its Backup

Clearing Broker so that, if one Clearing Broker is in Default, the claims and obligations
arising from the Customer’s Cleared Contracts cleared through the Defaulting Clearing
Broker and Clearing Brokerage Contract can be transferred to the Backup Clearing
Broker.
Any Clearing Broker which has been acting for a given Customer may be designated as
its Backup Clearing Broker; providing that no Defaulting Clearing Broker may bedesignated as Backup Clearing Broker.
2

A Customer intending to designate a Backup Clearing Broker as set forth inParagraph 1 and a Clearing Broker intending to accept such designation shall agree inadvance that the potential Backup Clearing Broker accept the claims and obligations
arising as a result of the Customer’s Cleared Contracts and Clearing BrokerageContracts in all or in part belonging to the Customer pursuant to the provisions of Article
94 or Article 94-2, in the event of the Default of the Customer’s other Clearing Broker.

63

3

The Customer who makes the designation of Backup Clearing Broker set forthin Paragraph 1 shall notify such designation, to JSCC through the Clearing Broker who
accepts such designation by submitting the notification form prescribed by JSCC in themanner prescribed by JSCC75, together with such documents as JSCC deems necessary.
4

A Backup Clearing Broker shall report to JSCC the details of the agreement

regarding Position Transfer in the event of Clearing Broker Default reached with theCustomer in the manner prescribed by JSCC76.
5The Customer designating its Backup Clearing Broker under the provisions ofParagraph 1 and the Backup Clearing Broker shall make efforts to put in place a structure,in the manner separately prescribed by JSCC77, that will enable transfer of Customer’s
Cleared Contracts and Clearing Brokerage Contracts pursuant to the agreement
between the Customer and the Backup Clearing Broker in the event of a determinationof a Default of the Customer’s Clearing Broker.
6

A Backup Clearing Broker no longer wishing to be a Customer’s designatedBackup Clearing Broker shall reach an agreement with the Customer, and notify JSCC
in the manner prescribed by JSCC.
Article 45-3.
1

Designation of Listed Futures Backup Clearing Broker

A Cross Margining User falling under Article 2.1.(13)-9.b. to d. may designate inadvance another JGB Futures Clearing Participant as its Listed Futures Backup Clearing
Broker to smoothly effect Listed Futures Position Transfer in respect of claims andobligations related to JGB Futures Cleared Contracts and the like and claims andobligations related to Interest Rate Futures Cleared Contracts and the like to one or more
JGB Futures Clearing Participants when claims and obligations come into existence
pursuant to the provisions of Article 84-5.1.
2

When a designation is intended as set forth in Paragraph 1 (hereinafter refer to

as “Designation of a Listed Futures Backup Clearing Broker”), a Cross Margining User
(and the JGB Futures Non-Clearing Participant, when the JGB Futures Contracts or theInterest Rate Futures Contracts of the Cross Margining User are traded through75

cf. Handling Procedures of IRS Clearing Business, Article 26-2.1
cf. Handling Procedures of IRS Clearing Business, Article 26-2.2.
77
cf. Handling Procedures of IRS Clearing Business, Article 26-2.3.
7664

brokerage of the JGB Futures Non-Clearing Participant; the same applies in Paragraphs
4 to 6 below), and a JGB Futures Clearing Participant intending to accept suchdesignation shall agree in advance that the potential Listed Futures Backup Clearing
Broker accepts the Listed Futures Position Transfer in respect of all or a part of the claims
and obligations related to JGB Futures Cleared Contracts and the like and the claims
and obligations related to Interest Rate Futures Cleared Contracts and the like pursuant
to the provisions of Article 94-3, when the claims and obligations come into existence
pursuant to the provisions of Article 84-5.1.
3

The Cross Margining User who makes the designation of Listed Futures Backup

Clearing Broker set forth in Paragraph 1 shall notify such designation to JSCC throughthe Cross Margining Accepting Party by submitting the notification form prescribed by
JSCC in the manner prescribed by JSCC, together with such documents as JSCC deems
necessary.
4

A Listed Futures Backup Clearing Broker shall report to JSCC, through the

Cross Margining Accepting Party, for the details of the agreement regarding Listed
Futures Position Transfer reached with the Cross Margining User in the mannerprescribed by JSCC78.
5

When a Listed Futures Backup Clearing Broker has been designated pursuant

to the provisions of Paragraph 1, the Cross Margining User and the Listed Futures
Backup Clearing Broker shall make efforts to put in place a structure, in the mannerseparately prescribed by JSCC79, that will enable Listed Futures Position Transfer inrespect of the claims and obligations related to JGB Futures Cleared Contracts and thelike and the claims and obligations related to Interest Rate Futures Cleared Contracts
and the like pursuant to the agreement between the Cross Margining User and the Listed
Futures Backup Clearing Broker, in the event that the claims and obligations come into
existence pursuant to the provisions of Article 84-5.1.
6

A Listed Futures Backup Clearing Broker no longer wishing to be a designated

Listed Futures Backup Clearing Broker shall reach an agreement with the Cross
Margining User who designated it as Listed FuturesBackup Clearing Broker, and submit
the request form prescribed by JSCC to JSCC through the Cross Margining Accepting
78
79

cf. Handling Procedures of IRS Clearing Business, Article 26-3.1.
cf. Handling Procedures of IRS Clearing Business, Article 26-3.2.
65

Party.
Article 46. Validity of Letter of Undertaking
1

A Customer letter of undertaking80 submitted to JSCC shall cease to have effectwhen the Clearing Brokerage Agreement entered into between the Customer and theClearing Broker is terminated.
2

If the outstanding claims and obligations remain between the Customer or the

Clearing Broker and JSCC in connection with the Customer’s Cleared Contracts and theClearing Brokerage Contracts that have been executed before the letter of undertaking
set forth in Paragraph 1 ceases to have effect, and in connection with associated Initial
Margin, such letter of undertaking shall remain in effect to the extent that it relates tosuch claims and obligations.
Article 47. Segregation of Cleared Contracts
1

A Clearing Broker shall manage the Cleared Contracts to which it is a party bysegregating Proprietary Cleared Contracts from Customer’s Cleared Contracts.
2

A Clearing Broker shall manage the Customer’s Cleared Contracts separately

for each Clearing Brokerage Account.

Chapter 4 Clearing and Cleared Contracts
Section 1 Clearing (Articles 48 – 50)
Article 48. Request for Clearing
1

A Clearing Participant may submit a request for Clearing to JSCC by submitting

a notification as prescribed by JSCC81.

JSCC will only receive such notification under

the conditions separately prescribed by JSCC82.
2

The request for Clearing pursuant to the provisions of Paragraph 1 shall bemade by both parties to the Eligible IRS Transaction for which Clearing is requested.

80cf. Handling Procedures of IRS Clearing Business, Article 26, as well as Exhibit Form 4.
cf. Handling Procedures of IRS Clearing Business, Article 271.
82
cf. Handling Procedures of IRS Clearing Business, Article 272.
81

66

3

If the Clearing Participant gives notification of request for Clearing set forth inParagraph 1, the Clearing Participant shall be deemed to have expressed, to theClearing Participant who is the counterparty to such Eligible IRS Transaction, its intention
to agree to the termination of such Eligible IRS Transaction in accordance with theprovisions of Article 50, on condition that a Cleared Contract corresponding to such
Eligible IRS Transaction comes into effect in accordance with the provisions of Article
49.1 below.
4

In the case where the Clearing Participant is a counterparty to the Clearing

Brokerage Original Transaction, if it gives notification of request for Clearing set forth inParagraph 1, the Clearing Participant shall be deemed to have expressed, to theCustomer who is a party to such Clearing Brokerage Original Transaction, its intention
to agree to the termination of such Clearing Brokerage Original Transaction, on condition
that the requirements set forth in each Item of Article 54.4 or Article 54-2.1.(4), as thecase maybe, are satisfied.
5

A Clearing Participant may withdraw a request set forth in Paragraph 1 and a

declaration of intent to agree to terminate in accordance with the provisions ofParagraphs 2 and 3 only if it withdraws all of such requests and declaration of intent.
Article 49. Execution of Cleared Contracts through Clearing
1

When JSCC receives a request set forth in Article 48.1 from both parties to an

Eligible IRS Transaction, JSCC confirms that the request and such Eligible IRS
Transaction satisfy the requirements separately prescribed by JSCC 83 and that therelevant Clearing Participants have deposited with or delivered to JSCC the margin
calculated according to the method separately prescribed by JSCC84 (“Margin Required
to Clear”) in the manner separately prescribed by JSCC85 (“Clearing Requirements”).
Upon JSCC’s confirmation of satisfaction of Clearing Requirements, an IRS Transaction
between the Clearing Participant who was a party to such an Eligible IRS Transaction(referred to as the “First Clearing Participant” in this Article) and JSCC, in which JSCC
assumes the same Transaction Side as that of the counterparty to the First Clearing
Participant (referred to as the “Second Clearing Participant” in this Article) under such
Eligible IRS Transaction, and another IRS Transaction between the Second Clearing83

cf. Handling Procedures of IRS Clearing Business, Article 28.1.
cf. Handling Procedures of IRS Clearing Business, Article 28.4, as well as Appendix 2.
85
cf. Handling Procedures of IRS Clearing Business, Article 28.2.
84

67

Participant and JSCC, in which JSCC assumes the same Transaction Side as that of theFirst Clearing Participant under the Eligible IRS Transaction, shall come into effect at thetime prescribed by JSCC86. However, even in the case where an amount sufficient tocover the Margin Required to Clear has not been deposited with or delivered to JSCC, if
the criteria listed below are satisfied at the time of JSCC’s receipt of the request for
Clearing set forth in Article 48.1, the IRS Transactions set forth in this paragraph shallcome into effect:(1) Notional Amount of the Eligible IRS Transactions subject to such request is less than
the amount prescribed by JSCC87;(2) The criteria set forth in a. or b., as applicable, are met according to the classification
listed in a. or b. below:
a. Proprietary Account subject to such request
Shortfall in Margin Required to Clear related to the Proprietary Account of the
Clearing Participant submitted such request is not more than the cap prescribedby JSCC 88 (or, when an allocation set forth in b. below is made, the amountremaining after deducting such allocated amount) (hereinafter referred to as “Capon Acceptable Shortfall in Margin Required to Clear”);
b. Customer Account subject to such request
When a Clearing Broker makes an allocation of the Cap on Acceptable Shortfall in
Margin Required to Clear for its Proprietary Account to the Customer Accountsubject to such request, the Shortfall in Margin Required to Clear related to therelevant Customer Account, or, when the Customer Buffer is available for allocation
to the relevant Customer Account pursuant to the provisions of Article 83-7.1, theShortfall in Margin Required to Clear after receiving such allocation, is not morethan the allocated cap. In the preceding sentence, an allocation means a conductof allocating a part of the Cap on Acceptable Shortfall in Margin Required to Clear
related to the Proprietary Account of the Clearing Broker to the relevant Customer
Account by Clearing Broker giving notice to JSCC in a manner prescribed by
JSCC89;(3) Initial Margin Deposited Amount of the Clearing Participant or the Customer is atleast equal to the Required Initial Margin on the JSCC Business Day immediately
preceding the date of submission of such request with respect to the Proprietary86

cf. Handling Procedures of IRS Clearing Business, Article 28.3.
cf. Handling Procedures of IRS Clearing Business, Article 28.1.5.
88
cf. Handling Procedures of IRS Clearing Business, Article 28.1.6.
89
cf. Handling Procedures of IRS Clearing Business, Article 28.1.7.
87

68

Account of the Clearing Participant or the relevant Customer Account, or theRequired Intraday Margin on the date of submission of such request;(4) The Clearing Participant submitted such request is not subject to the measures ofincreasing Required Initial Margin due to its creditworthiness as set forth in Article
32.1.
2

When Cleared Contracts come into effect pursuant to the provisions ofParagraph 1, JSCC shall promptly notify the Clearing Participants who are the parties tosuch Cleared Contracts to that effect in the manner as separately prescribed by JSCC90.
3

If, at the time of receipt by JSCC of a request for Clearing, JSCC cannot confirm

that both sides of the Clearing Participants who requested Clearings have deposited withor delivered to JSCC the Margin Required to Clear as set forth in Paragraph 1, JSCC
will promptly reject the Eligible IRS Transaction, and will promptly notify the relevant
Clearing Participants to such effect in the manner separately prescribed by JSCC91,
unless the criteria set forth in the proviso of Paragraph 1 are satisfied.
4

Notwithstanding Article 48.1, if JSCC deems it necessary to protect thecontinued operation of the IRS Clearing Business, including when it determines theDefault of a Clearing Participant, JSCC may temporarily change the time during which it
will receive requests for Clearing.

In such a case, JSCC shall notify the Clearing

Participants of the below listed matters in advance.
(1)

That JSCC has temporarily changed the time during which it will receive
requests for Clearing pursuant to the provisions of this paragraph; and(2)

The new time.

5

Once the Cleared Contracts come into effect pursuant to the provisions ofParagraph 1, the Clearing Participant may not assert any right against JSCC in respectof the Eligible IRS Transaction prescribed in Paragraph 1 or the Clearing Brokerage
Original Transaction, or claims and obligations thereunder, even if there are any grounds
entitling it to assert such right against another Clearing Participant or a Customer who
was the counterparty thereto, including but not limited to the existence of the relevant
9091

cf. Handling Procedures of IRS Clearing Business, Article 28.5.
cf. Handling Procedures of IRS Clearing Business, Article 28.5.
69

Eligible IRS Transaction, defects in expressing its intention or failure to express its
intention.
6

When Cleared Contracts come into effect pursuant to the provisions in

Paragraph 1, such Cleared Contracts shall come into effect as Cleared Contracts(Collateral Type).
Article 50. Agreed-upon Termination of Eligible IRS Transaction
1

The Eligible IRS Transaction that has been cleared and the claims andobligations under such Eligible IRS Transaction shall cease to exist and have no future
effect, as of the time when the Cleared Contracts come into effect, by an agreement to
the termination between the Clearing Participants which were the parties to such Eligible
IRS Transaction in accordance with the provisions of Article 48.3 and other provisions inthese Business Rules, except that the below listed obligations shall remain effective after
such termination:(1)

Payment obligations for the Fixed Amount and Floating Amount under the
Eligible IRS Transaction which have already become due at the time when such
Cleared Contracts come into effect; and(2)

Obligations that have already accrued at the time when such Cleared Contracts
come into effect, as specified by JSCC.

2

A Clearing Participant shall not be liable for payment of any fees, damages or

any other money in connection with the agreed-upon termination set forth in Paragraph1 other than those set forth in Paragraph 1.
3

In the event of any inconsistency or conflict between the agreement of the

Clearing Participants which were the parties to the Eligible IRS Transaction as set forthin Paragraph 1 and the provisions of Paragraph 1, the provisions of Paragraph 1 shallprevail.
Section 2 Cleared Contracts (Articles 51 – 53-4)
Article 51. Details of Cleared Contracts
1

Cleared Contracts shall be governed by the Rules, the ISDA Master Agreement70and the ISDA Definitions. Any individual 2002 ISDA Master Agreement with its Schedule,
or any other form of master agreement, separately prescribed by JSCC 92 , which
stipulates basic matters concerning over-the-counter derivative transactions, existing
between Clearing Participants, or any other agreement between Clearing Participants
which is not prescribed in the Rules, including but not limited to any Confirmation enteredinto between Clearing Participants which were the parties to the relevant Eligible IRS
Transaction, shall have no force or effect on Cleared Contracts.
2

Details of the Cleared Contracts shall be subject to the provisions set forth in

Article 49.1 and Paragraph 1 above, and the rules separately prescribed by JSCC93.
3

Any replacement of terms and other matters which would become necessary for

applying the ISDA Master Agreement and the ISDA Definitions to Cleared Contracts
pursuant to the provisions of Paragraph 1 shall be separately prescribed by JSCC94.
4

In the event of inconsistency or conflict between the provisions of the ISDA

Master Agreement or the ISDA Definitions and the provisions of the Rules, the provisionsof the Rules shall prevail.
Article 51-2.

Application for Exchanging Mark-to-Market Difference And Adjustment

Amount1

When a Clearing Participant intends to exchange Mark-to-Market Difference

And Adjustment Amount for Cleared Contracts (Collateral Type), it must notify such effectto JSCC in the manner prescribed by JSCC 95 (“Application for Exchanging Mark-toMarket Difference And Adjustment Amount).
2

When JSCC has received an Application for Exchanging Mark-to-Market

Difference And Adjustment Amount from a Clearing Participant for multiple Cleared
Contracts (Collateral Type) recorded in the Proprietary account or the same Customer
account pursuant to the provisions in Paragraph 1, JSCC will confirm that such Cleared
Contracts (Collateral Type) satisfy the conditions separately prescribed by JSCC96 (“VM-92

cf. Handling Procedures of IRS Clearing Business, Article 29.1.
cf. Handling Procedures of IRS Clearing Business, Article 29.3.
94
cf. Handling Procedures of IRS Clearing Business, Article 29.2.
95
cf. Handling Procedures of IRS Clearing Business, Article 29-2.1.
96Handling Procedures of IRS Clearing Business, Article 29-2.3
9371

as-Settlement Requirements”) in the manner prescribed by JSCC 97 .

If the Cleared

Contracts (Collateral Type) satisfy the VM-as-Settlement Requirements, such Cleared
Contracts shall be treated as Cleared Contracts (Settlement Type) as of the time of theconfirmation by JSCC. Then, Variation Margin will be not paid or received for such
Cleared Contracts.
3

Upon JSCC’s confirmation of satisfaction of VM-as-Settlement Requirements

pursuant to the provisions in Paragraph 2, the Variation Margin, obligations to return
Variation Margin and payment obligations for Mark-to-Market Difference shall be netted
automatically as prescribed by JSCC98, without any notice from JSCC or such Clearing
Participant.
4

A Clearing Participant may withdraw an Application for Exchanging Mark-to-Market Difference And Adjustment Amount made pursuant to the provisions in Paragraph
1 through a method separately prescribed by JSCC, during the period before JSCC
makes confirmation prescribed in Paragraph 2.
5

In addition to the matters set forth in Paragraphs 1 through 4, matters necessary

for the exchanging of Mark-to-Market Difference And Adjustment Amount shall beseparately prescribed by JSCC.
Article 52. Early Termination Charge
In the event of an Early Termination of a Cleared Contract, the relevant Clearing
Participant or JSCC, as the case may be, must pay an Early Termination Charge asprescribed in the Rules.
Article 53. Per Trade Compression of Cleared Contracts
1

If a Clearing Participant desires the Per Trade Compression of a Cleared

Contract, it shall apply for Per Trade Compression to JSCC by giving notice in the method
separately prescribed by JSCC99.
2

If JSCC receives the application for the Per Trade Compression of multiple

Cleared Contracts recorded on the Proprietary Account or a same Customer Account97

Handling Procedures of IRS Clearing Business, Article 29-2.4
Handling Procedures of IRS Clearing Business, Article 29-2.5
99
cf. Handling Procedures of IRS Clearing Business, Article 30.1.
98

72

from a Clearing Participant in accordance with Paragraph 1, JSCC shall check, in themanner separately prescribed by JSCC, to see if the Cleared Contracts and the new
Cleared Contract that will come into effect as a result of the Per Trade Compression
satisfy the requirements separately prescribed by JSCC100 (“Per Trade Compression
Conditions”). If such Cleared Contracts and new Cleared Contract that will come into
effect as a result of the Per Trade Compression satisfy the Per Trade Compression
Conditions, JSCC and the Clearing Participant shall have the relevant Cleared Contracts
terminated and the new Cleared Contract with such economic terms as designated by
JSCC identical to the relevant Cleared Contracts established as Cleared Contract(Collateral Type) in the manner prescribed by JSCC as of the time of such confirmation
by JSCC.
3

Claims and obligations under the Cleared Contract terminated as per theprovisions of Paragraph 2, other than those designated by JSCC101, shall cease to exist
and have no future effect.
4

JSCC will not conduct Per Trade Compression if the Per Trade Compression

Conditions are not satisfied when JSCC confirmed the satisfaction as set forth inParagraph 2.
5

A Clearing Participant may withdraw an application for Per Trade Compression

made pursuant to the provisions of Paragraph 1 through a method separately prescribedby JSCC102.
6

When JSCC receives an application for Blended Rates Compression under

Article 53-2.1 in respect of the Cleared Contracts for which an application for Per Trade
Compression is made by a Clearing Participant pursuant to the provisions of Paragraph
1, JSCC considers that all applications for Per Trade Compression related to all Cleared
Contracts recorded on the Proprietary Account or the same Customer Account on which
the relevant Cleared Contracts are recorded are withdrawn.
7

In addition to the matters set forth in Paragraphs 1 through 6, matters necessary

for the Per Trade Compression of Cleared Contracts shall be separately prescribed by
100

cf. Handling Procedures of IRS Clearing Business, Article 30.2.
cf. Handling Procedures of IRS Clearing Business, Article 30.6.
102
cf. Handling Procedures of IRS Clearing Business, Article 30.1.
10173

JSCC103.
Article 53-2.
1

Blended Rates Compression of Cleared Contracts

If a Clearing Participant desires the Blended Rates Compression of a Cleared

Contract, it shall apply for Blended Rates Compression to JSCC by giving notice in themethod separately prescribed by JSCC104.
2

If JSCC receives the application for the Blended Rates Compression of multiple

Cleared Contracts recorded on the Proprietary Account or a same Customer Accountfrom a Clearing Participant in accordance with Paragraph 1, JSCC shall check, in themanner separately prescribed by JSCC, to see if the Cleared Contracts and the new
Cleared Contract that will come into effect as a result of the Blended Rates Compression
satisfy the requirements separately prescribed by JSCC 105 (“Blended Rates
Compression Conditions”). If such Cleared Contracts and new Cleared Contract thatwill come into effect as a result of the Blended Rates Compression satisfy the Blended
Rates Compression Conditions, JSCC and the Clearing Participant shall have therelevant Cleared Contracts terminated and the new Cleared Contract with sucheconomic terms as designated by JSCC identical to the relevant Cleared Contracts
established as Cleared Contract (Collateral Type) in the manner prescribed by JSCC asof the time of such confirmation by JSCC.
3

Claims and obligations under the Cleared Contract terminated as per theprovisions of Paragraph 2, other than those designated by JSCC106, shall cease to exist
and have no future effect.
4

JSCC will not conduct Blended Rates Compression if the Blended Rates

Compression Conditions are not satisfied when JSCC confirmed the satisfaction as set
forth in Paragraph 2.
5

A Clearing Participant may withdraw an application for Blended Rates

Compression made pursuant to the provisions of Paragraph 1 through a method
separately prescribed by JSCC107.
103

cf. Handling Procedures of IRS Clearing Business, Article 30.
cf. Handling Procedures of IRS Clearing Business, Article 30-2.1.
105
cf. Handling Procedures of IRS Clearing Business, Article 30-2.2.
106
cf. Handling Procedures of IRS Clearing Business, Article 30-2.5.
107
cf. Handling Procedures of IRS Clearing Business, Article 30-2.1.
104

74

6

When JSCC receives an application for Per Trade Compression under Article

53.1 in respect of the Cleared Contracts for which an application for Blended Rates
Compression is made by a Clearing Participant pursuant to the provisions of Paragraph
1, JSCC considers that all applications for Blended Rates Compression related to all
Cleared Contracts recorded on the Proprietary Account or the same Customer Accounton which the relevant Cleared Contracts are recorded are withdrawn.
7

In addition to the matters set forth in Paragraphs 1 through 6, matters necessary

for the Blended Rates Compression of Cleared Contracts shall be separately prescribedby JSCC.
Article 53-2-2. Vendor-Initiated Compression of Cleared Contracts
1

When a Clearing Participant intends to carry out Vendor-Initiated Compression

in respect of Cleared Contracts, it shall apply for it to JSCC in the manner as separately
prescribed by JSCC108.
2

If JSCC receives an application for Vendor-Initiated Compression of Cleared

Contracts from a Clearing Participant pursuant to the provisions of Paragraph 1, JSCC
shall confirm that the Cleared Contracts and new Cleared Contracts that will come into
effect as a result of Vendor-Initiated Compression, satisfy the requirement separately
prescribed by JSCC109 and all Clearing Participants have deposited with or delivered to
JSCC the Required Intraday Margin calculated on an assumption of the execution of the
Vendor-Initiated Compression (“Vendor-Initiated Compression Conditions”) pursuant to
the provisions set forth by JSCC110.

If the Vendor-Initiated Compression Conditions are

satisfied, JSCC and the Clearing Participant shall have the relevant Cleared Contracts
terminated, and have new Cleared Contracts, terms and conditions of which aredescribed in such applications for Vendor-Initiated Compression established as Cleared
Contract (Collateral Type) at the time of such confirmation by JSCC.
3

Claims and obligations under the Cleared Contracts terminated as per theprovision of Paragraph 2, other than those designated by JSCC111, shall cease to exist

108

cf. Handling Procedures of IRS Clearing Business, Article 30-2.1.
cf. Handling Procedures of IRS Clearing Business, Article 30-2.2.
110
cf. Handling Procedures of IRS Clearing Business, Article 30-2.3.
111
cf. Handling Procedures of IRS Clearing Business, Article 30-2.4
10975

and have no future effect.
4

If JSCC cannot confirm the satisfaction of the Vendor-Initiated Compression

Conditions as set forth in Paragraph 2 at the time separately prescribed by JSCC112, no
Vendor-Initiated Compression will occur in respect of all applications for Vendor-InitiatedCompression submitted at such time.
5

Notwithstanding the provisions of Article 48.1, during the hours prescribed by

JSCC 113 on the day on which the application for Vendor-Initiated Compression is
submitted, no request for Clearings will be accepted by JSCC.
6

The parties to the Cleared Contracts terminated as per the provisions ofParagraph 2 shall settle Cash equivalent to Unwind Fee with JSCC in the mannerprescribed by JSCC114.
7

In addition to the matters set forth in Paragraphs 1 through 6, matters necessaryfor Vendor-Initiated Compression of Cleared Contracts shall be separately prescribed by
JSCC.
Article 53-2-3. Member-Initiated Compression of Cleared Contracts
1

When a Clearing Participant intends to carry out the Member-InitiatedCompression in respect of Cleared Contracts, it shall apply for it to JSCC in the mannerseparately prescribed by JSCC115. In this case, if multiple Clearing Participants intend
to jointly apply for Member-Initiated Compression, one of those Clearing Participants
shall be designated as a representative, which will apply to JSCC for Member-InitiatedCompression on behalf of other Clearing Participants (hereinafter referred to as“Collaborating Clearing Participants”).
2

If JSCC receives the application for the Member-Initiated Compression inaccordance with Paragraph 1, JSCC shall check, in the manner separately prescribedby JSCC, to see if the Cleared Contracts subject to such application and the new Cleared
Contract that will come into effect as a result of the Member-Initiated Compression satisfy

112

cf. Handling Procedures of IRS Clearing Business, Article 30-2.5.
cf. Handling Procedures of IRS Clearing Business, Article 30-2.6.
114
cf. Handling Procedures of IRS Clearing Business, Article 30-2.7.
115
cf. Handling Procedures of IRS Clearing Business, Article 30-4.1.
113

76

the requirements separately prescribed by JSCC 116 and if the Clearing Participant,including Collaborating Clearing Participants, if any (the same applies in this paragraph),has deposited with or delivered to JSCC Margin Required to Clear calculated on anassumption of the execution of the Member-Initiated Compression (“Member-InitiatedCompression Conditions”).

If the Member-Initiated Compression Conditions are

satisfied, JSCC and the Clearing Participant(s) shall have the relevant Cleared Contracts
terminated and have new Cleared Contract, terms and conditions of which are describedin such applications for Member-Initiated Compression established as Cleared Contract(Collateral Type) at the time of such confirmation by JSCC.
3

Claims and obligations under the Cleared Contract terminated as per theprovisions of Paragraph 2, other than those designated by JSCC117, shall cease to exist
and have no future effect.
4

JSCC will not conduct Member-Initiated Compression if the Member-InitiatedCompression Conditions are not satisfied when JSCC confirmed the satisfaction as set
forth in Paragraph 2.
5Parties to the Cleared Contracts terminated pursuant to the provisions ofParagraph 2 shall pay or receive Cash, as an Unwind Fee, between JSCC as prescribedby JSCC118.
6

In addition to the matters set forth in Paragraphs 1 through 5, matters necessary

for the Member-Initiated Compression of Cleared Contracts shall be separately
prescribed by JSCC.
Article 53-2-4. JSCC-Initiated Compression of Cleared Contracts
1

When a Clearing Participant intends to carry out the JSCC-InitiatedCompression in respect of Cleared Contracts, it shall express its intention to do so to
JSCC in advance in the manner separately prescribed by JSCC119.

116

cf. Handling Procedures of IRS Clearing Business, Article 30-4.2.
cf. Handling Procedures of IRS Clearing Business, Article 30-4.4.
118
cf. Handling Procedures of IRS Clearing Business, Article 30-4.5.
119
cf. Handling Procedures of IRS Clearing Business, Article 30-4-2.1.
117

77

2

The Clearing Participant expressed its intension as prescribed in Paragraph 1

shall apply for the JSCC-Initiated Compression in respect of the Cleared Contracts it
intends to carry out the JSCC-Initiated Compression in the manner separately
prescribed by JSCC120.
3

If JSCC receives the application for the JSCC-Initiated Compression inaccordance with Paragraph 2, JSCC shall give notice of the terms of the Cleared
Contracts to terminate and new Cleared Contracts to come into effect, through theCompression JSCC proposes based on such application, to the parties to such Cleared
Contracts.
4

When all Clearing Participants applied for the JSCC-Initiated Compression as

set forth in Paragraph 2 agree to the proposal set forth in Paragraph 3 in the mannerprescribed by JSCC121, JSCC shall check, in the manner separately prescribed by
JSCC122, to see if the Cleared Contracts subject to such application and the new
Cleared Contract that will come into effect as a result of the JSCC-InitiatedCompression satisfy the requirements separately prescribed by JSCC123 and if the
Clearing Participant has deposited with or delivered to JSCC Margin Required to Clear
calculated on an assumption of the execution of the JSCC-Initiated Compression(“JSCC-Initiated Compression Conditions”). If the JSCC-Initiated Compression
Conditions are satisfied, JSCC and the Clearing Participant(s) shall have the relevant
Cleared Contracts terminated and have new Cleared Contract established as Cleared
Contract (Collateral Type) as per the proposal for the JSCC-Initiated Compression at
the time of such confirmation by JSCC.
5

Claims and obligations under the Cleared Contract terminated as per theprovisions of Paragraph 4, other than those designated by JSCC, shall cease to exist
and have no future effect.
6

JSCC will not conduct JSCC-Initiated Compression if the JSCC-InitiatedCompression Conditions are not satisfied when JSCC confirmed the satisfaction as set
forth in Paragraph 4.

120

cf. Handling Procedures of IRS Clearing Business, Article 30-4-2.2.
cf. Handling Procedures of IRS Clearing Business, Article 30-4-2.3.
122
cf. Handling Procedures of IRS Clearing Business, Article 30-4-2.5.
123
cf. Handling Procedures of IRS Clearing Business, Article 30-4-2.4.
121

78

7

A Clearing Participant may withdraw its application for JSCC-InitiatedCompression submitted pursuant to the provisions of Paragraph 2 in the mannerseparately prescribed by JSCC124.
8

Parties to the Cleared Contracts terminated pursuant to the provisions ofParagraph 4 shall pay or receive Cash, as an Unwind Fee, between JSCC asprescribed by JSCC125.
9In addition to the matters set forth in Paragraphs 1 through 8, mattersnecessary for the JSCC-Initiated Compression of Cleared Contracts shall be separately
prescribed by JSCC.
Article 53-3. Request for Position Transfer of Proprietary Cleared Contracts of Clearing
Participant
1

A Clearing Participant may, in accordance with the provisions set forth in this

Article and Article 53-4, have all or a part of Proprietary Cleared Contracts existing
between such Clearing Participant and JSCC succeeded to by a Successor Clearing
Broker.
2

When requesting the Position Transfer to JSCC pursuant to the provisions ofParagraph 1, the relevant Clearing Participant shall ask the Successor Clearing Broker
to accept such Position Transfer and obtain its consent in advance.
3

When the Successor Clearing Broker accepts the Position Transfer of theProprietary Cleared Contracts set forth in Paragraph 2 and has received the request form
therefor from the Clearing Participant which is the party to the Proprietary Cleared
Contracts (referred to as “Requesting Clearing Participant” in this Article and Article 534), it shall submit such request form to JSCC by 1:00 p.m. on the desired date of Position
Transfer.

Such request form shall state that the Requesting Clearing Participant andthe Successor Clearing Broker have agreed to such Position Transfer.
Article 53-4.
1
124
125

Completion of Position Transfer of Proprietary Cleared Contracts

Upon receipt of the request for Position Transfer made in accordance with thecf. Handling Procedures of IRS Clearing Business, Article 30-4-2.2.
cf. Handling Procedures of IRS Clearing Business, Article 30-4-2.6.
79

provisions of Article 53-3, JSCC will calculate the Margin Required to Clear on anassumption of completion of the Position Transfer of the Proprietary Cleared Contracts
the Requesting Clearing Participant desires to Position Transfer to the Successor
Clearing Broker (hereinafter referred to as “Position Transfer Requested Cleared
Contracts”) as of 4:00 p.m. on the Position Transfer Date (as defined in Paragraph 4.(1)below), as well as the Early Termination Charge and the amount to be paid upon Position
Transfer in accordance with the rules prescribed by JSCC126. JSCC shall accept therequest for such Position Transfer, if JSCC can confirm that the Requesting Clearing
Participant and the Successor Clearing Broker has deposited to JSCC the amount ofsuch Margin Required to Clear no later than 4:00 p.m. on the Position Transfer Date andjudges that there is no specific issue in position holding status of the Requesting Clearing
Participant and the Successor Clearing Broker after the Position Transfer.
2

The Position Transfer of the Position Transfer Requested Cleared Contracts set

forth in Article 53-3.1 shall have an effect of having the Successor Clearing Broker
assume the claims and obligations that are identical, in terms and conditions separately
designated by JSCC 127 , to the claims and obligations under the Position Transfer
Requested Cleared Contracts between the Requesting Clearing Participant and JSCC
existing immediately before the termination of the Proprietary Cleared Contracts
pursuant to the provisions of Paragraph 3 below as of the time when JSCC accepts therequest for Position Transfer pursuant to the provisions of Paragraph 1:
3

Upon Position Transfer of the Position Transfer Requested Cleared Contracts

pursuant to the provisions of Paragraphs 1 and 2, such Position Transfer Requested
Cleared Contracts shall terminate as the matter of course as of the time when the claims
and obligations set forth in Paragraph 2 come into effect, and the claims and obligations
under the Position Transfer Requested Cleared Contracts shall cease to exist and haveno future effect, except for those designated by JSCC128.
4

When JSCC accepts, pursuant to the provisions of Paragraph 1, the request for

Position Transfer as set forth in the provisions of Article 53-3, the Position Transfer
Requested Cleared Contracts terminated pursuant to the provisions of Paragraph 3 shallbe settled and the Position Transfer thereof shall occur in accordance with the following
126

cf. Handling Procedures of IRS Clearing Business, Article 30-3.
cf. Handling Procedures of IRS Clearing Business, Article 30-4.
128
cf. Handling Procedures of IRS Clearing Business, Article 35-4-2.
127

80

provisions:(1)

The claims and obligations prescribed in Paragraph 2 shall arise de novo

between JSCC and the Successor Clearing Broker, on the date of such acceptance by
JSCC (“Position Transfer Date”);(2)

The claims and obligations which arise pursuant to Item (1) shall be deemed as

the claims and obligations under the Proprietary Cleared Contracts which are Cleared
Contracts (Collateral Type) between the Successor Clearing Broker and JSCC whichcame into effect as a result of the request for Clearing by the Successor Clearing Broker;
and(3)

When the Position Transfer Requested Cleared Contracts terminate pursuant toParagraph 3 and the claims and obligations arise pursuant to the provisions of Item (1),
JSCC, the Successor Clearing Broker and the Requesting Clearing Participant shall pay
or receive the amount due at the time of the Position Transfer, the Early Termination
Charge and Variation Margin in the manner prescribed by JSCC.
5

The provisions of the Rules shall apply to the claims and obligations which arise

between JSCC and Successor Clearing Broker pursuant to the provisions of Paragraph
4 as if such claims and obligations are the Proprietary Cleared Contracts which are
Cleared Contracts (Collateral Type) between the Successor Clearing Broker and JSCC.
Section 3 Special Provisions relating to Clearing Brokerage (Articles 54 – 58)
Article 54.

Clearing Brokerage by Customer Belonging to Same Corporate Group as

Clearing Broker
1

When a Customer in the same Corporate Group as the Clearing Broker (referred

to as “Affiliated Customer” in this Article, Articles 55 and 57) intends to request such
Clearing Broker to act as its Clearing Broker, it shall notify JSCC of the name of the
Clearing Participant that will become the counterparty (“Designated Counterparty”) to the
IRS Transaction to which its Clearing Broker executes and other matters prescribed by
JSCC129 in the manner set forth in the Subordinate Rules130.

129
130

cf. Handling Procedures of IRS Clearing Business, Article 31.2.
cf. Handling Procedures of IRS Clearing Business, Article 31.1.
81

2

The Clearing Broker and the Affiliated Customer agree in advance that, when

the notification given under Paragraph 1 arrives at JSCC, the Affiliated Customer shallbe deemed to have requested the Clearing Brokerage in respect of the IRS Transaction
set forth in Paragraph 1 and the Clearing Broker shall be deemed to have accepted such
request at that time.
3

The provisions of Paragraph 2 shall not apply in any of the following events:(1)

In respect of the notification set forth in Paragraph 1:a.

If JSCC has not received a letter of undertaking set forth in Article 43.2
from the Affiliated Customer submitted such notification, or such letter ofundertaking is not effective;b.

If new Clearing by the Clearing Broker subject to such notification for the
Customer’s Cleared Contracts on the book of the relevant Customer has
been suspended, either entirely or partially;c.

If the Clearing Brokerage Original Transaction which is the subject of such
notification fails to satisfy the requirements separately prescribed by
JSCC131; ord.

Such notification fails to meet the conditions separately prescribed by
JSCC.

(2)

The contents of the notification set forth in Paragraph 1 are inconsistent with aseparate agreement concerning limits on Clearing Brokerage made between a
Clearing Broker and the Customer, provided that such agreement is notified to
JSCC in the manner prescribed by JSCC, and the limits mentioned fell within
the criteria set by JSCC132.

4

The notification set forth in Paragraph 1 by Affiliated Customer shall be deemed

as its declaration, to the Clearing Participant or other Customer who is the counterparty
to such Clearing Brokerage Original Transaction (referred to as “Original Counterparty”
131
132

cf. Handling Procedures of IRS Clearing Business, Article 32.
cf. Handling Procedures of IRS Clearing Business, Article 34.1.
82

in this paragraph, Paragraph 54-2 and in Article 58), of an agreement to terminate theClearing Brokerage Original Transaction subject to the instruction to clear through
Clearing Brokerage, provided that below listed conditions are met:
(1)

Based on the request and acceptance pursuant to the provisions of Paragraph
2, an Eligible IRS Transaction, identical to the Clearing Brokerage Original
Transaction in the terms and conditions as separately prescribed by JSCC133,
comes into effect between such Clearing Broker and the Original Counterparty
or a Clearing Participant acting on behalf of such Original Counterparty;(2)

The Affiliated Customer and the Original Counterparty or a Clearing Participant
acting on behalf of the Original Counterparty request Clearing for the Eligible
IRS Transaction set forth in Item (1) to JSCC in accordance with the provisionsof Article 48; and(3)

The Clearing set forth in Item (2) becomes effective and the relevant Cleared
Contracts come into effect.

5

When withdrawing its request for Clearing Brokerage set forth in Paragraph 1,

the Affiliated Customer must also cancel its agreement to terminate the Clearing
Brokerage Original Transaction set forth in Paragraph 4.
Article 54-2.

Clearing Brokerage by Customer not Belonging to Same Corporate Groupas Clearing Broker
1

The following provisions shall apply to Clearing Brokerage by a Customer who

does not belong to the same Corporate Group as the Clearing Broker (referred to as“Unaffiliated Customer” in this Article, Articles 55-2 and 57-2).
(1)

The provisions of Article 54.1 shall apply mutatis mutandis.

When applying

Article 54.1, the term “Affiliated Customer” shall be replaced with “Unaffiliated Customer.”(2)

The Clearing Broker and the Unaffiliated Customer shall agree in advance that,when the notification given under Item (1) arrives at JSCC, the Customer shall bedeemed to have requested the Clearing Broker in respect of the IRS Transactions set
forth in Item (1).
133

cf. Handling Procedures of IRS Clearing Business, Article 34.2
83

(3)

The provisions of Article 54.3 shall apply. When applying Article 54.3, the term

“Affiliated Customer” shall be replaced with “Unaffiliated Customer.”(4)

The notification set forth in Paragraph 1 by Unaffiliated Customer

shall bedeemed as its declaration, to the Original Counterparty, of an agreement to terminate theClearing Brokerage Original Transaction subject to instruction to clear through Clearing
Brokerage, provided that below listed conditions are met:
Based on the request pursuant to the provisions of Item (2), an Eligible IRS

i.

Transaction, identical to the Clearing Brokerage Original Transaction in theterms and conditions as separately prescribed by JSCC134, comes into effectbetween such Clearing Broker and the Original Counterparty or a Clearing
Participant acting on behalf of such Original Counterparty;
The provisions of Article 54.4.(2) shall apply. In applying Article 54.4.(2), theii.

term “Affiliated Customer” shall be replaced with “Unaffiliated Customer.”
The provisions of Article 54.4.(3) shall apply. In applying Article 54.4.(3), theiii.

term “Affiliated Customer” shall be replaced with “Unaffiliated Customer.”(5)

The provisions of Article 54.5 shall apply. In applying Article 54.5., the term

“Affiliated Customer” shall be replaced with “Unaffiliated Customer.”2

Upon receipt of the notification set forth in Article 54.1 which applies to this

Article as per provisions of Paragraph 1, JSCC shall inform the Clearing Broker of thecontents of such notice as required according to its rules.
3

The Clearing Broker that has received the notification as set forth in Paragraph

2 shall advise JSCC of its decision as to whether or not it accepts such request for
Clearing Brokerage.
4

Notwithstanding the provisions of Paragraphs 2 and 3 above, if a Clearing

Broker notifies JSCC of its desire to skip the notifications set forth in Paragraphs 2 and134

cf. Handling Procedures of IRS Clearing Business, Article 34.2.
84

3 above in a manner prescribed by JSCC135, the Clearing Broker and the Customer agree
in advance to the effect that the notification from JSCC to the Clearing Broker underParagraph 2 and the notification of the acceptance from the Clearing Broker to JSCC
under Paragraph 3 shall be deemed to have been given when the notification set forth in
Article 54.1 to apply mutatis mutandis in accordance with the provisions of Paragraph 1
arrives at JSCC.
Article 55.

Execution of Cleared Contracts according to Request for Clearing Brokerage

by Customer in Same Corporate Group as Clearing Broker
1

When the notification specified in Article 54.1 arrives at JSCC and Clearing

Brokerage is deemed to have been requested and accepted pursuant to Article 54.2, an
IRS Transaction identical, in the terms and conditions prescribed by JSCC 136, to theClearing Brokerage Original Transaction shall come into effect between the Clearing
Broker who provides Clearing Brokerage services to the Affiliated Customer and the
Designated Counterparty in the manner as separately prescribed by JSCC137.
2The Clearing Participants that will become parties to the IRS Transaction set

forth in Paragraph 1 agree in advance that, when such IRS Transaction comes into effectpursuant to the provisions of Paragraph 1, the request for the Clearing in respect of such
IRS Transaction shall be deemed to have been made to JSCC by each such Clearing
Participant in accordance with the provisions of Article 48 at the time when such IRS
Transaction comes into effect.
3

When a Customer’s Cleared Contracts comes into effect, the Clearing Broker

shall notify the relevant Affiliated Customer to that effect and the details thereof without
delay.
4

In the event of termination of the Clearing Brokerage Contract or in any otherevent prescribed by JSCC138, the Customer’s Cleared Contract shall be treated as the
Cleared Contract (Collateral Type) on the proprietary book of the Clearing Participant
who is the party to the Customer’s Cleared Contract after the point of time separately
prescribed by JSCC139.
135

cf. Handling Procedures of IRS Clearing Business, Article 31-2.
cf. Handling Procedures of IRS Clearing Business, Article 34.2.
137
cf. Handling Procedures of IRS Clearing Business, Article 33.
138
cf. Handling Procedures of IRS Clearing Business, Article 35.1.
139
cf. Handling Procedures of IRS Clearing Business, Article 35.2.
136

85

5

If the Clearing Broker acting on behalf of the Affiliated Customer and the

Designated Counterparty are the same entity, for the purpose of the Rules, the Clearing
Broker acting in the capacity of the Designated Counterparty shall be deemed as aseparate Clearing Participant.
6

Once a Customer’s Cleared Contract comes into effect following a Customer

instruction to a Clearing Broker, neither the Affiliated Customer nor the Clearing Broker
may assert any right against each other, as the counterparty to the Clearing BrokerageContract, in respect of the Clearing Brokerage Original Transaction or the IRS
Transaction to come into effect between the Clearing Broker and the DesignatedCounterparty pursuant to the provisions of Paragraph 1, or claims and obligations
thereunder, even if there are any grounds entitling it to assert such right against the
Clearing Participant or the Affiliated Customer who is the counterparty thereto, including
but not limited to the existence of the IRS Transaction, defects in any declaration of its
intention or failure to declare its intention.
Article 55-2.

Execution of Cleared Contracts according to Request for Clearing

Brokerage by Customer not Belonging to Same Corporate Group as Clearing Broker
The following provisions shall apply.
(1)

When the Clearing Broker advises JSCC of its acceptance of an UnaffiliatedCustomer’s request for Clearing Brokerage pursuant to the provisions of Article 54-2.3
or is deemed to have advised JSCC of its acceptance of an Unaffiliated Customer’s
request for Clearing Brokerage pursuant to the provisions of Article 54-2.4, an IRS
Transaction identical, in terms of the terms and conditions separately prescribed by
JSCC140, to the Clearing Brokerage Original Transaction shall come into effect between
the Clearing Broker who provides Clearing Brokerage services to the UnaffiliatedCustomer and the Designated Counterparty in the manner as separately prescribed by
JSCC141.
(2)

The provisions of Article 55.2 shall apply.

(3)

The provisions of Article 55.3 shall apply.

140
141

In applying Article 55.3, the termcf. Handling Procedures of IRS Clearing Business, Article 34.2.
cf. Handling Procedures of IRS Clearing Business, Article 33.
86

“Affiliated Customer” shall be replaced with “Unaffiliated Customer.”(4)

The provisions of Article 55.4 shall apply.

(5)

The provisions of Article 55.5 shall apply. In applying Article 55.5, the term

“Affiliated Customer” shall be replaced with “Unaffiliated Customer.”(6)

The provisions of Article 55.6 shall apply.

In applying Article 55.6, the term

“Affiliated Customer” shall be replaced with “Unaffiliated Customer.”
Article 55-3.

Customer’s Application for Exchanging Mark-to-Market Difference And

Adjustment Amount of Customer’s Cleared Contract
1

In respect of a Customer’s Cleared Contract, when a Customer intends toinstruct the Clearing Broker to apply for exchanging Mark-to-Market Difference And
Adjustment Amount or give instruction to withdraw its Application for Exchanging Mark-

to-Market Differences And Adjustment Amount it shall notify its Clearing Broker of suchintention in the manner agreed between the Customer and its Clearing Broker.
2Upon receipt of the notification set forth in Paragraph 1, the Clearing Broker

shall apply for exchanging Mark-to-Market Difference And Adjustment Amount, orwithdraw the Application for Exchanging Mark-to-Market Difference And Adjustment
Amount, of the Customer’s Cleared Contracts in question to JSCC pursuant to theprovisions of Article 51-2.1 or 4.
Article 56.

Attribution of Profits and Losses Resulting from Customer’s Cleared

Contract1

All profits and losses resulting from Customer’s Cleared Contracts shall attributeto the Customer.
2

When a Clearing Broker receives the Fixed Amount, Floating Amount or any

other Funds, other than Margin, from JSCC in respect of any Customer’s Cleared
Contract, such Clearing Broker shall deliver such Funds to the relevant Customer.
3

When a Clearing Broker owes obligations to pay Funds to JSCC in respect of

any Customer’s Cleared Contract, the Customer shall pay such Funds to the relevant
Clearing Broker.
87Funds referred to in the preceding sentence do not include Margin, the Special Clearing
Charge Collateral, clearing fees, and the Special Clearing Charge.
Article 56-2.

Customer’s Request for Per Trade Compression of Customer’s Cleared

Contract1

In respect of a Customer’s Cleared Contract, when a Customer intends to give

instruction to apply for Per Trade Compression or give instruction to withdraw its
application for Per Trade Compression, it shall notify its Clearing Broker of such intention
in the manner agreed between the Customer and its Clearing Broker.
2Upon receipt of the notification set forth in Paragraph 1, the Clearing Broker

shall apply for Per Trade Compression, or withdraw an application for Per Trade
Compression, of the Customer’s Cleared Contracts in question to JSCC pursuant to theprovisions of Article 53.1 or Article 53.5.
Article 56-3.

Customer’s Request for Blended Rates Compression of Customer’s

Cleared Contract
1

In respect of a Customer’s Cleared Contract, when a Customer intends to give

instruction to apply for Blended Rates Compression or give instruction to withdraw its
application for Blended Rates Compression, it shall notify its Clearing Broker of suchintention in the manner agreed between the Customer and its Clearing Broker.
2Upon receipt of the notification set forth in Paragraph 1, the Clearing Broker

shall apply for Blended Rates Compression, or withdraw an application for Blended
Rates Compression, of the Customer’s Cleared Contracts in question to JSCC pursuant
to the provisions of Article 53-2.1 or Article 53-2.5.
Article 57.

Application for Vendor-Initiated Compression in respect of Customer’s

Cleared Contracts Executed by Customer in Same Corporate Group as Clearing Broker
1

When an Affiliated Customer intends to instruct the Clearing Broker to apply for

Vendor-Initiated Compression, it shall notify such effect to JSCC in the method
prescribed by JSCC142.
142

cf. Handling Procedures of IRS Clearing Business, Article 35-2.1.
88

2

The Clearing Broker and the Affiliated Customer shall agree in advance that,when the notification set forth in Paragraph 1 arrives at JSCC, the Affiliated Customer
shall be deemed to have given instruction to the Clearing Broker to apply for

Vendor-Initiated Compression, and the Clearing Broker shall be deemed to have accepted such
instruction and made application, at that time.
Article 57-2.

Application for Vendor-Initiated Compression in respect of Customer’s

Cleared Contracts Executed by Customer not in Same Corporate Group as Clearing
Broker
1

The following provisions shall apply except that the term “Affiliated Customer”

shall be replaced with “Unaffiliated Customer” and otherwise mutatis mutandis.
(1)

The provisions of Article 57.1 shall apply.

(2)

The provisions of Article 57.2 shall apply.

(3)

The Clearing Broker and the Customer shall agree in advance that, when the

notification set forth in Item (1) arrives at JSCC, the Unaffiliated Customer shall bedeemed to have given instruction to the Clearing Broker to apply for Vendor-InitiatedCompression, at that time.
2

Upon receipt of the notification set forth in Article 57.1 which applies to this

Article as per provisions of Paragraph 1, JSCC shall notify such substance as prescribedby JSCC143 of such notice to the Clearing Broker.
3

The Clearing Broker who has received the notification set forth in Paragraph 2

shall notify JSCC of its decision as to whether or not it accepts the instruction to apply
for such Vendor-Initiated Compression so notified.
Article 57-3. Application for Member-Initiated Compression in respect of Customer’s
Cleared Contracts Executed by Customer in Same Corporate Group as Clearing Broker
1

When an Affiliated Customer intends to instruct the Clearing Broker to apply for

Member-Initiated Compression, it shall notify such effect to JSCC in the method

143

cf. Handling Procedures of IRS Clearing Business, Article 35-2.2.
89

prescribed by JSCC144.
2The Clearing Broker and the Affiliated Customer shall agree in advance that,when the notification set forth in Paragraph 1 arrives at JSCC, the Affiliated Customer
shall be deemed to have given instruction to the Clearing Broker to apply for MemberInitiated Compression, and the Clearing Broker shall be deemed to have accepted such
instruction and made application, at that time.
Article 57-4. Application for Member-Initiated Compression in respect of Customer’s
Cleared Contracts Executed by Customer not in Same Corporate Group as Clearing
Broker
1

The following provisions shall apply except that the term “Affiliated Customer”

shall be replaced with “Unaffiliated Customer” and otherwise mutatis mutandis.
(1)

The provisions of Article 57-3.1 shall apply.

(2)

The provisions of Article 57-3.2 shall apply.

(3)

The Clearing Broker and the Customer shall agree in advance that, when the

notification set forth in Item (1) arrives at JSCC, the Unaffiliated Customer shall bedeemed to have given instruction to the Clearing Broker to apply for Member-InitiatedCompression, at that time.
2

Upon receipt of the notification set forth in Article 57-3.1 which applies to this

Article as per provisions of Paragraph 1, JSCC shall notify such substance as prescribedby JSCC145 of such notice to the Clearing Broker.
3

The Clearing Broker who has received the notification set forth in Paragraph 2

shall notify JSCC of its decision as to whether or not it accepts the instruction to apply
for such Member-Initiated Compression so notified.
Article 57-5.

Customer’s Application for JSCC-Initiated Compression of Customer’s

Cleared Contracts

144
145

cf. Handling Procedures of IRS Clearing Business, Article 35-2-2.1.
cf. Handling Procedures of IRS Clearing Business, Article 35-2-2.2.
90

1

In respect of Customer’s Cleared Contracts, when a Customer intends to give

instruction to express its intention of utilization of the JSCC-Initiated Compression, give
instruction to apply for the JSCC-Initiated Compression in respect of its Customer’s
Cleared Contracts, give instruction to withdraw its application or give instruction toagree to the JSCC-Initiated Compression, the Customer shall notify its Clearing Brokerof such intention in the manner separately agreed between the Customer and its
Clearing Broker.
2Upon receipt of the notification set forth in Paragraph 1, the Clearing Broker

shall express the intention of utilization of the JSCC-Initiated Compression, apply for the
JSCC-Initiated Compression in respect of the Customer’s Cleared Contracts, withdraw
the relevant application or agree to the JSCC-Initiated Compression to JSCC in respectof the Customer’s Cleared Contracts subject such notice, pursuant to the provisions ofArticles 53-2-4.1, 53-2-4.2, 53-2-4.4 or 53-2-4.7.
Article 58. Agreed-upon Termination of Clearing Brokerage Original Transaction
1

A Clearing Brokerage Original Transaction set forth in Article 54.4 or Article 54-

2.1.(4) and any claims and obligations thereunder shall, upon termination thereof byagreement between the Customer who is the party to such Clearing Brokerage Original
Transaction and the Original Counterparty in accordance with the provisions of Article
54.4 or Article 54-2.1.(4) and other provisions of the Rules, cease to exist and have nofuture effect at the time when the Cleared Contracts come into effect as set forth in Article
54.4.(3) or Article 54-2.1.(4).iii, provided that following obligations shall remain effective
after such termination:(1)

Payment obligations for the Fixed Amount and the Floating Amount which havealready become due at the time when such Cleared Contracts come into effect;
and

(2)

Obligations that have already accrued at the time of the execution of such
Cleared Contracts, in addition to those listed in Item (1).

2The Customer and the Original Counterparty shall have no obligation to pay any

fees, damages or other money in relation to the agreed-upon termination set forth inParagraph 1 except for those listed in each item of Paragraph 1.

91

3

In the event of any inconsistency or conflict between the agreement between

the Customer and the Original Counterparty and the provisions of this Article, theprovisions of this Article shall prevail.
Section 4 Position Transfer (Articles 58-2 – 58-7)
Article 58-2.
1

Request for Position Transfer of Customer’s Cleared Contracts

A Customer with respect to whom no Event of Default set forth in the Clearing

Brokerage Agreement has occurred and who has completed deposit or payment to theClearing Broker of the Cash Settlement Amount related to Foreign Currency Cleared
Contracts recorded on the Customer Account established for such Customer may, in
accordance with the provisions set forth in this Article and Article 58-3, have all or a partof Customer’s Cleared Contracts existing on its book transferred from the Clearing
Broker, who is a party to such Customer’s Cleared Contracts and corresponding Clearing
Brokerage Contract, to a Successor Clearing Broker.
2

A Successor Clearing Broker must have concluded the Clearing Brokerage

Agreement with the relevant Customer.
3

In the event of the Position Transfer pursuant to the provisions of Paragraphs 1

and 2, the relevant Customer shall ask the Successor Clearing Broker to accept such
Position Transfer and obtain its consent in advance. Then, the Customer shall notify the
Clearing Broker ( “Carrying Clearing Broker”) who is the party to the Customer’s Cleared
Contracts that will be so transferred (referred to as the “Relevant Cleared Contracts” inthis Section) at the time of such Position Transfer to the effect that it will request such
Position Transfer.
4

When the Successor Clearing Broker accepts the Position Transfer set forth inParagraph 3 and has received the request form therefor from the Customer requestingsuch Position Transfer, it shall submit such request form to JSCC by 1:00 p.m. on thedesired date of Position Transfer.

Such request form shall state, among other things,

the effect that the Successor Clearing Broker has received the request to accept the
Position Transfer and it has consented to accept such Position Transfer; that theCustomer has notified the Carrying Clearing Broker that it desires such Position Transfer
and is requesting such Position Transfer to JSCC; and that the Successor Clearing
Broker is submitting the request form for such Position Transfer to JSCC.
92

Article 58-3.
1

Completion of Position Transfer of Customer’s Cleared Contract

Upon receipt of the request for Position Transfer made in accordance with theprovisions of Article 58-2, JSCC will calculate the Margin Required to Clear on anassumption of completion of the Position Transfer of the Relevant Cleared Contracts asof 4:00 p.m. on the Position Transfer Date, as well as the Early Termination Charge andthe amount to be paid upon Position Transfer in accordance with the rules prescribed by
JSCC146. JSCC shall accept the request for such Position Transfer, if JSCC can confirm
that such Successor Clearing Broker and Carrying Clearing Broker has deposited ordelivered to JSCC the amount of such Margin Required to Clear no later than 4:00 p.m.
on the Position Transfer Date and judges that there is no specific issue in position holding
status of the Carrying Clearing Broker and the Successor Clearing Broker after the
Position Transfer.
The amount of the Margin Required to Clear required to be deposited in the above
sentence shall be the amount of the Margin Required to Clear so calculated minus theamount of Initial Margin deemed to have been deposited with JSCC by Successor
Clearing Broker as an agent pursuant to the provisions of Paragraph 4.(4)2The Position Transfer set forth in Article 58-2.1 shall have an effect of having

the Successor Clearing Broker assume all of the below listed claims and obligations
under the Relevant Cleared Contracts as of the time when JSCC accepts the request for
Position Transfer pursuant to the provisions of Paragraph 1:(1)Claims and obligations that are identical, in terms and conditions separately

designated by JSCC 147 , to the claims and obligations under the Relevant Cleared
Contracts between the Carrying Clearing Broker and JSCC existing immediately before
the termination of the Relevant Cleared Contracts pursuant to the provisions ofParagraph 3 below; and(2)

Claims and obligations that are identical, in terms and conditions separately

designated by JSCC 148 , to the claims and obligations under the Clearing BrokerageContracts between the Carrying Clearing Broker and the relevant Customer existing146

cf. Handling Procedures of IRS Clearing Business, Article 35-3.
cf. Handling Procedures of IRS Clearing Business, Article 35-4.
148
cf. Handling Procedures of IRS Clearing Business, Article 35-4.
147

93

immediately before the termination of the Clearing Brokerage Contracts corresponding
to the Relevant Cleared Contracts pursuant to the provisions of Paragraph 3 below.
3

Upon Position Transfer of the Relevant Cleared Contracts pursuant to theprovisions of Paragraphs 1 and 2, such Relevant Cleared Contracts and the Clearing
Brokerage Contracts corresponding thereto shall terminate as the matter of course as of
the time when the Position Transfer of the claims and obligations set forth in Paragraph2 becomes effective, and the claims and obligations under the Relevant Cleared
Contracts and the Clearing Brokerage Contracts corresponding thereto shall cease toexist and have no future effect, except for those designated by JSCC149.
4

When JSCC accepts, pursuant to the provisions of Paragraph 1, the request for

Position Transfer as set forth in the provisions of Article 58-2, the Relevant Cleared
Contracts terminated pursuant to the provisions of Paragraph 3 shall be settled and the
Position Transfer thereof shall occur in accordance with the following provisions:(1)

The claims and obligations prescribed in each item of Paragraph 2 shall arise

de novo among JSCC, the Successor Clearing Broker and the relevant Customer, as
applicable, on the Position Transfer Date;(2)

The claims and obligations which arise pursuant to Item (1) shall be deemed as

the claims and obligations under the Customer’s Cleared Contracts which are Cleared
Contracts (Collateral Type) and the corresponding Clearing Brokerage Contracts, bothof which came into effect as a result of Clearing Brokerage by such Customer to such
Successor Clearing Broker;(3)

When the Relevant Cleared Contracts and the corresponding Clearing

Brokerage Contracts terminate pursuant to Paragraph 3 and the claims and obligations
arise pursuant to the provisions of Item (1), JSCC, the Successor Clearing Broker, theCarrying Clearing Broker and the relevant Customer shall pay or receive the amount due
at the time of the Position Transfer, the Early Termination Charge and Variation Margin
in the manner prescribed in the Subordinate Rules; and(4)

If all claims and obligations specified in each item of Paragraph 2 are assumed,

Initial Margin deposited pursuant to the provisions of Article 72 in which the relevant
149

cf. Handling Procedures of IRS Clearing Business, Article 35-4-2.
94

Customer has the right to claim return pursuant to the provisions of Article 76 shall bedeemed as Initial Margin that has been deposited with JSCC by such Customer throughthe Successor Clearing Broker acting as its agent, except for those for which notification
to the effect of treating it as Initial Margin deposited with JSCC through Carrying Clearing
Broker acting as agent has been given.
5

The provisions of the Rules shall apply to the claims and obligations which arise

between JSCC and Successor Clearing Broker pursuant to the provisions of Paragraph
4 as if such claims and obligations are the Customer’s Cleared Contracts which are
Cleared Contracts (Collateral Type).
Article 58-4.
1

Request for Transfer of Clearing Brokerage Contract of Customer

A Customer with respect to whom no Event of Default set forth in the Clearing

Brokerage Agreement has occurred and who has completed deposit or payment to theClearing Broker of the Cash Settlement Amount related to Foreign Currency Cleared
Contracts recorded on the Customer Account established for such Customer (referred toin this Article and Article 58-5 as “Transferring Customer”) may, in accordance with theprovisions set forth in this Article and Article 58-5, Transfer all or a part of Clearing
Brokerage Contracts existing between it and the Clearing Broker to a Clearing Participant(hereinafter referred to as “Receiving Clearing Participant”) or another Customer(referred to as “Receiving Customer” in this Article and Article 58-5).
2

When Transferring Clearing Brokerage Contracts to its Clearing Broker pursuant

to the provisions of Paragraph 1, the Transferring Customer shall ask its Clearing Broker
to accept such Transfer, and shall obtain consent of such Clearing Broker in advance.
When Transferring Clearing Brokerage Contracts to a Receiving Clearing Participant
other than its Clearing Broker pursuant to the provisions of Paragraph 1, the Transferring
Customer shall ask its Clearing Broker and the Receiving Clearing Participant to accept
such Transfer, and shall obtain their consent in advance.

When Transferring Clearing

Brokerage Contracts to a Receiving Customer pursuant to the provisions of Paragraph
1, the Transferring Customer shall ask its Clearing Broker, the Receiving Customer andthe Clearing Broker for the Receiving Customer to accept such Transfer, and shall obtain
their consents in advance.
3

When the Clearing Broker for the Transferring Customer, or the Clearing Broker

for the Transferring Customer and the Receiving Clearing Participant, or the Clearing
95

Broker for the Transferring Customer, the Receiving Customer and the Clearing Broker
for the Receiving Customer, as applicable, consents to the Transfer of Clearing
Brokerage Contracts as set forth in Paragraph 2 and receives the request form thereforfrom the Transferring Customer, it (or they) shall submit such request form to JSCC by
1:00 p.m. on the desired date of Transfer.

Such request form shall state that all the

relevant parties involved in the Transfer have agreed to such Transfer.
Article 58-5.
1Completion of Transfer of Clearing Brokerage Contract

Upon receipt of the request for Transfer made in accordance with the provisionsof Article 58-4.3, JSCC will calculate Margin Required to Clear on an assumption ofcompletion of the Transfer of the Clearing Brokerage Contracts as of 4:00 p.m. on thedesired date of transfer. JSCC shall accept the request for such Transfer, if JSCC canconfirm that (i) in the case of a Transfer to Clearing Broker for the Transferring Customer,
the Clearing Broker for the Transfering Customer has deposited or delivered the amountof such Margin Required to Clear to JSCC, (ii) in the case of a Transfer to the Receiving
Clearing Participant other than the Clearing Broker for the Transferring Customer, theClearing Broker for the Transferring Customer and the Receivng Clearing Participant
have deposited or delivered the amount of such Margin Required to Clear to JSCC, or(iii) in the case of a Transfer to the Receivng Customer, the Clearing Broker for theTranseferring Customer and the Clearing Broker for the Receiving Customer havedeposited or delivered the amount of such Margin Required to Clear to JSCC, in eachcase no later than 4:00 p.m. on such date, and judges that (i) in the case of a Transfer
to Clearing Broker for the Transferring Customer, there is no specific issue in position
holding status of the Clearing Broker for the Transferring Customer after the Transfer, (ii)in the case of a Transfer to the Receiving Clearing Participant other than the Clearing
Broker for the Transferring Customer, there is no specific issue in position holding statusof the Clearing Broker for the Transferring Customer and the Receivng Clearing
Participant after the Transfer, or (iii) in the case of a Transfer to the Receivng Customer,
there is no specific issue in position holding status of the Clearing Broker for theTranseferring Customer and the Clearing Broker for the Receiving Customer after theTransfer.
The amount of the Margin Required to Clear required to be deposited in the above
sentence shall be the amount of the Margin Required to Clear so calculated minus theamount of Initial Margin deemed to have been deposited with JSCC by Receiving
Customer through the Clearing Broker for the Receiving Customer acting as its agent or96

Initial Margin deemed to have been deposited with JSCC by the Receiving Clearing
Participant pursuant to the provisions of Paragraph 3.
2

Transfer of Clearing Brokerage Contracts shall come into effect at the time when

JSCC accepts the request for the Transfer pursuant to the provisions of Paragraph 1.
3

Upon the Transfer of the Clearing Brokerage Contracts pursuant to theprovisions of Paragraph 2, and only if all Clearing Brokerage Contracts are Transferredand Initial Margin have been deposited pursuant to the provisions of Article 72, Initial
Margin to which the Transferring Customer has the right to claim return pursuant to theprovisions of Article 76 shall be deemed as Initial Margin that has been deposited with
JSCC by the Receiving Customer through the Clearing Broker for the Receiving
Customer acting as its agent, or Initial Margin deposited with JSCC by the Receiving
Clearing Participant if Clearing Brokerage Contracts are Transferred to the Receiving
Clearing Participant, except for those for which notification to the effect of treating it as
Initial Margin deposited by Transferring Customer with JSCC through the Clearing Broker
for the Transferring Customer as its agent has been given.
4

For a Transfer of Clearing Brokerage Contracts to the Receiving Clearing

Participant that is the Clearing Broker for the Transferring Customer, when the Transfer
comes into effect pursuant to the provisions of Paragraph 2, the Clearing BrokerageContracts between the Transferring Customer and the Clearing Broker for theTransferring Customer subject to the Transfer shall terminate as a matter of course andthe claims and obligations under such Clearing Brokerage Contracts other than thoseprescribed by JSCC 150 shall have no future effect.

For a Transfer of Clearing

Brokerage Contracts to the Receiving Clearing Participant other than the Clearing Broker
for the Transferring Customer, when the Transfer comes into effect pursuant to theprovisions of Paragraph 2, the Clearing Brokerage Contracts between the Transferring
Customer and the Clearing Broker for the Transferring Customer subject to the Transfer
and the Customer’s Cleared Contracts corresponding to the said Clearing BrokerageContracts shall terminate as a matter of course and the claims and obligations
thereunder other than those prescribed by JSCC151 shall cease to exist and have nofuture effect, and at the same time, the claims and obligations that are identical, in terms

150
151

cf. Handling Procedures of IRS Clearing Business, Article 35-4-2.
cf. Handling Procedures of IRS Clearing Business, Article 35-4-2.
97

and conditions separately designated by JSCC152, to the claims and obligations under
the Customer’s Cleared Contracts that shall terminate pursuant to the provisions of thisparagraph shall arise between the Receiving Clearing Particpant and JSCC.
5

In the case of a Transfer to the Receivng Clearing Participant other than the

Clearing Broker for the Transferring Customer, JSCC shall calculate the amount to be
paid upon Transfer and the Early Termination Charge, and, in association with thetermination of the Customer’s Cleared Contracts and the coming into effect of the claims
and obligations as set forth in Paragraph 4, JSCC, the Clearing Broker for theTransferring Customer and the Receiving Clearing Participant shall pay or receive theamount to be paid upon Transfer, the Early Termination Charge and Variation Margin in
the manner prescribed by JSCC.
6.

For a Transfer of Clearing Brokerage Contracts to the Receiving Customer

whose Clearing Broker is the same as the Clearing Broker for the Transferring Customer,
when the Transfer comes into effect pursuant to the provisions of Paragrpah 2, theClearing Brokerage Contracts between the Transferring Customer and the Clearing
Broker for the Transferring Customer subject to the Transfer shall terminate as a matterof course and the claims and obligations under the said Clearing Brokerage Contracts
other than those prescribed by JSCC153 shall cease to exist and have no future effectand, at the same time, the legal relationship with the same terms and conditions as thesaid Clearing Brokerage Contracts shall come into effect between the Receiving
Customer and the Clearing Broker for the Receiving Customer.

For a Transfer ofClearing Brokerage Contracts to the Receiving Customer whose Clearing Broker is not
the same as the Clearing Broker for the Transferring Customer, when the Transfer comes
into effect pursuant to the provisions of Paragrpah 2, the Clearing Brokerage Contracts
between the Transferring Customer and the Clearing Broker for the Transferring
Customer and the Customer’s Cleared Contracts corresponding to the said Clearing
Brokerage Contracts shall terminate as a matter of course and the claims and obligations
thereunder other than those prescribed by JSCC154 shall cease to exist and have nofuture effect, and at the same time, the legal relationship with the same terms andconditions as the said Clearing Brokerage Contracts shall come into effect between the
Receiving Customer and the Clearing Broker for the Receiving Customer, and the claims152

cf. Handling Procedures of IRS Clearing Business, Article 35-4-3
cf. Handling Procedures of IRS Clearing Business, Article 35-4-2.
154
cf. Handling Procedures of IRS Clearing Business, Article 35-4-2.
153

98

and obligations identical, in terms and conditions separately designated by JSCC155, tothe claims and obligations under the Customer’s Cleared Contracts that shall terminate
pursuant to this paragraph shall come into effect between the Clearing Broker for the
Receiving Customer and JSCC.
7.

In case of the Transfer to the Receiving Customer whose Clearing Broker is not

the same as the Clearing Broker for the Transferring Customer, JSCC shall calculate theamount to be paid upon Transfer and the Early Termination Charge, and, in association
with the termination of the Customer’s Cleared Contracts and the coming into effect of
the legal relationship pursuant to the provisions of Paragraph 6, JSCC, the Clearing
Broker for the Transferring Customer and the Clearing Broker for the Receiving
Customer shall pay or receive the amount to be paid upon Transfer, the Early Termination
Charge and Variation Margin in the manner prescribed by JSCC.
8.

The claims and obligations between the Transferring Customer and the Clearing

Broker for the Transferring Customer, or among the Transferring Customer, the Clearing
Broker for the Transferring Customer and the Receiving Clearing Participant, or among
the Transferring Customer, the Clearing Broker for the Transferring Customer, theReceiving Customer and the Clearing Broker for the Receiving Customer, as applicable,
shall be settled among the relevant parties in accordance with their agreements.
9

When Transferring the Clearing Brokerage Contracts to the Receiving Clearing

Participant, the provisions of the Rules shall apply by regarding the Customer’s Cleared
Contracts corresponding to the Clearing Brokerage Contracts which shall terminate
pursuant to the first sentence of Paragraph 4, or in the case of a Transfer to the Receiving
Clearing Participant other than the Clearing Broker for the Transferring Customer, theclaims and obligations arising pursuant to the provisions of the second sentence ofParagraph 4, as the Proprietary Cleared Contracts of the Receiving Clearing Participant
which are Cleared Contracts (Collateral Type).
10.

When Transferring the Clearing Brokerage Contracts to a Receiving Customer,

the provisions of the Rules shall apply by regarding the legal relationship that comes into
effect between the Receiving Customer and the Clearing Broker for the Receiving
Customer pursuant to Paragrpah 6 as the Clearing Brokerage Contracts (CollateralType) that come into effect through a brokerage to the Clearing Broker for the Receiving
155

cf. Handling Procedures of IRS Clearing Business, Article 35-4-3.
99

Customer by the Receiving Customer, and (i) in the case of a Transfer to the Receiving
Customer whose Clearing Broker is the same as the Clearing Broker for the Transferring
Customer, regarding the Customer’s Cleared Contracts corresponding to the Clearing
Brokerage Contracts that shall terminate pursuant to the provisions of the first sentenceof Paragrpah 6 as the Customer’s Cleared Contracts which are Cleared Contracts(Collateral Type) that comes into effect on the book of the Receiving Customer, or (ii) in
the case of a Transfer to the Receiving Customer whose Clearing Broker is not the sameas the Clearing Broker for the Transferring Customer, regarding the claims andobligations arising between the Clearing Broker for the Receiving Customer and JSCC
pursuant to the provisions of the second sentence of Paragraph 6 as the Customer’s
Cleared Contracts which are Cleared Contracts (Collateral Type) that comes into effecton the book of the Receiving Customer.
Article 58-6.

Request for Transfer of Proprietary Cleared Contracts of Clearing

Participant
1

A Clearing Participant (referred to as “Transferring Clearing Participant” in this

Article and Article 58-7) may, in accordance with the provisions set forth in this Article
and Article 58-7, Transfer all or a part of the Proprietary Cleared Contracts existing
between it and JSCC to a Customer (referred to as “Receiving Customer” in this Article
and Article 58-7).
2

When Transferring the Proprietary Cleared Contracts to a Receiving Customer,

for whom theTransferring Clearing Participant is acting as Clearing Broker, pursuant to
the provisions of Paragraph 1, such Transferring Clearing Participant shall ask the
Receiving Customer to accept such Transfer, and shall obtain consent of such Receiving
Customer in advance.

When Transferring the Proprietary Cleared Contracts to a

Receiving Customer, for whom another Clearing Participant is acting as Clearing Broker,
pursuant to the provisions of Paragraph 1, such Transferring Clearing Participant shallask the Receiving Customer and the Clearing Participant which is acting as a Clearing
Broker for the Receiving Customer to accept such Transfer, and shall obtain theirconsents in advance.
3

When the Transferring Clearing Participant obtains consent to the Transfer of

the Proprietary Cleared Contracts from the Receiving Customer, or the Receiving
Customer and the Clearing Broker for the Receiving Customer, as applicable, as set forthin Paragraph 2, it shall submit the request form to JSCC by 1:00 p.m. on the desired date100

of Transfer.

Such request form shall state that all the relevant parties involved in theTransfer have agreed to such Transfer.
Article 58-7

Completion of Transfer of Proprietary Cleared Contracts of Clearing

Participant
1

Upon receipt of the request for Transfer made in accordance with the provisionsof Article 58-6.3, JSCC will calculate Margin Required to Clear on an assumption ofcompletion of the Transfer of the Proprietary Cleared Contracts the Transferring Clearing
Participant desires Transfer to the Receiving Customer as of 4:00 p.m. on the desireddate of Transfer. JSCC shall accept the request for such Transfer, if JSCC can confirm
that (i) in case of the Transfer to its Customer, the Transferring Clearing Participant has
deposited or delivered the amount of such Margin Required to Clear to JSCC, or (ii) incase of the Transfer to the Receiving Customer whose Clearing Broker is another
Clearing Participant, the Transferring Clearing Participant and the Clearing Broker for the
Receiving Custoer have deposited or delivered the amount of such Margin Required toClear to JSCC, no later than 4:00 p.m. on such date and judges that there is no specificissue in position holding status of the Transferring Clearing Paraticipant (or, in case of
the Transfer to the Receiving Customer whose Clearing Broker is another Clearing
Participant, position holding status of the Transferring Clearing Participant and theClearing Broker for the Receiving Customer) after the Transfer.
The amount of the Margin Required to Clear required to be deposited or delivered in theabove sentence shall be the amount of the Margin Required to Clear so calculated minus
the amount of Initial Margin deemed to have been deposited with JSCC by the Receiving
Customer through the Clearing Broker for the Receiving Customer acting as its agent
pursuant to the provisions of Paragraph 3.
2

Transfer of Proprietary Cleared Contracts shall come into effect at the time when

JSCC accepts the request for the Transfer pursuant to the provisions of Paragraph 1.
3

Upon Transfer of the Proprietary Cleared Contracts pursuant to the provisionsof Paragraph 2, Initial Margin related to the Proprietary Cleared Contracts to which theTransferring Clearing Participant has the right to claim return pursuant to the provisionsof Article 76 shall be deemed as Initial Margin that has been deposited with JSCC by the
Receiving Customer through the Clearing Broker for the Receiving Customer acting as
its agent, except for those for which notification to the effect of treating it as Initial Margin101

deposited by the Transferring Clearing Participant with JSCC has been given when all of
the Proprietary Cleared Contracts are Transferred.
4

Upon Transfer of the Proprietary Cleared Contracts pursuant to the provisionsof Paragraph 2, the legal relationship with the same economic effect as the relevant
Proprietary Cleared Contracts (other than claims and obligations designated by JSCC tobe excluded) shall come into effect between the Receiving Customer and the Clearing
Broker for the Receiving Customer.

In this case, when the Proprietary Cleared

Contracts are Transferred to a Receiving Customer whose Clearing Broker is another
Clearing Participant, such Proprietary Cleared Contracts shall terminate as a matter ofcourse, and the claims and obligations other than those prescribed by JSCC under the
relevant Proprietary Cleared Contract shall cease to exist and have no future effect, andat the same time, the claims and obligations that are identical, in terms and conditions
separately designated by JSCC156 , to the claims and obligations of such Proprietary
Cleared Contracts shall arise between the Clearing Broker for the Receiving Customer
and JSCC.
5

The settlement of the claims and obligations between a Transferring Clearing

Participant and a Receiving Customer (or, in case of a Transfer to a Receiving Customer
whose Clearing Broker is another Clearing Participant, among a Transferring Clearing
Participant, a Receiving Customer and a Clearing Broker for the Receiving Customer)
required in association with the Transfer of the Proprietary Cleared Positions shall be
performed between the relevant parties in accordance with their agreements.
6

In case of a Transfer to a Receiving Customer whose Clearing Broker is another

Clearing Participant, JSCC shall calculate the amount to be paid upon Transfer and the
Early Termination Charge, and, in association with the termination of the Proprietary
Cleared Contracts and the coming into effect of the claims and obligations pursuant to
the provisions of Paragraph 4, JSCC, the Transferring Clearing Participant and theClearing Broker for the Receiving Customer shall pay or receive the amount to be paid
upon Transfer, the Early Termination Charge and Variation Margin in the mannerprescribed by JSCC.
7

The provisions of the Rules shall apply by regarding the legal relationship thatcomes into effect pursuant to the provisions of the first sentence of Paragraph 4 as156

cf. Handling Procedures of IRS Clearing Business, Article 35-4-3.
102

Clearing Brokerage Contracts (Collateral Type) executed through the Clearing
Brokerage by the Receiving Customer to the Clearing Broker for the Receiving Customer
and by regarding the Proprietary Cleared Contractss for which Transfer is requested
pursuant to the provisions of Paragraph 1 (or, in case of a Transfer to a Receiving
Customer whose Clearing Broker is another Clearing Participant, the claims andobligations arising pursuant to the provisions of the second sentence of Paragraph 4) as
the Customer’s Cleared Contracts corresponding to the relevant Clearing BrokerageContracts which are Cleared Contracts (Collateral Type).

Chapter 5 Clearing Participant Account (Articles 59 – 60)
Article 59. Clearing Participant Account1

To manage Initial Margin, Variation Margin and Mark-to-Market Difference, inrespect of each Cleared Contract to which each Clearing Participant is a party and otherFunds to be paid or received in respect of such Cleared Contract between JSCC andeach Clearing Participant in accordance with the Rules, JSCC shall set up an accountfor each Clearing Participant (“Clearing Participant Account”) on which each of such
Cleared Contract and Positions in JGB Futures Contracts and Interest Rate Futures
Contracts covered by Cross Margining are recorded.
2

A Clearing Participant Account shall be divided into the account to record theCleared Contracts on a Clearing Participant’s proprietary book and Positions in JGB
Futures Contracts and Interest Rate Futures Contracts on the Clearing Participant’s bookcovered by Cross Margining (“Proprietary Account”) and the accounts to record, by each
Clearing Brokerage Agreement, the Cleared Contracts on Customers’ book andPositions in JGB Futures Contracts and Interest Rate Futures Contracts on the
Customer’s book covered by Cross Margining (“Customer Accounts”).

For this purpose,

JSCC may not use one Customer Account for multiple Customers or for multiple Clearing
Brokerage Agreements of one Customer.
3

JSCC may divide the Proprietary Account set up for a Clearing Participant into

multiple accounts when requested by such Clearing Participant.
4

A Clearing Participant shall, if it opens multiple accounts which divide a Clearing

Brokerage Account pursuant to the provisions of Article 60.2, request that JSCC divide
a Customer Account in the same manner, and JSCC shall set up multiple accounts to103

divide the Customer Account based on such request.
5

For multiple accounts which are set for the Proprietary Account or Customer

Accounts in accordance with Paragraphs 3 and 4 (“Sub-Accounts”), JSCC shall book
Cleared Contracts and Positions in JGB Futures Contracts and Interest Rate Futures
Contracts covered by Cross Margining to the relevant Sub-Account according to thedesignations made by the relevant Clearing Participant.
6

The claims and obligations between JSCC and a Clearing Participant and theclaims and obligations between JSCC and a Customer in relation to each Cleared
Contract, Positions in JGB Futures Contracts and Interest Rate Futures Contracts
covered by Cross Margining, Initial Margin, Variation Margin and Mark-to-Market
Difference related thereto shall arise separately for the Proprietary Account and each of
the Customer Accounts.
7

A Clearing Participant shall request that its Customer notify whether its

Customer Account is Hedge Account or Non-hedge Account, in the manner as separately
prescribed by JSCC157, and shall notify JSCC thereof.

A Customer shall also givenotice to the Clearing Participant when it changes the types of its Customer Account.
Article 60. Clearing Brokerage Account1

A Clearing Broker shall set up an account for each Clearing Brokerage

Agreement executed with a Customer (“Clearing Brokerage Account”) to manage thedetails of Clearing Brokerage Contracts under each Clearing Brokerage Agreement,
Positions in JGB Futures Contracts and Interest Rate Futures Contracts on the
Customer’s book covered by Cross Margining, Initial Margins, Customer Initial Margins,
Variation Margins and Mark-to-Market Differences related to such Clearing BrokerageContracts and other Funds to be paid or received between the Clearing Broker and theCustomer in accordance with each of such Clearing Brokerage Agreements and theRules.
2

Upon request of a Customer, a Clearing Broker may set up multiple accounts

dividing the Clearing Brokerage Account for the Customer.
3
157

The claims and obligations between a Clearing Broker and a Customer in
cf. Handling Procedures of IRS Clearing Business, Article 35-5.
104relation to each Clearing Brokerage Contract, Positions in JGB Futures Contracts andInteres Rate Futures Contracts on the Customer’s book covered by Cross Margining,
Initial Margin, Variation Margin and Mark-to-Market Difference related thereto shall arise
separately for each of the Clearing Brokerage Accounts.

Chapter 6 Margin, etc.
Section 1 General Provisions (Articles 61 – 62)
Article 61. Purpose of Margin
1

Margin shall be paid or received among JSCC, a Clearing Participant and a

Customer pursuant to the Rules and the Clearing Brokerage Agreement to secure
performance of below listed obligations (referred to as “Obligations to be Collateralized ”
in Paragraph 2 below) according to the classification of Margin listed below:(1)

Initial Margin:
Obligations that a Clearing Participant owes to JSCC in relation to Cleared
Contracts, including the obligation arising out of termination of such Cleared
Contracts, and obligations that a Clearing Participant owes to JSCC in relation
to Cross Margined JGB Futures Cleared Contracts and Cross Margined Interest
Rate Futures Cleared Contracts recorded on the Clearing Participant Account,
and obligations that a Customer owes to a Clearing Broker in relation to Clearing
Brokerage Contracts, including the obligation arising out of termination of such
Cleared Contracts, and obligations that a Customer owes to a Clearing Broker
in relation to Cross Margined JGB Futures Cleared Contracts and Cross
Margined Interest Rate Futures Cleared Contracts recorded on the Customer
Account established for the relevant Customer;(2)

Customer Initial Margin:
The obligations that a Customer owes to a Clearing Broker in relation to a
Clearing Brokerage Contract, including the obligation arising out of terminationof such Clearing Brokerage Contract, and obligations that a Customer owes toa Clearing Broker in relation to Cross Margined JGB Futures Cleared Contracts
and Cross Margined Interest Rate Futures Cleared Contracts recorded on the
Customer Account established for the relevant Customer;

105

(3)

Variation Margin paid or received between JSCC and each Clearing Participant
in relation to Proprietary Cleared Contracts:
Obligations that a Clearing Participant owes to JSCC in relation to Proprietary
Cleared Contracts which are Cleared Contracts (Collateral Type) or obligations
that JSCC owes to a Clearing Participant in relation to Proprietary Cleared
Contracts which are Cleared Contracts (Collateral Type);(4)

Variation Margin paid or received between JSCC and each Clearing Broker in
relation to Customer’s Cleared Contracts:
Obligations that a Clearing Broker owes to JSCC in relation to Customer’s
Cleared Contracts which are Cleared Contracts (Collateral Type) or obligations
that JSCC owes to a Clearing Broker in relation to Customer’s Cleared
Contracts which are Cleared Contracts (Collateral Type);(5)

Variation Margin paid or received between a Clearing Broker and a Customer in
relation to a Clearing Brokerage Contracts:
Obligations that a Customer owes to a Clearing Broker in relation to Clearing
Brokerage Contracts (Collateral Type) or obligations that a Clearing Broker
owes to a Customer in relation to Clearing Brokerage Contracts(CollateralType).
2

JSCC, a Clearing Participant or a Customer who has received a deposit ofMargin may use the Margin remaining after deducting costs required for conversion ofCash into another currency or after the payment of the cost of liquidation of Eligible
Securities Collateral to satisfy the Obligations to be Collateralized or to set off the rightto claim a return of Margin or the said cash proceeds against the claims related to the
Obligations to be Collateralized in the equivalent amounts in accordance with the Rules
and the Clearing Brokerage Agreement.
3

Unless otherwise specified in the Rules, deposit of Margin shall constitute a

deposit for consumption (shohi kitaku) for collateral purpose in the case of Margin in theform of Cash; and a loan for consumption (shohi taishaku) free of charge for collateral
purpose in the case of Margin in the form of Eligible Securities Collateral.
Article 61-2 Purpose of Mark-to-Market Difference
1Mark-to-Market Difference shall be paid or received among JSCC, a Clearing
106

Participant and a Customer pursuant to the Rules and the Clearing Brokerage
Agreement to settle exposure related to the change in present value of Clearing
Contracts (Settlement Type) or Clearing Brokerage Contracts (Settlement Type) listed in
the following items according to the classification of Mark-to-Market Difference set forthin the items below;(1) Mark-to-Market Difference paid or received between JSCC and each Clearing
Participant in relation to Proprietary Cleared Contracts
Exposure related to the change in present value of the Proprietary Cleared
Contracts of Clearing Contracts (Settlement Type);(2) Mark-to-Market Difference paid or received between JSCC and each Clearing Broker
in relation to Customer’s Cleared Contracts
Exposure related to the change in present value of the Customer’s Cleared
Contracts of Clearing Contracts (Settlement Type); and(3) Mark-to-Market Difference paid or received between a Clearing Broker and a
Customer in relation to Clearing Brokerage Contracts
Exposure related to the change in present value of Clearing Brokerage Contracts ofClearing Brokerage Contracts (Settlement Type)2

At the time prescribed in Article 78-2, Paragraph 2, the Net Present Value of the

Cleared Contracts (Settlement Type) or Clearing Brokerage Contracts (Settlement Type)listed in each item of Paragraph 1 shall be regarded as zero; provided, however, that in
the case prescribed by JSCC158, the Net Present Value shall be regarded as zero at thetime prescribed by JSCC on the day when an Application for exchanging Mark-to-Market
Difference And Adjustment Amount is submitted for the Cleared Contracts (SettlementType) or Clearing Brokerage Contracts (Settlement Type), pursuant to Article 51-2,
Paragraph 1.
Article 62. Precedence of the Rules over Civil Code or Commercial CodeNotwithstanding the provisions of the Civil Code (Act No.89 of 1896) and the Commercial
Code (Act No.48 of 1899), JSCC, a Clearing Participant and a Customer may claim areturn of Margin or assert any other claim, only as prescribed in the Rules or the Clearing
Brokerage Agreement.
158

cf. Handling Procedures of IRS Clearing Business, Article 35-6.
107

Section 2 Initial Margin and Intraday Margin (Articles 63 – 76)
Article 63. Obligation to Deposit Initial Margin
A Clearing Participant and a Customer shall be required to deposit Initial Margin with
JSCC pursuant to the provisions of each item below according to the classification of the
Cleared Contracts listed in each such item.

For the purpose of this Article and Articles

64 to 66, the reference to Initial Margin shall exclude Intraday Margin:(1)

Proprietary Cleared Contract
A Clearing Participant shall deposit with JSCC Cash or Eligible Securities
Collateral in an amount not less than the Required Initial Margin in relation to a
Proprietary Cleared Contract as Initial Margin.

(2)

Customer’s Cleared Contracta.

A Customer shall deposit with JSCC Cash or Eligible Securities Collateralin an amount not less than the Required Initial Margin in relation to theCustomer’s Cleared Contracts for such Customer as Initial Margin. If the
Clearing Broker and the Customer separately agree otherwise, theamount to be deposited shall be the amount calculated based on suchagreement or the Required Initial Margin, whichever is larger (the same
rule shall apply hereinafter).

b.

Deposit of Initial Margin by a Customer with JSCC pursuant to a. above
shall be made through a Clearing Broker prescribed in a. above acting as
its agent in accordance with the provisions of Article 72.

c.

When a Customer deposits the Customer Initial Margin with a Clearing
Broker in accordance with Article 73, the amount of such Customer Initial
Margin shall be deducted from the Required Initial Margin to be deposited
with JSCC by such Customer. In such case, the Clearing Broker shalldeposit with JSCC, as Substituted Initial Margin, Cash or Eligible
Securities Collateral in an amount not less than the Customer Initial
Margin deposited by the Customer with such Clearing Broker.

d.

When a Customer Buffer is allocated to a Customer Account pursuant to108

the provisions of Articles 84-7.1 and 84-7.2, the amount so allocated shallbe deducted from the Required Initial Margin to be deposited by the
Customer with JSCC.
Article 64. Required Initial Margin for Clearing Participant
1

JSCC shall calculate the Required Initial Margin for a Clearing Participant inrelation to Proprietary Cleared Contracts and Customer’s Cleared Contracts respectively
on each JSCC Business Day in the manner separately prescribed by JSCC159.
2The Required Initial Margin in respect of Proprietary Cleared Contracts shall be

the amount calculated for the Proprietary Account.
3

The Required Initial Margin in respect of Customer’s Cleared Contracts for each

Customer Account shall be the amount calculated for the relevant Customer Account.
4

JSCC shall notify each Clearing Participant of the calculated Required Initial

Margin in the manner separately prescribed by JSCC160.
Article 65. Required Initial Margin for Customer
1

The Required Initial Margin for a Customer shall be the amount calculated by

JSCC in the manner separately prescribed by JSCC161 for the Customer Account.
2

A Clearing Broker shall promptly notify the Customer of the Required Initial

Margin for such Customer calculated by JSCC pursuant to Paragraph 1.
Article 65-2.

Increase of Required Initial Margin for Customer under Agreement

between Clearing Broker and Customer
Upon receipt of a notification in a manner prescribed by JSCC162 from a Clearing Brokerof an increase in the Required Initial Margin for its Customer not in the same corporategroup as such Clearing Broker in accordance with an agreement between such Clearing
Broker and such Customer, JSCC shall increase the Required Initial Margin related to159

cf. Handling Procedures of IRS Clearing Business, Article 36.1, as well as Appendix 2.
cf. Handling Procedures of IRS Clearing Business, Article 36.2.
161
cf. Handling Procedures of IRS Clearing Business, Article 36.1, as well as Appendix 2.
162
cf. Handling Procedures of IRS Clearing Business, Article 36-2.1
160

109

such Customer’s Cleared Contracts in a manner prescribed by JSCC163.
Article 66. Cutoff Time for Deposit of Initial Margin
1

When the sum of the amount of Cash and the appraisal value of Eligible

Securities Collateral deposited as Initial Margin (“Initial Margin Deposited Amount”) with
JSCC falls short of the Required Initial Margin to be deposited with JSCC with respect to
the Proprietary Account or each Customer Account, the Clearing Participant or the
Customer, as the case may be, shall deposit with JSCC the amount equal to such
shortfall by 11:00 a.m. on the JSCC Business Day immediately following the date ofoccurrence of such shortfall.
2

If it has been agreed in advance between the Clearing Participant and theCustomer that it is practically difficult for the Customer to put in place the businessexecution procedures for depositing the amount equal to the shortfall by the timeprescribed in Paragraph 1, such Customer shall deposit with JSCC the amount equal tosuch shortfall by 11:00 a.m. on the second JSCC Business Day following the date ofoccurrence of such shortfall.
3.

Notwithstanding the provisions of Paragraphs 1 and 2 above, if the Initial Margin

Deposited Amount is equal to or more than the amount of the Margin Required to Clear
calculated by JSCC upon receipt of the application for Clearing, the Required Initial
Margin shall be deemed to be equal to the amount of the Margin Required to Clear.
Article 67. Obligation to Deposit Intraday Margin
A Clearing Participant and a Customer shall be required to deposit Intraday Margin with
JSCC pursuant to the provisions of each item below according to the classification of the
Cleared Contracts listed in each such item:(1)

Proprietary Cleared Contract
A Clearing Participant shall deposit with JSCC Cash or Eligible Securities
Collateral in an amount not less than the Required Intraday Margin in relation toa Proprietary Cleared Contract as Initial Margin.

(2)

Customer’s Cleared Contracta.

163

A Customer shall deposit with JSCC Cash or Eligible Securities Collateralcf. Handling Procedures of IRS Clearing Business, Article 36-2.3
110

in an amount not less than the Required Intraday Margin in relation to a
Customer’s Cleared Contract for such Customer as Initial Margin. If the
Clearing Broker and the Customer separately agree otherwise, theamount to be deposited shall be the amount calculated based on suchagreement or the Required Intraday Margin, whichever is larger (the same
rule shall apply hereinafter).
b.

Deposit of Intraday Margin by a Customer with JSCC pursuant to a. above
shall be made through a Clearing Broker prescribed in a. above acting as
its agent in accordance with the provisions of Article 72.

c.

When a Customer deposits the Customer Initial Margin with a Clearing
Broker in accordance with Article 73, the amount of such Customer Initial
Margin shall be deducted from the Required Intraday Margin to bedeposited with JSCC by such Customer. In such case, the Clearing Broker
shall deposit with JSCC, as Substituted Initial Margin, Cash or Eligible
Securities Collateral in an amount not less than the Customer Initial
Margin deposited by the Customer with the Clearing Broker.

d.

When a Customer Buffer is allocated to a Customer Account pursuant to
the provisions of Articles 84-7.1 and 84-7.2, the amount so allocated shallbe deducted from the Required Intraday Margin to be deposited by the
Customer with JSCC.

Article 68. Required Intraday Margin for Clearing Participant
1

JSCC shall calculate the Required Intraday Margin for a Clearing Participant inrespect of Proprietary Cleared Contracts and Customer’s Cleared Contracts respectively
on each JSCC Business Day in the manner separately prescribed by JSCC164.
2The Required Intraday Margin in respect of Proprietary Cleared Contracts shallbe the amount calculated for the Proprietary Account.
3

The Required Intraday Margin in respect of Customer’s Cleared Contracts foreach Customer Account shall be the amount calculated for the relevant Customer
Account.
164

cf. Handling Procedures of IRS Clearing Business, Article 36.1, as well as Appendix 2.
111

4JSCC shall notify each Clearing Participant of the calculated Required Intraday

Margin in the manner separately prescribed by JSCC165.
Article 69. Required Intraday Margin for Customer
1

The Required Intraday Margin for a Customer shall be the amount calculated by

JSCC in the manner separately prescribed by JSCC166 for the Customer Account.
2

A Clearing Broker shall promptly notify the Customer of the Required Intraday

Margin for such Customer calculated by JSCC pursuant to Paragraph 1.
Article 70. Cutoff Time for Deposit of Intraday Margin
1

When the Initial Margin Deposited Amount falls short of the Required Intraday

Margin Amount to be deposited with JSCC, the Clearing Participant or the Customer, as
the case may be, shall deposit with JSCC the amount equal to such shortfall by 3:30 p.m.
of the date of occurrence of such shortfall.
2

If it has been agreed in advance between the Clearing Participant and theCustomer that it is practically difficult for the Customer to put in place the businessexecution procedures for depositing the amount equal to such shortfall by the timeprescribed in Paragraph 1, such Customer shall deposit with JSCC the amount equal tosuch shortfall by 3:30 p.m. of the second JSCC Business Day following the date ofoccurrence of such shortfall.
3

If the Initial Margin Deposited Amount is equal to or more than the amount of

the Margin Required to Clear calculated by JSCC upon receipt of the application for
Clearing or Voluntary Termination, the Required Intraday Margin Amount shall bedeemed to be equal to the amount of the Margin Required to Clear .
Article 71. Method of Deposit of Initial Margin
Initial Margins shall be deposited with JSCC in the manner separately prescribed by
JSCC167.

165

cf. Handling Procedures of IRS Clearing Business, Article 36.2.
cf. Handling Procedures of IRS Clearing Business, Article 36.1, as well as Appendix 2.
167
cf. Handling Procedures of IRS Clearing Business, Article 18.
166

112

Article 72. Deposit of Initial Margin by Customer
1

A Customer shall deliver Cash or Eligible Securities Collateral in an amount notless than the Required Initial Margin or the Required Intraday Margin, as the case may
be, to be deposited with JSCC to a Clearing Broker as Initial Margin in accordance with
the Clearing Brokerage Agreement.
2

The Clearing Broker shall deposit with JSCC all of Cash or Eligible Securities

Collateral delivered as Initial Margin by the Customer pursuant to the provisions ofParagraph 1 as an agent of such Customer.
3

A Clearing Broker shall conduct separate management of the Cash and Eligible

Securities Collateral delivered by Customers as Initial Margin by preparing separatebooks and records for each Clearing Brokerage Account.
4

When the sum of the amount of Cash and the appraisal value of the Eligible

Securities Collateral delivered to a Clearing Broker by a Customer as Initial Margin isless than the Required Initial Margin or the Required Intraday Margin, as the case may
be, to be deposited with JSCC by such Customer, such Clearing Broker shall depositwith JSCC the Cash or Eligible Securities Collateral in an amount not less than theamount equal to such shortfall from its own fund by the date and time prescribed in Article
66.1 or Article 70.1.
5

The Cash or Eligible Securities Collateral deposited with JSCC by the Clearing

Broker from its own fund pursuant to Paragraph 4 shall be regarded as Substituted Initial
Margin.
Article 73. Substituted Deposit
1

A Clearing Broker may accept deposit of Cash or Eligible Securities Collateralby a Customer as Customer Initial Margin for Customer’s Cleared Contracts with theconsent of such Customer.
2

When a Customer deposits with a Clearing Broker Cash or Eligible Securities

Collateral as Customer Initial Margin, such Clearing Broker shall deposit with JSCC, as
Substituted Initial Margin, Cash or Eligible Securities Collateral, from its own funds, in an
amount not less than the amount of Cash or the appraisal value of Eligible Securities
Collateral deposited by the Customer with the Clearing Broker.
113

3

In the case of Paragraph 2, the Clearing Broker shall separately manage theCash and Eligible Securities Collateral deposited by Customers as Customer Initial
Margins by preparing separate books and records for each Clearing Brokerage Account.
Article 74. Ad Hoc Deposit of Initial Margin
Notwithstanding the provisions of Article 64 through Article 66 and Article 68 throughArticle 70, in the event of sudden change in market condition or otherwise JSCC deems
it necessary to secure appropriate operation of the IRS Clearing Business, JSCC may
require Clearing Participants to make an ad hoc deposit of Initial Margin in such amountand such manner as prescribed by JSCC on a case-by-case basis.
Article 75. Classification and Management Method of Initial Margin
1

When depositing Cash or Eligible Securities Collateral as Initial Margin with

JSCC, the Clearing Participant shall deposit such Cash or Eligible Securities Collateralseparately according to the below listed classifications:(1)

Initial Margin for Proprietary Cleared Contract;(2)

Initial Margin for Customer’s Cleared Contract of each Customer to bedeposited by a Clearing Participant acting as an agent of a Customer;(3)

Initial Margin for Customer’s Cleared Contract of each Customer to bedeposited by a Clearing Participant as Substituted Initial Margin; and(4)

Initial Margin to be deposited as Customer Buffer.

2

JSCC shall manage Cash or Eligible Securities Collateral deposited by a

Clearing Participant as Initial Margin separately according to the classificationsprescribed in Paragraph 1.
3

With respect to the Substituted Initial Margin described in Paragraph 1.(3), a

Clearing Participant shall report to JSCC, on each JSCC Business Day, the amount of
Customer Initial Margin in the form of cash, and the total amount of the appraisal valuesof Eligible Securities Collateral deposited as Customer Initial Margin by the Customer
with the Clearing Participant. JSCC shall separately monitor the difference between the114amount of cash and the appraisal value of Eligible Securities Collateral deposited as
Customer Initial Margin and the amount of the Substituted Initial Margin.
Article 76. Right to Claim Return of Initial Margin
1

A Clearing Participant and a Customer shall respectively have the right to claim

the return of specified categories of Initial Margin from JSCC as described in the items
below:(1)

Initial Margin for Customer’s Cleared Contractsa.

For Initial Margin deposited with JSCC by a Customer and Substituted
Initial Margin deposited with JSCC by a Clearing Participant as broker for
the Customer, the Customer shall have the right to request the return of
Initial Margin in an amount equivalent to the sum of (i) Initial Margin and(ii) Customer Initial Margin less (iii) the outstanding obligation of the
Customer owed to its Clearing Broker in respect of that Customer’s
Clearing Brokerage Contracts (including any outstanding obligation
arising as a result of the termination of that Customer’s Clearing
Brokerage Contracts) and (iv) the outstanding obligation of the Customer
owed to its Clearing Broker in respect of the Cross Margined JGB Futures
Cleared Contracts and the Cross Margined Interest Rate Futures Cleared
Contracts recorded on the Customer Account established for such
Customer (including any outstanding obligation arising as a result of thetermination of the Cross Margined JGB Futures Cleared Contracts andthe Cross Margined Interest Rate Futures Cleared Contracts).

Theamount of Customer Initial Margin above shall be limited to the amount of
Substituted Initial Margin deposited with JSCC by the Clearing Broker
Notwithstanding the foregoing, in case the amount calculated above as
Customer’s claim exceeds the sum of Initial Margin and Substituted Initial
Margin less the outstanding obligation of the Clearing Broker owed to
JSCC in respect of the Customer’s Cleared Contracts (including any
outstanding obligation arising in association with liquidation of the
Customer’s Cleared Contracts as a result of the Default of the Clearing
Broker, but excluding obligation owed pursuant to the provision of Article
99-2.2) and the outstanding obligation of the Clearing Broker owed to115

JSCC in respect of the Cross Margined JGB Futures Cleared Contracts
and the Cross Margined Interest Rate Futures Cleared Contracts
recorded on the Customer Account established for such Customer, theCustomer’s claim shall not cover such excess amount.; andb.

For Initial Margin and Substituted Initial Margin deposited with JSCC as
broker for a Customer, their Clearing Broker may request the return of anamount equivalent to the sum of Initial Margin and Substituted Initial
Margin less the total of b-1, b-2 and b-3 below;
b-1 : outstanding obligation of such Clearing Broker owed to JSCC in
respect of the Customer’s Cleared Contracts
b-2: outstanding obligation of the Clearing Broker owed to JSCC in
respect of the Cross Margined JGB Futures Cleared Contracts andthe Cross Margined Interest Rate Futures Cleared Contractts
recorded on the Customer Account established for the Customer
b-3 : the amount of Initial Margin which said Customer shall have the rightto reclaim under a. above.

(2)

Initial Margin for Proprietary Cleared Contracts
A Clearing Participant shall have the right to request the return of Initial Margin
in the amount equivalent to the amount of Initial Margin deposited with JSCC
less the amount of outstanding obligation of the Clearing Participant owed to
JSCC in respect of the Clearing Participant’s Cleared Contracts (including any
outstanding obligation arising from the settlement of Cleared Contracts due toDefault of said Clearing Participant and other monies owed to JSCC) and theoutstanding obligation of the Clearing Participant owed to JSCC in respect of
the Cross Margined JGB Futures Cleared Contracts and the Cross MarginedInterest Rate Futures Cleared Contracts recorded on its Proprietary Account.

(3)

Customer Buffer
A Clearing Participant shall have the right to request the return of Initial Margin
116

with respect to the Customer Buffer Unallocated Balance; provided, however,
that, when an allocated Customer Buffer is released from allocation pursuant to
the provisions of Article 84-7.4, a Clearing Participant shall not have the right torequest the return with respect to such allocated amount of Customer Buffer
until the relevant Customer deposits or delivers sufficient amount to covershortfall in the Required Initial Margin.
If the amount of the right to claim return of Initial Margin prescribed in Paragraph2

1 exceeds the Required Initial Margin or the Required Intraday Margin, a Clearing
Participant or a Customer may request JSCC to return Initial Margin up to the excess
amount.
3

In addition to the case prescribed in Paragraph 2, a Customer may claim thereturn of Initial Margin as set forth in the Rules168.
4

A Customer shall exercise its right to request the return of Initial Margin throughits Clearing Broker; provided however, in the event that JSCC has declared the Defaultof the Clearing Broker, the Customer shall request the return of Initial Margin directlyfrom JSCC.
5

Notwithstanding the provisions of Paragraphs 2 and 3, where a Customer may

request the return of Customer Initial Margin from its Clearing Broker, said Customer
shall not request the return of Initial Margin which corresponds to the said Customer
Initial Margin from JSCC, except where JSCC has declared the Default of such Clearing
Broker.
Section 3 Variation Margin, etc. (Articles 77 – 84)
Article 77. Payment and Receipt of Variation Margin etc.
1 JSCC and a Clearing Participant shall pay or receive the Variation Margin in Cashdenominated in the currency of the relevant Cleared Contract (Collateral Type) on each
day specified below according to each type of Cleared Contract (Collateral Type):(1) JPY Cleared Contracts:

JSCC Business Day; and(2) Foreign Currency Cleared Contracts:

Day which is JSCC Business Day
and

168

cf. Handling Procedures of IRS Clearing Business, Article 37
117

Foreign

Currency

HomeBusiness Day.
2

Provisions of Paragraph 1 shall apply mutatis mutandis when JSCC and each

Clearing Participant pay or receive Mark-to-Market Difference. When applying Paragraph
1, the term “Variation Margin” described in Paragraph 1 shall be replaced with “Mark-toMarket Difference” and the term “Cleared Contract (Collateral Type)” shall be replacedwith “Cleared Contract (Settlement Type).”
Article 77-2.
1

Cross Margining MtM Difference

If claims and obligations come into existence pursuant to the provisions ofArticle 84-5.1, JSCC and a Clearing Participant shall settle the Cash equivalent to thedifference related to Cross Margined JGB Futures Cleared Contracts and Cross
Margined Interest Rate Futures Cleared Contracts respectively set forth in Articles 73-9
and 73-9-2 of the Securities and Similar Contracts Business Rules (“Cross Margining
MtM Difference”) on the next JSCC Business Day following the occurrence of suchdifference.
2

A Clearing Participant who is a payer of the Cross Margining MtM Difference, it

must pay such amount by 11:00 a.m. on the next JSCC Business Day following the dateof occurrence of Cross Margining MtM Difference.
3

JSCC will pay Cross Margining MtM Difference to the Clearing Participant toreceive such amount without delay after 1:30 p.m. on the next JSCC Business Day
following the occurrence of such Cross Margining MtM Difference.
Article 78. Required Amount of Variation Margin
1

The required amount of Variation Margin shall be calculated by JSCC for the

Proprietary Account and each Customer Account of each Clearing Participant based on
the change in Net Present Value of Cleared Contracts (Collateral Type) from the previous
JSCC Business Day to the current JSCC Business Day by the method separately
prescribed by JSCC169.
2JSCC shall calculate the required amount of Variation Margin in respect ofCustomer’s Cleared Contracts of Cleared Contracts (Collateral Type) for each Customer

169

cf. Handling Procedures of IRS Clearing Business, Article 38.
118

Account using the JSCC-prescribed method 170 and shall notify said amounts to theCustomer’s Clearing Broker.
Article 78-2.

Required Amount of Mark-to-Market Difference

1 Provisions of Article 78 shall apply mutatis mutandis for the required amount of Markto-Market Difference. When applying Article 78, the term “the required amount of
Variation Margin” shall be replaced with “the required amount of Mark-to-Market
Difference,” the term “Cleared Contracts (Collateral Type) shall be replaced with “Cleared
Contracts (Settlement Type)” and the term “based on the change in Net Present Value”
shall be replaced with “based on the Net Present Value” respectively.
2

When Mark-to-Market Difference is calculated according to Paragraph 1 and notified

to Clearing Participant by JSCC, the claims and obligations of Mark-to-Market Difference
shall come into existence at that time.
Article 79. Determination of Clearing Yield Curve
JSCC shall build forward curves and discount curves (collectively referred to as “Clearing
Yield Curve”) for calculation of IRS NPVs using the data prescribed by JSCC171 in themanner prescribed by JSCC172.
Article 80. Deleted
Article 81. Cutoff Time for Deposit of Variation Margin
1

A Clearing Participant who is a payer of Variation Margin shall deposit with JSCC

the amount of Cash equal to the required amount of Variation Margin by 11:00 a.m. on
the JSCC Business Day immediately following the date of calculation of such Variation
Margin, or, for Variation Margin related to Foreign Currency Cleared Contracts, 11:00
a.m. on the first JSCC Business Day and Foreign Currency Home Business Day
following the date of calculation of such Variation Margin.
2

JSCC shall deposit with a Clearing Participant who is a receiver of Variation

Margin the amount of Cash equal to the required amount of Variation Margin without
delay after 1:30 p.m. on the next JSCC Business Day following the date of calculation of170

cf. Handling Procedures of IRS Clearing Business, Article 38.
cf. Handling Procedures of IRS Clearing Business, Article 40.1
172
cf. Handling Procedures of IRS Clearing Business, Article 40.2
171

119

such Variation Margin, or, for Variation Margin related to Foreign Currency Cleared
Contracts, without delay after 1:00 p.m. on the first JSCC Business Day and Foreign
Currency Home Business Day following the date of calculation of such Variation Margin.
Article 81-2. Cut-off Time for Payment of Mark-to-Market Difference
1

Provisions of Article 81 shall apply mutatis mutandis for exchanging Mark-to-Market Difference. In applying Article 81, the term “Variation Margin” shall be replacedwith “Mark-to-Market Difference,” and the term “Clearing Contracts (Collateral Type)”
shall be replaced with “Cleared Contract (Settlement Type).” And the part of “deposit with
JSCC the amount of Cash equal to the required amount of Variation Margin” in Paragraph1 shall be replaced with “pay to JSCC the amount of Cash equal to the Mark-to-Market
Difference” and the part of “deposit with a Clearing Participant” and “the amount of Cashequal to the required amount of Variation Margin” in Paragraph 2 shall be replaced with“pay to a Clearing Participant” and “the amount of Cash equal to the Mark-to-Market
Difference” respectively.
Article 82. Ad Hoc Deposit of Variation Margin
Notwithstanding the provisions of Article 78 and Article 81, where there is a suddenchange in market conditions or event for which JSCC deems it necessary to protect thecontinued operation of IRS Clearing Business, JSCC may require that Clearing
Participants make an ad-hoc deposit of Variation Margin in an amount and mannerprescribed by JSCC for that event.
Article 82-2. Ad Hoc Payment of Mark-to-Market Difference
Provisions of Article 82 shall apply mutatis mutandis for ad-hoc payment of Mark-toMarket Difference. When applying Article 82, “Article 78 and Article 81” shall be replacedwith “Article 78-2 and Article 81-2,” and “ad-hoc deposit of Variation Margin” shall be
replaced with “ad-hoc payment of Mark-to-Market Difference” respectively.
Article 83. Interest on Variation Margin
1

JSCC and a Clearing Participant shall pay or receive interest on Variation

Margin in Cash denominated in the currency of the relevant Cleared Contract (CollateralType) on a daily basis, as specified below according to the type of Cleared Contract(Collateral Type), at the rate prescribed by JSCC173 and in the manner prescribed by
JSCC:
173

cf. Handling Procedures of IRS Clearing Business, Article 42.1.
120

(1) JPY Cleared Contracts which are Cleared Contracts:
JSCC Business Day; and(2) Foreign Currency Cleared Contracts which are Cleared Contracts:
Day which is JSCC Business Day and Foreign Currency Home Business Day.
2

A Clearing Participant who is a payer of interest on Variation Margin shall pay

such interest to JSCC by 11:00 a.m. on the next JSCC Business Day following the dayon which the interest is calculated, or, for interest on Variation Margin related to Foreign
Currency Cleared Contracts, 11:00 a.m. on the first JSCC Business Day and Foreign
Currency Home Business Day following the date of calculation of such interest on
Variation Margin.
3

JSCC shall pay interest on Variation Margin to each Clearing Participant who isa receiver of such interest without delay after 1:30 p.m. on the next JSCC Business Day
following the day on which the interest is calculated, or, for interest on Variation Margin
related to Foreign Currency Cleared Contracts, without delay after 1:00 p.m. on the first
JSCC Business Day and Foreign Currency Home Business Day following the date ofcalculation of such interest on Variation Margin.
Article 83-2. Adjustment Amount related to Mark-to-Market Difference
1

JSCC and each Clearing Participant shall pay or receive Adjustment Amountrelated to Mark-to-Market Difference in Cash denominated in the currency of the relevant
Cleared Contracts (Settlement Type) on a daily basis, as specified below according to
the type of Cleared Contract (Settlement Type) in the manner prescribed by JSCC174:(1) JPY Cleared Contracts which are Cleared Contract:
JSCC Business Day; and(2) Foreign Currency Cleared Contracts which are Cleared Contracts:
Day which is JSCC Business Day and Foreign Currency Home
Business Day.
2

Provisions of Article 83.2 and 3 shall apply mutatis mutandis for payment or

receiving Adjustment Amount related to Mark-to-Market Difference. When applying
Article 83.2 and 3, the term “interest on Variation Margin” shall be replaced with
“Adjustment Amount related to Mark-to-Market Difference.”

174

Handling Procedures of IRS Clearing Business, Article 42.3
121

Article 84. Right to Claim Return of Variation Margin
JSCC and a Clearing Participant may not claim the other party to return Variation Margin
except for payment and return in accordance with the provisions of the Rules or for return
as a result of the Early Termination of any Cleared Contract.
Section 4 Cross Margining (Articles 84-2 – 84-5)
Article 84-2.
1

Notification of Using Cross Margining

When a Clearing Participant or a Customer intends to use Cross Margining, theClearing Participant must give an advance notification to JSCC in the manner prescribedby JSCC175.
2

When a Clearing Participant intends to make change to the matters notified to

JSCC pursuant to the provisions of Paragraph 1, it must give an advance notification to
JSCC in the manner prescribed by JSCC176.
Article 84-3.

Discontinuance of Using Cross Margining

When a Clearing Participant or its Affiliated Customer desires to discontinue use of Cross
Margining, the Clearing Participant must give an advance notification to JSCC in themanner prescribed by JSCC177.
Article 84-4. Acceptance of Cross Margining
1

Upon receipt of a Cross Margining Request and if such request satisfies

conditions prescribed by JSCC 178 , JSCC shall immediately notify the details of such
request to the Clearing Participant which is the Cross Margining Accepting Party relevant
to such request in the manner prescribed by JSCC179.
2

Upon receipt of the notification under Paragraph 1, the Cross Margining

Accepting Party shall notify its acceptance or rejection of such request to JSCC by 6:30
p.m. on JSCC Business Day on which it received the said notification in the manner175

cf. Handling Procedures of IRS Clearing Business, Article 42-2.1
cf. Handling Procedures of IRS Clearing Business, Article 42-3.
177
cf. Handling Procedures of IRS Clearing Business, Article 42-4.
178
cf. Handling Procedures of IRS Clearing Business, Article 42-6.
179
cf. Handling Procedures of IRS Clearing Business, Article 42-5.
176

122

prescribed by JSCC180.
3

If the notice of an acceptance arrives at JSCC pursuant to the provisions ofParagraph 2 and such acceptance satisfies the conditions prescribed by JSCC181, JSCC
shall record the Positions in JGB Futures Contracts and Interest Rate Futures Contracts
covered by such notice of acceptance to the Proprietary Account of the Clearing
Participant if the Cross Margining User made such request is a Clearing Participant, andto the Customer Account established for the relevant Customer if the Cross Margining
User made such request is a Customer.
4

JSCC shall delete Positions recorded pursuant to the provisions of Paragraph 3

from the Proprietary Account or Customer Account, as applicable, at the timingprescribed by JSCC182.
Article 84-5. Identical Claims and Obligations as Those in Cross Margined JGB Futures
Cleared Contracts and Cross Margined Interest Rate Futures Cleared Contracts
1

When the claims and obligations in the Cross Margined JGB Futures Cleared

Contracts and the Cross Margined Interest Rate Futures Cleared Contracts between a
Cross Margining Requestor and JSCC cease to exist pursuant to the provisions of Article
73-15-4.1 of the Securities and Similar Contracts Business Rules, the claims andobligations with the same terms and conditions as the said claims and obligations shallcome into existence between the Clearing Participant on whose Clearing Participant
Account the Positions in the said Cross Margined JGB Futures Cleared Contracts andCross Margined Interest Rate Futures Cleared Contracts are recorded and JSCC in themanner prescribed by JSCC.
2

If the Positions in the Cross Margined JGB Futures Cleared Contracts and the

Cross Margined Interest Rate Futures Cleared Contracts described in Paragraph 1 arerecorded on a Customer Account, the legal relationship with the same economic effectas a Clearing Brokerage Contract, which would come into effect if the claims andobligations under Paragraph 1 come into effect through a Clearing Brokerage under
Clearing Brokerage Agreement between such Customer and its Clearing Broker, shallarise between the Customer and the Clearing Broker at the same time as such claims
180

cf. Handling Procedures of IRS Clearing Business, Article 42-5.
cf. Handling Procedures of IRS Clearing Business, Article 42-7.1
182
cf. Handling Procedures of IRS Clearing Business, Article 42-8.
181

123

and obligations come into existence.
3

When JSCC conducts offsetting sale or offsetting purchase set forth in Article

93-2.1, the claims and obligations which came into effect in accordance with theprovisions of Paragraph 1 and the legal relationship which has arisen in accordance withthe provisions of Paragraph 2 shall cease to exist and have no future effect as of the timeof such offsetting sale or offsetting purchase.
Section 5. Customer Buffer Framework
Article 84-6. Notification of Customer Buffer Utilization
1

When allowing its Customer to utilize Customer Buffer, a Clearing Broker shallnotify JSCC, in advance in a manner prescribed by JSCC183, of the Customer Buffer Cap
for each Customer Account that are allowed Customer Buffer utilization.
2

When changing the Customer Buffer Cap for its Customer that are allowed

Customer Buffer utilization, a Clearing Broker shall notify such change to JSCC in
advance in a manner prescribed by JSCC184.
3

When intending to allocate the Customer Buffer to a shortfall in Intraday

Margin for the Customers it allows utilization of the Customer Buffer, the Clearing
Broker shall notify such effect to JSCC in advance in a manner prescribed by JSCC185.
4

A Clearing Broker may withdraw its notification given pursuant to Paragraph 3

in a manner prescribed by JSCC186.
Article 84-7. Utilization of Customer Buffer
1

When a Customer requested a Clearing Broker to act as its Clearing Broker

pursuant to the provisions of Article 54 or Article 54-2 and an amount sufficient to cover
the Margin Required to Clear has not been deposited with or delivered to JSCC and theamount obtained by subtracting the Available Buffer Upon New Clearing from the183

cf. Handling Procedures of IRS Clearing Business, Article 42-10.1
cf. Handling Procedures of IRS Clearing Business, Article 42-10.1
185
cf. Handling Procedures of IRS Clearing Business, Article 42-10.1
186
cf. Handling Procedures of IRS Clearing Business, Article 42-10.1
184

124

Shortfall in Margin Required Clear is equal to or less than the cap set forth in Article
49.1.(2).b, the amount of Customer Buffer equal to the Shortfall in Margin Required toClear, or if the Available Buffer Upon New Clearing is less than the Shortfall in Margin
Required to Clear, the amount equal to the Available Buffer Upon New Clearing,shall

be automatically allocated to such Customer’s Customer Account in a manner prescribedby JSCC187, and JSCC shall confirm satisfaction of the Clearing Requirements based on
the deposited amount which includes the Customer Buffer so allocated, unless the
Shortfall in Margin Required to Clear is more than the Available Customer Buffer.
2

When an amount sufficient to cover the Required Intraday Margin for a

Customer has not been deposited with or delivered to JSCC, and such amount ofshortfall (referred to as “Intraday Margin Shortfall” in this Article) is not more than the
Available Customer Buffer Amount at Intraday Margin Calculation, the Customer Buffer
in the amount equal to the Intraday Margin Shortfall shall be automatically allocated tosuch Customer's Customer Account in a manner prescribed by JSCC188, and shortfall
in Intraday Margin is resolved.
3

As to the Customer Buffer allocated to a Customer Account pursuant to theprovisions of Paragraphs 1 and 2, when the sum of the Initial Margin Deposited
Amount of the Customer and the Customer Buffer allocated to the relevant Customer
Account as of the time designated by JSCC189 is more than the Required Intraday
Margin or the amount prescribed by JSCC as the amount equivalent to the Margin
Required to Clear190 not taking into account the allocated Customer Buffer, theallocated Customer Buffer in an amount equal to such excess, or, when the Required
Intraday Margin or the amount prescribed by JSCC as the amount equivalent to the
Margin Required to Clear for the relevant Customer is less than the Initial Margin
Deposited Amount of the relevant Customer, the Customer Buffer in an amount equal
to the entire amount of the Customer Buffer allocated to the relevant Customer
Account, shall be released from allocation to such Customer Account.
4

The Customer Buffer allocated to a Customer Account pursuant to theprovisions of Paragraphs 1 and 2 shall be released from allocation to such Customer

187

cf. Handling Procedures of IRS Clearing Business, Article 42-11.1
cf. Handling Procedures of IRS Clearing Business, Article 42-11.2
189
cf. Handling Procedures of IRS Clearing Business, Article 42-11.3
190
cf. Handling Procedures of IRS Clearing Business, Article 42-11.4
188

125

Account every JSCC Business Day at the timing prescribed by JSCC191.
5

When Customer Buffer allocated to a Customer Account is released pursuant to

the provisions of Paragraph 2, notwithstanding the provisions of Paragraph 1, theCustomer may not receive an allocation of Customer Buffer to its Customer Account until
it deposits or delivers the amount sufficient to cover the shortfall in the Required Initial
Margin.

Chapter 7 Settlement (Articles 85 – 85-5)
Article 85. Japanese Yen Fund Settlement
1

JSCC and Clearing Participants shall pay or receive Japanese yen Cashspecified by JSCC192 in the manner prescribed by JSCC193.
2JSCC may pay or receive Japanese yen Cash on a net basis separately foreach of the Clearing Participant’s Proprietary Account, including an amount of Customer
Buffer if the Clearing Participant has deposited Customer Buffer, and separately by each
Customer Account, in the manner prescribed by JSCC194.
Article 85-2.
1

Netting of Initial Margin and Settlement Amount

After the netting pursuant to Article 85.2, for the Proprietary Account andCustomer Account the net amount payable by a Clearing Participant to JSCC in terms of
Settlement Amount, Variation Margin, and interest on Variation Margin for JPY Cleared
Contracts (referred to as “Clearing Participant Net Payable” in this Article) shall be nettedwith Initial Margin (as set forth in Article 66) as specified in the formulae below.

If thenet amount is negative, then the Clearing Participant shall deposit the absolute value ofsuch amount with JSCC. The net amount calculated in Item (1) shall be deposited in
Cash:
(1)

Initial Margin Deposited Amount deposited in Cash minus Clearing Participant
Net Payable191

cf. Handling Procedures of IRS Clearing Business, Article 42-11.5
cf. Handling Procedures of IRS Clearing Business, Article 43.1.
193
cf. Handling Procedures of IRS Clearing Business, Article 43.2.
194
cf. Handling Procedures of IRS Clearing Business, Article 43.4.
192

126

(2)

Initial Margin Deposited Amount minus Cash Allocated to Settlement minus
Required Initial Margin

For the purpose of this Article, “Cash Allocated to Settlement” means Initial Margin
Deposited Amount deposited in Cash which is applied to Clearing Participant Net
Payable payable by Clearing Participant to JSCC pursuant to Article 85-2.1.(1) above.
2

After the netting pursuant to the provisions of Article 85.2, for each account, a

net amount payable by JSCC (referred to as “JSCC Net Payable” in this Article) shall be
netted with Initial Margin (as set forth in Article 66) as specified in the formula below.

If

the net amount is negative, then the Clearing Participant shall deposit the absolute valueof such amount with JSCC.
Initial Margin Deposited Amount plus JSCC Net Payable minus Required Initial Margin
Article 85-3.
1

Request for Withdrawal and Deemed Deposit of Initial Margin

A Clearing Participant due to receive the net amount, as a result of the netting

set forth in Article 85.2, shall only receive such amount upon informing JSCC of theattribution of such payment across each of its Proprietary Account and Customer
Accounts.
2

If no request for the withdrawal of Initial Margin (as specified in Paragraph 1,

above) is received for a particular Proprietary Account or Customer Account, the net
amount for that account shall be deemed to have been deposited in the relevant accountas Initial Margin.
Article 85-4.
1Foreign Currency Fund Settlement Method

Notwithstanding Article 85, the settlement of non-Japanese yen Cashdesignated by JSCC to be settled between JSCC and a Clearing Participant shall be
performed through a method prescribed by JSCC195.
2

Upon settlement of non-Japanese yen Cash with a Clearing Participant

pursuant to Paragraph 1, JSCC will calculate net settlement amount by each currency of
the Foreign Currency Cleared Contracts separately for each of the Clearing Participant’s
Proprietary Account and each Customer Account, in the manner prescribed by JSCC.
195

cf. Handling Procedures of IRS Clearing Business, Article 43-2.
127

JSCC may pay or receive non-Japanese yen Cash equivalent to the net amount so
obtained.
3

Dates and times for payment and receipt of Settlement Amount for Foreign

Currency Cleared Contracts between JSCC and Clearing Participants (excluding Markto-Market Difference And Adjustment Amount) shall be as specified below by each typeof Foreign Currency Cleared Contract:

4(1) AUD Cleared Contract:

6:00 p.m. Sydney time on Payment Date

(2) USD Cleared Contract:

5:00 p.m. New York time on Payment Date

(3) EUR Cleared Contract:

4:45 p.m. London time on Payment Date

When a Clearing Participant has notified JSCC of its designation of theProprietary Account or Customer Account as a unit of fund settlement (referred to as“Designated Account” in this paragraph and Paragraph 5), in advance, in a form
prescribed by JSCC, it may, notwithstanding the second sentence of Paragraph 2, pay
or receive Cash equivalent to the amount obtained for each Designated Accountpursuant to the first sentence of Paragraph 2, and the net amount of the amount obtained
pursuant to the first sentence of Paragraph 2 for its Proprietary Account and each
Customer Account which are not the Designated Account, separately.
5

With respect to the notification set forth in Paragraph 4, a Clearing Participant

may designate any combination of its Proprietary Account or multiple Customer Accounts
as a single Designated Account.

When such designation is made, in the application of

the provisions of Paragraph 4, the combination of Proprietary Account or multiple
Customer Accounts shall be deemed to be a single Designated Account.
6

When a Clearing Participant desires to change the matters notified in the

notification set forth in Paragraphs 4 and 5, it shall give an advance notice of such change
to JSCC.
Article 85-5.

Treatment of Settlement Failure related to Foreign Currency Cleared

Contracts
1

In the situation where a Clearing Participant has not completed deposit of

Variation Margin or payment of interest on Variation Margin or Settlement Amount related
to Foreign Currency Cleared Contracts by the deposit or payment cutoff time, if JSCC
128

deems appropriate considering the creditworthiness of the relevant Clearing Participant,the causes of the failure to complete such deposit or payment or other circumstances,
JSCC will defer the deposit cutoff time for such amount remained undeposited to thesame time on the first JSCC Business Day and Foreign Currency Home Business Day
for the relevant Foreign Currency Cleared Contract following such deposit failure, ordefer the payment cutoff time for such amount remained unpaid (together with such
undeposited amount, “Unpaid Amount”) to the same time on the first Foreign Currency
Home Business Day for the relevant Foreign Currency Cleared Contract following such
settlement failure.
2

In case of the deferral set forth in Paragraph 1, JSCC shall charge additional

Required Initial Margin in the manner prescribed by JSCC196 to the Clearing Participant
which has failed such deposit or payment (“Clearing Participant Failing Settlement”).
3

Clearing Participants shall make their utmost efforts to prevent occurrence ofthe deferral of deposit cutoff time or payment cutoff time for Variation Margin and interest
on Variation Margin or Settlement Amount related to Foreign Currency Cleared Contracts
set forth in Paragraph 1.
4

In addition to Paragraphs 1 through 3 above, matters necessary for treatment

of deferral of deposit cutoff time or payment cutoff time for Unpaid Amount pursuant toParagraph 1 shall be prescribed by JSCC.

Chapter 8 Clearing Deposit (Articles 86 - 88)
Article 86. Clearing Deposit
The IRS Clearing Fund, Initial Margin, the Third Tier Special Clearing Charge Collateraland the Default Contingent Margin deposited with JSCC by Clearing Participants
constitute the “Clearing Deposit” as prescribed in Article 156-11 of the Financial
Instruments and Exchange Act.
Article 87. Management of Clearing Deposit
1

JSCC shall hold the entire amount of the Clearing Deposit by segregating it in

the manner prescribed by JSCC197 on behalf of the Clearing Participants or Customers.
196
197

cf. Handling Procedures of IRS Clearing Business, Article 43-3.1
cf. Handling Procedures of IRS Clearing Business, Article 44.
129

2

JSCC may manage the Clearing Deposit in the manner prescribed by JSCC198

on behalf of the depositing Clearing Participants.
3

The profit or loss (including costs and fees) from JSCC’s management of the

Clearing Deposit shall vest in JSCC.
4

JSCC may, at its discretion, pay interest on the Clearing Deposit in the mannerprescribed by JSCC199 if the profit arises from the management of the Clearing Deposit.
5

If there arise any loss from the management of the Clearing Deposit as set forthin Paragraph 2, each Clearing Participant and Customer which has deposited IRS
Clearing Fund, Initial Margin or Default Contingent Margin in cash shall pay JSCC its
share of such loss determined in the manner prescribed by JSCC200.
6.

IRS Clearing Fund, Initial Margin and Default Contingent Margin that have been

deposited by the Clearing Participants and Customers shall be applied to the payment
due from the Clearing Participants and Customers under Paragraph 5 above in themanner prescribed by JSCC201.
Article 88. Prohibition of Use of Clearing Deposit for Other Purposes
JSCC is restricted in what it may do with the Clearing Deposit as follows: JSCC may not
utilise, withdraw it, transfer it to a third party, create a pledge or any other security
interests for the benefit of a third party on it, or otherwise dispose of it; provided that
JSCC may manage it, including the payment of interest to a Clearing Participant as set
forth in Article 87.4, and refund it to a Clearing Participant or a Customer in accordancewith these Business Rules.

Chapter 9 Actions to be Taken in Case of Clearing Participant’s Failure of
Settlement198

cf. Handling Procedures of IRS Clearing Business, Article 44-2.
cf. Handling Procedures of IRS Clearing Business, Article 44-3.1 &2.
200
cf. Handling Procedures of IRS Clearing Business, Article 44-3.3
201
cf. Handling Procedures of IRS Clearing Business, Article 44-3.4.
199

130

Section 1 Determination of Failure of Settlement and Default (Articles 89 – 90)
Article 89. Actions to be Taken in Case of Occurrence of Failure of Settlement andDefault
1

Where JSCC determines a Clearing Participant’s Settlement Failure, JSCC

shall suspend Clearing of transactions to which such Clearing Participant (“Failed
Participant”) is a party and suspend the transfer of Funds, entirely or partially, , to theFailed Participant to the extent and for such period deemed necessary by JSCC.
2

Notwithstanding the provisions of Paragraph 1, in the case where JSCC

determines the Default of a Clearing Participant, JSCC may suspend an acceptance ofClearing of the Subject Transaction for Clearing to which such Defaulting Clearing
Participant is a party and suspend the transfer of Funds, entirely or partially, to theDefaulting Clearing Participant.
3

JSCC may apply Funds, the delivery of which is suspended pursuant toParagraphs 1 and 2, to the performance of the obligations of the Failed Participant or the
Defaulting Clearing Participant to JSCC.

Where such Funds consist of securities, JSCC

shall liquidate them. The manner, time and price are at JSCC’s discretion.
Article 90. Notification of Suspension of Clearing
When JSCC suspends acceptance of Clearing for any Clearing Participant under theprovisions of Article 89.1 or 2, JSCC shall immediately notify all Clearing Participants
and make a public announcement to that effect. If JSCC determines the Default of aClearing Participant (Article 89.2), JSCC shall also notify the fact of determination of
Default and the date of determination.
Section 2 Compulsory Termination of Cleared Contracts of Defaulting Clearing
Participant (Articles 91 – 99)
Article 91. Compulsory Termination of Cleared Contracts
1

The Cleared Contracts belonging to a Clearing Participant found to be in Default

shall be terminated without further notice on the Default Determination Date.
2

The Early Termination Charge payable due to closing out of the Defaulting

Clearing Participant’s Cleared Contracts shall be, by each currency type of the Defaulting
131Clearing Participant’s Cleared Contracts, the sum of the costs and losses incurred by
JSCC in re-establishing its positions.

The method of calculation is specified in the

Subordinate Rules202.
3

JSCC shall notify the Defaulting Clearing Participant of the Early Termination

Charge, as described in Paragraph 2.
4Upon receipt of notice of the Early Termination Charge, the Defaulting Clearing

Participant shall immediately pay such fee to JSCC.
5

Notwithstanding the provisions of Paragraph 1, if Cross Margined JGB Futures

Cleared Contracts or Cross Margined Interest Rate Futures Cleared Contracts arebooked on the Clearing Participant Account of the Defaulting Clearing Participant, theDefaulting Clearing Participant’s Cleared Contracts shall terminate, without further noticefrom JSCC or the Defaulting Clearing Participant, by, and as of the time of, the claims
and obligations coming into effect between the Defaulting Clearing Participant and JSCC
pursuant to the provisions of Article 84-5.1.
Article 92. IRS Default Management Committee
1

JSCC shall establish the IRS Default Management Committee in order to advice

on hedging and the Default Auctions and other matters specified in the Subordinate
Rules203 (referred to as “Matters for Consultation” in Paragraph 2 below) which would
become necessary upon Clearing Participant’s Default or when the claims andobligations come into effect pursuant to the provisions of Article 84-5.1.
2

JSCC shall consult the IRS Default Management Committee on Matters for

Consultation, and shall take account of the advice of the Default Management Committee
thereon.
3

JSCC shall nominate the Clearing Participants who shall be the members of the

IRS Default Management Committee in the manner prescribed in the Subordinate
Rules 204 . JSCC shall require that the committee members be bound to maintain202

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 6.
203
cf. IRS Default Management Committee Rules, Article 4.
204
cf. IRS Default Management Committee Rules, Articles 5 and 6.
132

confidentiality.
4

The powers, authority, composition, term of office of each committee member,the operation of the committee and other related matters shall be specified in the
Subordinate Rules205.
Article 93. Hedging Measures
1

At JSCC’s discretion, taking account the advice of the IRS Default Management

Committee, the composition and size of the Defaulting Clearing Participant’s Cleared
Contracts and the Cross Margining Liquidation Transactions as set forth in Paragraph93-2, market conditions and other factors, JSCC may execute IRS Transactions for the
purpose of hedging the risk of all or part of losses that may be suffered by JSCC as aresult of a termination of the Defaulting Clearing Participant’s Cleared Contracts or the
Cross Margining Liquidation Transactions, including losses which JSCC may incur fromthe claims and obligations came into effect pursuant to the provisions of Article 84-5.1 ofthese Business Rules, if any, until JSCC is able to re-establish its positions, subject tothe provisions of this Article (“Hedge Transactions”).2062

For the purpose of the Rules, Hedge Transactions shall be Cleared Contracts(Collateral Type).

The details concerning the Hedge Transactions shall be prescribedby JSCC on each occasion.
Article 93-2.
1

Execution of Cross Margining Liquidation Transactions

If the claims and obligations have come into existence pursuant to the provisionsof Article 84-5.1, JSCC may, taking account the advice of the IRS Default Management
Committee, cause the JGB Futures Clearing Participant of its selection conduct offsetting
sale or offsetting purchase set forth in Article 73-15-4.2 of the Securities and Similar
Contracts Business Rules or take other necessary liquidation process in respect of the
Cross Margined JGB Futures Cleared Contracts or the Cross Margined Interest Rate
Futures Cleared Contracts set forth in Article 84-5.1.
2

For the purpose of hedging all or part of losses which may JSCC incur as aresult of the settlement of the Cross Margined JGB Futures Cleared Contracts or the205

IRS Default Management Committee Rules.
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 7.
206

133

Cross Margined Interest Rate Futures Cleared Contracts, taking account the advice of
the IRS Default Management Committee, the size of and market conditions and otherfactors surrounding the Cross Margined JGB Futures Cleared Contracts or the Cross
Margined Interest Rate Futures Cleared Contracts mentioned in Paragraph 1, JSCC may
execute IRS Transactions (hereinafter referred to as the “Cross Margining Liquidation
Transactions”) simultaneously with the settlement of the Cross Margined JGB Futures
Cleared Contracts or the Cross Margined Interest Rate Futures Cleared Contracts
pursuant to the provisions of Paragraph 1 in the manner prescribed by JSCC in the
Subordinate Rules207.
3

The Cross Margining Liquidation Transaction shall be deemed as a Cleared

Contract (Collateral Type) to which the provisions of the Rules shall apply. In such event,details shall be prescribed by JSCC on each occasion.
4

If the claims and obligations come into effect pursuant to the provisions of Article

84-5.1 for any reason other than Clearing Participant’s Default and JSCC executes the
Cross Margining Liquidation Transactions, JSCC shall have corresponding IRS
Transactions with identical terms and conditions as the Cross Margining Liquidation
Transactions, except for the transaction side on the part of JSCC which shall be opposite,
executed between JSCC and the Clearing Participant set forth in Article 84-5.1
simultaneously with the execution of the Cross Margining Liquidation Transactions.
5

Provisions of Paragraph 3 shall apply mutatis mutandis to IRS Transactions set

forth in Paragraph 4.
6

If the Cross Margining Liquidation Transactions under Paragraph 4 are

executed in respect of the Cross Margined JGB Futures Cleared Contracts or the Cross
Margined Interest Rate Futures Cleared Contracts recorded on the Customer Accountof a Clearing Participant and the Clearing Brokerage Contracts for the Customer owning
such Customer Account has not been terminated, the IRS Transactions under Paragraph4 shall be deemed as the Customer’s Cleared Contract concluded through the Clearing
Brokerage for the Customer and the legal relationship between the Clearing Participant
and the Customer in relation to such IRS Transactions shall be deemed as the Clearing
Brokerage Contracts related to such Customer’s Cleared Contracts.
207

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 7-2.
134

7Details of the IRS Transactions to come into effect pursuant to the provisions ofParagraph 4 shall be prescribed by JSCC in the Subordinate Rules208.

Article 94. Position Transfer of Customer’s Cleared Contract upon Default of Clearing
Broker1

On the termination of Customer’s Cleared Contract pursuant to the provisionsof Article 91, the Customer’s Cleared Contracts of each Customer specified in the
Subordinate Rules209 (where the Customer is not in Default set forth in Artcile 91; thesame applies in this Article 94, Article 95 and Article 99-2 below) may be transferred as
Position Transfer as a whole, to one or more Successor Clearing Brokers, who shallassume the rights, claims and obligations listed below, through the submission by the
Customer of an application to JSCC via the Successor Clearing Broker(s).

This may

only be done during the period specified in the Subordinate Rules210:(1)

The claims and obligations identical, in terms and conditions as prescribed in
the Subordinate Rules211, to the claims and obligations under the Customer’s
Cleared Contracts between the Defaulting Clearing Broker and JSCC which arein effect immediately before the termination of such Customer’s Cleared
Contracts pursuant to the provisions of Article 91; and(2)

The claims and obligations identical, in terms and conditions as prescribed in
the Subordinate Rules 212 , to the claims and obligations under the Clearing
Brokerage Contract between the Defaulting Clearing Broker and the Customer
which are in effect immediately before the termination of the Customer’s
Cleared Contracts pursuant to the provisions of Article 91.

208

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 7-2.
209
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8.3.
210
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8.1.
211
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8.4.
212
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8.4.
135

2

All Successor Clearing Brokers must have concluded the Clearing Brokerage

Agreement with the Customer for whom they will become a Successor Clearing Broker.
3

Where a Customer applies to JSCC a transfer to one or more Successor

Clearing Brokers, the Customer shall obtain the consent of all of the Successor Clearing
Brokers.
4

When all Successor Clearing Brokers consent to the Position Transfer inParagraph 3, they shall submit the request form received from the Customer to JSCC
within the period referenced in Paragraph 1.
The request form shall state, among other things, the effect that the Successor Clearing
Broker was asked to accept Position Transfer and has accepted it; that the Customer issubmitting request for Position Transfer to JSCC; and that the Successor Clearing Broker
is submitting the request for Position Transfer to JSCC.
5

Upon receipt of a request for Position Transfer, in accordance with theprovisions of Paragraph 4, JSCC shall calculate Initial Margin (as specified in Articles 64
and 65) as if there had been a successful Position Transfer on the date of request ofsuch Position Transfer, as well as the Position Transfer Fee 213 , accrued liabilities,
excluding liabilities which are already due between JSCC and the Defaulting Clearing
Participant at the time of determination of the Default and which relate to the Fixed
Amount, Floating Amount and upfront fee to be settled on the Position Transfer Date inrespect of the Cleared Contracts whose Notional Amount and settlement currency aredenominated in a currency other than Japanese yen, Variation Margin and Mark-toMarket Difference as set forth in more detail in the Subordinate Rules214.

JSCC shallaccept the request for such Position Transfer, if JSCC can confirm that such Successor
Clearing Broker has deposited and paid Initial Margin, Position Transfer fee, accrued
liabilities,

Variation Margin and Mark-to-Market Difference to JSCC, no later than 11:00

a.m. on the JSCC Business Day immediately following such date.

213

Position Transfer Fee is equal to the amount of net Variation Margin deposited by the
Customer to the Defaulting Clearing Participant by the Default Determination Date. See Rules
on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing Business,
Article 8.4.(1) for detail.
214
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8.4.
136

6

Where JSCC accepts the request for Position Transfer under Paragraph 5, thesettlement for the transferred Customer’s Cleared Contracts and the Position Transfer
shall be undertaken according to the following provisions:(1)

The claims and obligations prescribed in each item of Paragraph 1 shall arise
de novo among JSCC, all of the Successor Clearing Brokers and the Customer,
as applicable, on the Position Transfer Date;(2)

The claims and obligations which arise pursuant to Item (1) shall be deemed tobe the claims and obligations that would have arisen had the Customer Clearing
Contracts of Cleared Contract (Collateral Type) been transferred to theSuccessor Clearing Broker at the moment that the Customer Clearing Contracts
with the Defaulting Clearing Broker were terminated;(3)

Where claims and obligations arise as a result of Item (1), JSCC, the Successor
Clearing Broker and the Customer respectively shall pay or receive the Position
Transfer Fee, any accrued liabilities other than those which has already becomedue between JSCC and the Defaulting Clearing Broker at the time of Default
determination, Variation Margin and Mark-to-Market Difference, as prescribedin the Subordinate Rules215;(4)

Initial Margin to which the relevant Customer has the right to claim return under
Article 76 shall be treated as Initial Margin that has been deposited with JSCC
by such Customer through the Successor Clearing Broker;(5)

The claims and obligations arising as a result of the Clearing BrokerageContract between the Defaulting Clearing Broker and the Customer as well as
the claims and obligations resulting from Variation Margin paid or received
between them in relation to such Clearing Brokerage Contract, excluding theobligations of the Defaulting Clearing Participant in connection with the Cleared
Contracts which have become already due on the Default Determination Dateand the obligations of the Defaulting Clearing Participant in relation to the
Unpaid Amount set forth in Article 85-5.1, and the claims and obligations relating
to Customer Initial Margin in the amount equal to those deemed to have been215

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8.6.
137

deposited with JSCC by the Customer through the Successor Clearing Broker
pursuant to Item (4), shall cease to exist and have no future effect; and(6)

Notwithstanding the provisions of Article 91.2, the Early Termination Charge asa result of the Customer’s Cleared Contracts shall be calculated according to
the Net Present Value of each Cleared Contract on the date of termination
thereof as prescribed in the Subordinate Rules216.

7

For the purpose of the Rules, the claims and obligations which arise between

JSCC and each Successor Clearing Broker pursuant to the provisions of Paragraph 6
shall be deemed as the Customer’s Cleared Contracts which are Cleared Contracts(Collateral Type).
8

In addition to the provisions of Paragraphs 1 to 7, other matters necessary for

Position Transfer shall be prescribed in the Subordinate Rules217.
Article 94-2.

Position Transfer of Customer’s Cleared Contract upon Default of Cross

Margining Accepting Party
1

Notwithstanding the provisions of Article 94, when the claims and obligations set

forth in Article 84-5.1 come into existence as a result of a Default of a Cross Margining
Accepting Party, the Customer’s Cleared Contracts may be transferred as Position
Transfer as a whole, to one or more Successor Clearing Brokers, who shall assume therights, claims and obligations listed below, through the submission by the Customer ofan application to JSCC via the Successor Clearing Broker(s).

This may only be done

during the period specified in the Subordinate Rules218:(1)

The claims and obligations identical, in terms and conditions as prescribed in
the Subordinate Rules219, to the claims and obligations under the Customer’s
Cleared Contracts between the Cross Margining Accepting Party and JSCC

216

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8.7.
217
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8.
218
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8-2.1.
219
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8-3.2.
138which are in effect immediately before the claims and obligations coming into
existence pursuant to the provisions of Article 84-5.1; and(2)

The claims and obligations identical, in terms and conditions as prescribed in
the Subordinate Rules 220 , to the claims and obligations under the Clearing
Brokerage Contract between the Cross Margining Accepting Party and theCustomer which are in effect immediately before the claims and obligations
coming into existence pursuant to the provisions of Article 84-5.1.

2

The provisions of Article 94.2 to 94.8 shall apply mutatis mutandis for Position

Transfer of claims and obligations related to the Customer’s Cleared Contracts andClearing Brokerage Contracts set forth in the provisions of Paragraph 1, except that
Article 94.5 shall be replaced by the following provisions:“5 Upon receipt of a request for Position Transfer, in accordance with the provisions ofParagraph 4, JSCC shall calculate Initial Margin (as specified in Articles 64 and 65) as if
there had been a successful Position Transfer at 4:00 p.m. on the date of request of such
Position Transfer, as well as the Position Transfer Fee, accrued liabilities, excluding
liabilities which are already due between JSCC and the Defaulting Clearing Participant
at the time of determination of the Default and which relate to the Fixed Amount, Floating
Amount and upfront fee to be settled on the Position Transfer Date in respect of the
Cleared Contracts whose Notional Amount and settlement currency are denominated ina currency other than Japanese yen, and Variation Margin as set forth in more detail in
the Subordinate Rules. JSCC shall accept the request for such Position Transfer, if
JSCC can confirm that such Successor Clearing Broker has deposited and paid Initial
Margin, Position Transfer fee, accrued liabilities and Variation Margin to JSCC, no later
than 4:00 p.m. on such date.”
3

The Position Transfer of Customer’s Cleared Contracts and Clearing BrokerageContracts by a Cross Margining User set forth in Paragraphs 1 and 2 above may only beallowed when the Cross Margining User has agreed with the Listed Futures Successor
Clearing Broker (and the JGB Futures Non-Clearing Participant, when the JGB Futures
Contracts or the Interest Rate Futures Contracts of the said Cross Margining User are
traded through brokerage of the JGB Futures Non-Clearing Participant) on the Listed
220

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8-3.2.
139

Futures Position Transfer, and submitted a request for Listed Futures Position Transfer
in the form prescribed by JSCC to JSCC via the Listed Futures Successor Clearing
Broker.
Article 94-3. Listed Futures Position Transfer of Claims and Obligations related to JGB
Futures Cleared Contracts and the like and Claims and Obligations related to Interest
Rate Futures Cleared Contracts and the like upon Default of Cross Margining Accepting
Party
1

When the claims and obligations come into existence pursuant to the provisionsof Article 84-5.1, a Listed Futures Position Transfer in relation to the claims andobligations listed below corresponding to such claims and obligations and the legal
relationship set forth in Article 84-5.2 as a whole to a Listed Futures Successor Clearing
Broker may be effected, through the submission by the Cross Margining User fallingunder Article 2.1.(13)-9.b. to d. an application to JSCC via the Listed Futures Successor
Clearing Broker.
Rules

221

This may only be done during the period specified in the Subordinate, and so long as no event of default under the Agreement for Setting Up

Futures/Options Trading Account prescribed by the Designated Market Operator or theContract for Commissioning Clearance related to JGB Futures, etc. executed with the
Cross Margining Requestor has occurred on the part of the Cross Margining User or the
Cross Margining User has not been subject to the measures of suspension of a Clearing
Brokerage for Market Transactions of Derivatives by the Designated Market Operator as
it is judged to be insolvent or likely to be insolvent:(1)

The claims and obligations identical, in terms and conditions as prescribed in
the Subordinate Rules, to the claims and obligations set forth in Article 84-5.1
between the Cross Margining Accepting Party and JSCC which are in effect at
the time when the claims and obligations come into existence pursuant to theprovisions of Article 84-5.1; and(2)

The claims and obligations identical, in terms and conditions as prescribed in
the Subordinate Rules, to the legal relationship set forth in Article 84-5.2
between the Cross Margining Accepting Party and the Customer which are ineffect at the time when the claims and obligations come into existence pursuant
to the provisions of Article 84-5.1.

221

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8-3.1.
140

2

Where a Cross Margining User applies to JSCC for a Listed Futures Position

Transfer pursuant to the provisions of Paragraph 1, the Cross Margining User shallobtain the consent of the Listed Futures Successor Clearing Broker (and the JGB
Futures Non-Clearing Participant, when the JGB Futures Contracts or the Interest Rate
Futures Contracts of the Cross Margining User are traded through a brokerage of a JGB
Futures Non-Clearing Participant).
3

When the Listed Futures Successor Clearing Broker consents to the Listed

Futures Position Transfer in Paragraph 2, it shall submit the request form for Listed
Futures Position Transfer received from the Cross Margining User to JSCC within the
period referenced in Paragraph 1.
The request form shall state, among other things, the effect that the Listed Futures
Successor Clearing Broker was asked to accept Listed Futures Position Transfer andhas accepted it; that the JGB Futures Non-Clearing Participant has agreed to it, when
the JGB Futures Contracts or the Interest Rate Futures Contracts of the Cross Margining
User are traded through a brokerage of the JGB Futures Non-Clearing Participant; that
the Cross Margining User is submitting request for Listed Futures Position Transfer to
JSCC; and that the Listed Futures Successor Clearing Broker is submitting the request
for Listed JGB Futures Position Transfer to JSCC.
4

Upon receipt of a request for Listed Futures Position Transfer pursuant to theprovisions of Paragraph 3, JSCC shall accept the request for such Listed Futures
Position Transfer, if the conditions set forth below according to each case listed below
are satisfied:(1)

When the claims and obligations set forth in Article 84-5.1 come into existence
as a result of a Default of the Cross Margining Accepting Party:
Position Transfer of Customer’s Cleared Contracts and Clearing BrokerageContracts as set forth in Paragraph 94-2 is possible;(2)

When the claims and obligations set forth in Article 84-5.1 come into existence
due to any reason other than a Default of the Cross Margining Accepting Party:
Such Cross Margining Accepting Party has deposited the amount of Initial
Margin calculated by JSCC pursuant to the provisions of Articles 64 and 65 as141

if there had been a successful Listed Futures Position Transfer at 4:00 p.m. on
the date of request of such Listed Futures Position Transfer with JSCC no later
than 4:00 p.m. on such date.
5

Where JSCC accepts the request for Listed Futures Position Transfer underParagraph 4, the settlement for the transferred Cross Margined JGB Futures Cleared
Contracts and Cross Margined Interest Rate Futures Cleared Contracts and the Listed
Futures Position Transfer shall be undertaken according to the following provisions:(1)

According to the cases listed below, the claims and obligations prescribed ineach item of Paragraph 1 shall arise de novo among the parties specified in therelevant items below on the Listed Futures Position Transfer Date:a. When the Cross Margining User falls under Article 2.1.(13)-8.b:
Among JSCC, Listed Futures Successor Clearing Broker and the customer
whose JGB Futures Contracts or Interest Rate Futures Contracts are tradedthrough a brokerage of the Listed Futures Successor Clearing Broker;
b. When the Cross Margining User falls under Article 2.1.(13)-8.c:Among JSCC, Listed Futures Successor Clearing Broker and the JGB Futures
Non-Clearing Participant whose JGB Futures Contracts or Interest Rate Futures
Contracts are Cleared through brokerage of the Listed Futures Successor
Clearing Broker;
c. When the Cross Margining User falls under Article 2.1.(13)-8.d:Among JSCC, Listed Futures Successor Clearing Broker, the JGB Futures NonClearing Participant whose JGB Futures Contracts or Interest Rate Futures
Contracts acting as broker for the customer are Cleared through brokerage of
the Listed Futures Successor Clearing Broker and the customer whose JGB
Futures Contracts or Interest Rate Futures Contracts are traded throughbrokerage of the JGB Futures Non-Clearing Participant.

(2)

The claims and obligations which arise pursuant to Item (1) shall be deemed to
be as follows:a. Among the parties specified in Item (1).a. above, the claims and obligations
142

related to the JGB Futures Cleared Contracts or the Interest Rate Futures
Cleared Contracts which would have come into effect at the time of the Listed
Futures Position Transfer had brokerage for the JGB Futures Contracts or theInterest Rate Futures Contracts been asked by the customer to the Listed
Futures Successor Clearing Broker, and the claims and obligations related tothe brokerage for the relevant JGB Futures Contracts or the relevant Interest
Rate Futures Contracts;b. Among the parties specified in Item (1).b. above, the claims and obligations
related to the JGB Futures Cleared Contract or the Interest Rate Futures
Cleared Contracts which would have come into effect at the time of the Listed
Futures Position Transfer had Clearing brokerage for the JGB Futures Contracts
or the Interest Rate Futures Contracts been asked by the JGB Futures NonClearing Participant to the Listed Futures Successor Clearing Broker, and theclaims and obligations related to the Clearing brokerage for the relevant JGB
Futures Contracts or the relevant Interest Rate Futures Contracts;c. Among the parties specified in Item (1).c. above, the claims and obligations
related to the JGB Futures Cleared Contract or the Interest Rate Futures
Cleared Contracts which would have come into effect at the time of the Listed
Futures Position Transfer had brokerage for the JGB Futures Contracts or theInterest Rate Futures Contracts been asked by the customer to the JGB Futures
Non-Clearing Participant and Clearing related to such JGB Futures Contracts
or Interest Rate Futures Contracts been asked by the JGB Futures NonClearing Participant to the Listed Futures Successor Clearing Broker, the claims
and obligations related to Clearing brokerage for the JGB Futures Contracts or
the Interest Rate Futures Contracts, and the claims and obligations related tothe brokerage for the customer’s JGB Futures Contracts or Interest Rate
Futures Contracts of the JGB Futures Non-Clearing Participant;(3)

In the Listed Futures Position Transfer, the Settlement Price, as defined in the
Securities and Similar Contracts Business Rules, on the JSCC Business Day
immediately preceding the date on which the claims and obligations come into
existence pursuant to the provisions of Article 84-5.1 shall be used as theContract Price.

143

(4)

Where claims and obligations arise as a result of Item (1), JSCC and the Cross
Margining Accepting Party respectively shall pay or receive the amountequivalent to the Cross Margining MtM Difference, as prescribed in the
Subordinate Rules222;(5)

The claims and obligations between JSCC and the Cross Margining Accepting
Party set forth in Article 84-5.1 and the legal relationship between the Cross
Margining Accepting Party and the Customer set forth in Article 84-5.2 shallcease to exist and have no future effect.

6

The claims and obligations which arise between JSCC and the Listed Futures

Successor Clearing Broker pursuant to the provisions of Paragraph 5 shall be deemedas the JGB Futures Cleared Contracts or the Interest Rate Futures Cleared Contracts,
as applicable, and the provisions of the Securities and Similar Contracts Business Rules
and sub-ordinated rules thereof shall apply.
7

In addition to the provisions of Paragraphs 1 to 6, other matters necessary for

Listed Futures Position Transfer shall be prescribed in the Subordinate Rules.

Article 95. Default Auction
1

Following the Default of a Clearing Participant, in order to re-establish thepositions affected by the termination of the Defaulting Clearing Participant’s Cleared
Contracts (exclusing Customer’s Cleared Contracts succeeded to the Successor
Clearing Broker pursuant to the provisions of Article 94 and Article 94-2), JSCC may holdan auction (“Default Auction”) to execute IRS Transactions to eliminate losses that JSCC
may suffer from the termination of such Defaulting Clearing Participant’s Cleared
Contracts, the Hedge Transactions and the Cross Margining Liquidation Transactions,
including those losses that JSCC may suffer from the claims and obligations which havecome into effect pursuant to the provisions of Article 84-5.1 of these Business Rules, if
any.
The Customer’s Cleared Contracts transferred to the Successor Clearing Broker
pursuant to the provisions of Article 94 shall be excluded from the scope of such Default
222

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 8-3.2.
144

Auction.
2

JSCC may hold Default Auction set forth in Paragraph 1 separately by eachcurrency type of the Defaulting Clearing Participant’s Cleared Contracts.
3

Before holding a Default Auction, JSCC shall determine, and advise Clearing

Participants of, the details of the IRS Transactions to be executed by the Default Auction(“Auction Transactions”) and other terms and conditions, in the manner prescribed in the
Subordinate Rules223.
4

All Clearing Participants other than Defaulting Clearing Participant are required

to participate in Default Auction in the manner prescribed in the Subordinate Rules224.
5

In addition to the provisions of Paragraphs 1, 2 and 3, the procedures and othermatters related to Default Auction shall be prescribed in the Subordinate Rules225.
Article 95-2. Treatment in the event of Possible Shortfall in Loss Recovery by Default
Auction1

Following a Default Auction, where it is threatened that the losses arising out of

the Default of the Defaulting Clearing Participant as a result of the execution of the
Auction Transactions, calculated by each currency type of the Defaulting Clearing
Participant’s Cleared Contracts pursuant to the provisions of Article 102.1, cannot berecovered in full under Articles 103 to 106, JSCC shall, taking account the advice of the
IRS Default Management Committee, either hold another Default Auction in respect of
the Defaulting Clearing Participant’s Cleared Contracts denominated in the currency
which would be likely to cause shortfall or conduct consultation pursuant to the provisionsof Article 96.
2

Notwithstanding the provisions of Paragraph 1, if the Default Auctions to be held

separately by each currency type of the Defaulting Clearing Participant’s Cleared223

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 10.
224
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 9.
225
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Articles 10, 11, 12 and 13.
145

Contracts are held at the same time or in respect of the Default Auction held at lastamong the Default Auctions to be held in association with the termination of the
Defaulting Clearing Participant’s Cleared Contracts, when the losses arising out of the
Default of the Defaulting Clearing Participant as a result of the execution of the Auctioned
Transactions may not be recovered in full under Articles 103 to 106, JSCC and Clearing
Participants shall have mutual consultation pursuant to the provisions of Article 96.
3

The provisions of Paragraph 2 shall apply mutatis mutandis when another

Default Auction shall be held pursuant to the provisions of Paragraph 1.
Article 96. Consultation in the event of Shortfall in Loss Recovery
1

The mutual consultation under the provisions of Article 95-2.1 and 95-2.2 shallbe held among JSCC and all Clearing Participants required to participate in the Default
Auction on how to settle losses arising out of the Default of the Defaulting Clearing
Participant as a result of the execution of the Auctioned Transactions in the mannerprescribed in the Subordinate Rules226.
2

When, as a result of the consultation, an agreement is reached among JSCC

and all Clearing Participants required to participate in the Default Auction in question,
pursuant to the provisions of the Subordinate Rules, JSCC shall settle such losses inaccordance with such agreement, provided that the settlement shall enable it to recoversuch losses in full and to continue its IRS Clearing Business.
Article 97.

Compulsory Termination of Cleared Contracts due to Failure of MutualConsultation
1

When the consultation is held among JSCC and the Clearing Participants

pursuant to Article 96.1 but they fail to reach the agreement referred to in Article 96.2
within the period prescribed in the Subordinate Rules227, any and all Cleared Contracts
remaining in force whose Notional Amount and settlement currency are denominated in
the same currency as that of the Defaulting Clearing Participant’s Cleared Contracts forwhich the agreement cannot be reached shall terminate automatically as of the end ofsuch period without any notice from JSCC or any Clearing Participant.

226

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 15.3.
227
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 16.
146

2

JSCC shall prescribe in the Subordinate Rules 228 the amount of Early

Termination Charge which becomes payable and other necessary matters relating to thetermination of Cleared Contracts under Paragraph 1.
Article 98. Notification in relation to Mutual Consultation
When agreement is reached under Article 96.2, or Cleared Contracts specified in Article
97.1 are terminated under Article 97.1, JSCC shall immediately notify all Clearing
Participants and make a public announcement to that effect.
Article 99. Execution of Auction Transaction
1

When a Clearing Participant makes a successful bid on Auction Transactions in

a Default Auction, such Auction Transactions shall come into effect between JSCC andsuch Clearing Participant in the manner as prescribed in the Subordinate Rules229.
2

JSCC and the Clearing Participant referred to in Paragraph 1 shall, whenAuction Transactions comes into effect pursuant to the provisions of Paragraph 1, pay orreceive the cash, Variation Margin and Mark-to-Market Difference prescribed in the
Subordinate Rules230 in the manner prescribed in the Subordinate Rules231.
3

For the purpose of the Rules, Auction Transactions that come into effectpursuant to the provisions of Paragraph 1 shall be deemed as Cleared Contracts which
are Cleared Contracts (Collateral Type).
4

In addition to the provisions of Paragraphs 2 and 3, procedures that would need

to be followed when a Subject Transaction for Auction comes into effect shall beprescribed in the Subordinate Rules.
Article 99-2.

Customer Profit Direct Receipt upon Default of Clearing Broker

228

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17.
229
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 12.
230
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 14.1.
231
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 14.2.
147

1

Upon termination of Customer’s Cleared Contracts executed on an account ofa Customer pursuant to the provision of Article 91, if the Customer’s Cleared Contracts
are not transferred pursuant to the provision of Articles 94 through 94-3, the Customer
has the right to request payment from JSCC of the amount of Cash specified in the
Subordinate Rules 232 as the amount equivalent to the profit which the Customer isentitled to receive in respect of the Customer’s Cleared Contracts on and after the
Default Determination Date, and may exercise such right to request payment in themanner specified in the Subordinate Rules233.
2

The Defaulting Clearing Participant shall be liable to JSCC for indemnificationof the amount of Cash set forth in Paragraph 1 above irrespective of before or after its
payment by JSCC.
Section 3 Netting and Application of Collateral in respect of Obligation of
Defaulting Clearing Participant (Articles 100 – 101)
Article 100. Obligation in relation to Default Settlement
A Defaulting Clearing Participant shall be required to pay an Early Termination Charge
which becomes payable upon termination of the Defaulting Clearing Participant’s
Cleared Contracts. In addition, if JSCC incurs losses, expenses or obligations as aresult of the Default Auction, the execution of the Auction Transactions under Articles 95
and 99 or otherwise for the settlement of the Defaulting Clearing Participant’s Cleared
Contracts and the claims and obligations which have come into effect pursuant to theprovisions of Article 84-5.1, the Defaulting Clearing Participant shall indemnify JSCC forsuch losses, expenses or obligations.
Article 101.

Method for Settlement of Defaulting Clearing Participant’s Cleared

Contracts
1

Notwithstanding anything to the contrary stated herein, in respect of theobligations which a Defaulting Clearing Participant owes to JSCC in connection withtermination of the Defaulting Clearing Participant’s Cleared Contracts set forth in Item
(1) below (“Unsettled Obligations”), the net-settlement thereof and the application of232

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-2.1.
233
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-2.2.
148

collateral thereto shall be made by each currency type of the Defaulting Clearing
Participant’s Cleared Contracts pursuant to the provisions of Item (2) of this paragraph,on the day on which all the amounts of Unsettled Obligations, obligations of JSCC to be
netted out against such Unsettled Obligations and the value of the collateral to be applied
to the payment of such Unsettled Obligations are fixed:(1)

Unsettled Obligations shall be:a.

Payment obligation for the Early Termination Charge payable by the
Defaulting Clearing Participant to JSCC in respect of the currency of therelevant Defaulting Clearing Participant’s Cleared Contracts as a result oftermination of the Defaulting Clearing Participant’s Cleared Contracts;b.

Obligation to return Variation Margin deposited by JSCC with theDefaulting Clearing Participant for the Defaulting Clearing Participant’s
Cleared Contracts and the payment obligation for the accrued interests
on such Variation Margin.

Variation Margin and interests on Variation

Margin related to the Defaulting Clearing Participant’s Cleared Contracts
whose Notional Amount and settlement currency are denominated in acurrency other than Japanese yen shall be converted into Japanese yen
in the manner prescribed by JSCC in the Subordinate Rules234, the same
applies in below Item (2);c.

Any unsettled obligation of the Defaulting Clearing Participant in relation
to any Cleared Contract in the relevant currency that has already becomedue at the time when the occurrence of the Default of such Defaulting
Clearing Participant is determined. The unsettled obligation in relation to
the Defaulting Clearing Participant’s Cleared Contracts whose Notional
Amount and settlement currency are denominated in a currency otherthan Japanese yen shall be converted into Japanese yen in the mannerprescribed by JSCC in the Subordinate Rules 235 , the same applies in
below Item (2);234

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-2.
235
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-2.
149

d.

Payment obligations in respect of the currency of the Defaulting Clearing
Participant’s Cleared Contracts owed by the Defaulting Clearing
Particpant pursuant to the provision of Article 99-2.2.

The payment

obligations in respect of the Defaulting Clearing Participant’s Cleared
Contracts whose Notional Amount and settlement currency aredenominated in a currency other than Japanese yen shall be converted
into Japanese yen in the manner prescribed by JSCC in the Subordinate
Rules236;ande.

Payment obligations in respect of the currency of the Defaulting Clearing
Participant’s Cleared Contracts owed by the Defaulting Clearing
Participant pursuant to the provision of Article 101. The payment
obligations in respect of the Defaulting Clearing Participant’s Cleared
Contracts whose Notional Amount and settlement currency aredenominated in Japanese yen shall include those related to claims andobligations came into effect pursuant to the provisions of Article 84-5.1.
The payment obligations in respect of the Defaulting Clearing Participant’s
Cleared Contracts whose Notional Amount and settlement currency aredenominated in a currency other than Japanese yen shall be converted
into Japanese yen in the manner prescribed by JSCC in the Subordinate
Rules237, the same applies in below Item (2).

(2)

Netting and application of collateral to be conducted by each currency of the
Defaulting Clearing Participant’s Cleared Contracts shall be conductedpursuant to the following provisions:a.

The amount of the Early Termination Charge payable by JSCC for the
relevant currency shall be deducted from the total amount of the Unsettled
Obligations for the relevant currency set forth in Item (1) ( “Defaulting
Clearing Participant Payment Amount”).

If any Cross Margined JGB

Futures Cleared Contract or Cross Margined Interest Rate Futures236

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-3.
237
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-2.
150

Cleared Contract is booked on the Clearing Participant Account of the
Defaulting Clearing Participant, the amount of the Early Termination
Charge payable by JSCC in respect of the Defaulting Clearing
Participant’s JPY Cleared Contracts shall include JSCC’s payment
obligations related to the claims and obligations which have come into
effect pursuant to the provisions of Article 84-5.1;b.

Variation Margin deposited with JSCC by the Defaulting Clearing
Participant for the Defaulting Clearing Participant’s Cleared Contracts
shall be applied to the payment of the Unsettled Obligations in respect of
the relevant currency, and the amount so applied shall be deducted fromthe total amount of Unsettled Obligations remaining after the deduction
set forth in a. above;c.

The Funds of which delivery to the Defaulting Clearing Participant has
been suspended pursuant to the provisions of Article 89.2 shall be applied
to the payment of the Unsettled Obligations in respect of the relevant
currency, and the amount so applied shall be deducted from the total
amount of Unsettled Obligations remaining after the deduction set forth inb. above, provided that, for securities, the proceeds from their liquidation
remaining after payment of cost of liquidation shall be applied to thepayment of the Unsettled Obligations, and for Cash in a currency otherthan Japanese yen, the Japanese yen equivalent converted in the mannerprescribed by JSCC in the Subordinate Rules238 shall be applied to thepayment of the Unsettled Obligations;d.

Initial Margin deposited for the Defaulting Clearing Participant’s Cleared
Contracts and allocated by each currency type using the allocation ratioprescribed by JSCC in the Subordinate Rules239 other than Initial Marginof which the Customer has the right to claim return pursuant to theprovisions of Article 76 shall be applied to the payment of the Unsettled
Obligations in respect of the relevant currency, and the amount so applied238

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-2.
239
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-3.1.
151

shall be deducted from the total amount of Unsettled Obligations
remaining after the deduction set forth in c. above, provided that, for Initial
Margin in the form of securities, the proceeds from their liquidation
remaining after payment of cost of liquidation shall be applied to thepayment of the Unsettled Obligations;e.

The IRS Clearing Fund and the Default Contingent Margin deposited by
the Defaulting Clearing Participant and allocated by each currency type of
the Defaulting Clearing Participant’s Cleared Contracts using theallocation ratio prescribed by JSCC in the Subordinate Rules240 shall beapplied to the payment of the Unsettled Obligations in respect to therelevant currency, and the amount so applied shall be deducted from theamount of Unsettled Obligations remaining after the deduction set forth ind. above, provided that for securities deposited as the IRS Clearing Fundor the Default Contingent Margin, the proceeds from their liquidation
remaining after payment of cost of liquidation shall be applied to thepayment of the Unsettled Obligations; andf.

The excess collateral deposited by the Defaulting Clearing Participant tosecure its obligations under any Other Clearing Business and allocatedby each currency type of the Defaulting Clearing Participant’s Cleared
Contracts using the allocation ratio prescribed by JSCC in the Subordinate
Rules241 shall be applied to the payment of the Unsettled Obligations in
respect to the relevant currency, and the amount so applied shall be
deducted from the Unsettled Obligations remaining after the deduction set
forth in e. above.

As used herein, “excess collateral” means margin,

clearing fund and any other collateral deposited by the Defaulting Clearing
Participant with JSCC in respect of any of the Other Clearing Businesses,
to which the Defaulting Clearing Participant has the right to claim return,remaining after application thereof to the payment of the Defaulting
Clearing Participant’s obligations in accordance with the business rules ofsuch Other Clearing Business, provided that in the case of the excess

240

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-3.2.
241
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 17-3.2.
152

collateral in the form of securities, it shall be the amount of proceeds oftheir liquidation remaining after the cost of such liquidation.
2

When there still remains any Defaulting Clearing Participant Payment Amountin respect of a certain currency outstanding after the netting and application of collateral
by each currency of the Defaulting Clearing Participant’s Cleared Contracts as set forthin Paragraph 1, the total amount of such outstanding Defaulting Clearing Participant
Payment Amounts shall constitute one single claim of JSCC against the Defaulting
Clearing Participant arising from termination of all Defaulting Clearing Participant’s
Cleared Contracts notwithstanding any other provision of these Business Rules.
Section 4 Sharing of Losses by Other Clearing Participants (Articles 102 – 111)
Article 102. Calculation of Losses Resulting from Default Settlement
1

On the date prescribed in the Subordinate Rules242 (“Initial Loss-Determination

Date”), JSCC shall determine whether or not any loss suffered by JSCC will arise by
subtracting the Re-Allocated Margin (as defined in Article 102-2) from the amountremaining after the netting and application of collateral pursuant to the provisions ofArticle 101.1.(2), and if there is any such loss, calculate the amount thereof.
2

If under Paragraph 1, there is any claim or obligation or collateral the amount of

which is yet to be determined, JSCC shall carry out the calculation set forth in Paragraph
1 by reference to an estimated amount thereof determined by JSCC.
Article 102-2.

(Allocation of Collaterals to Defaulting Clearing Participant’s Cleared

Contracts in Different Currencies)
If the Defaulting Clearing Participant’s Cleared Contracts are composed of JPY Cleared
Contracts and Foreign Currency Cleared Contracts or Foreign Currency Cleared
Contracts in multiple currencies and the resultant value obtained from the loss calculation
pursuant to the provisions of Article 102.1 for Defaulting Clearing Participant’s Cleared
Contracts of one currency is negative, the absolute value of such negative value prorated

242

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 18.
153

in the manner prescribed by JSCC in the Subordinate Rules243 shall be distributed as
Re-Allocation Margin to be netted against the Excess Default Loss in respect of the
Defaulting Clearing Participant’s Cleared Contracts in other currencies, other than the
Defaulting Clearing Participant’s Cleared Contracts in the currency for which calculationof loss pursuant to the provisions of Article 102.1 has been completed and the Defaulting
Clearing Participant’s Cleared Contracts in the currency in respect of which Clearing
Contracts are terminated pursuant to the provisions of Article 97.1.
Article 103. Recovery of Losses with IRS Settlement Guarantee Reserve1

If any loss arises against JSCC as a result of the calculation under Article 102,

JSCC shall recover, by each currency of the Defaulting Clearing Participant’s Cleared
Contracts, the loss calculated by each currency in respect of the Defaulting Clearing
Participant’s Cleared Contracts corresponding to the amount of such loss (other thanthose items excluded by the Subordinate Rules 244 ), and any other losses for eachcurrency in respect of the Defaulting Clearing Participant’s Cleared Contracts prescribedin the Subordinate Rules245 that have arisen in the course of the settlement of default of
the Defaulting Clearing Participant by the Initial Loss-Determination Date (“Excess
Default Loss”), in the order and in the manner set forth in the following items. For the
purpose of these Business Rules, “Clearing Participant Default Settlement” includes theDefault Auction and any other necessary actions in resolving the Default of a Defaulting
Clearing Participant:(1)

Application of the First Tier IRS Settlement Guarantee Reserve allocated byeach currency type of the Defaulting Clearing Participant’s Cleared Contracts inthe manner prescribed by JSCC in the Subordinate Rules246;(1)-2

Application of the Re-Allocated First Tier IRS Settlement Guarantee Reserve
to be allocated to recover the Excess Default Loss pursuant to the provisions ofArticle 103-2.1;

243

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 18-2.
244
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 19.1.
245
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 19.2.
246
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 19.3.
154

(2)

Application of the IRS Clearing Fund deposited by each Clearing Participant
other than the Defaulting Clearing Participant with JSCC and the Second Tier
IRS Settlement Guarantee Reserve allocated by each currency type of the
Defaulting Clearing Participant’s Cleared Contracts in the manner prescribed by
JSCC in the Subordinate Rules247.
The amount of the IRS Clearing Fund to be applied shall not exceed the Second
Tier Clearing Participant Cap applicable to each Clearing Participant minus theamount that has already been used for the recovery of losses pursuant to this
Article in respect of other Defaults determined during the same Default
Settlement Period, if any, allocated by each currency of the Defaulting Clearing
Participant’s Cleared Contracts in the manner prescribed by JSCC in the
Subordinate Rules.

(3)

Application of the Re-Allocated IRS Clearing Fund to be allocated to recover
Excess Default Loss pursuant to the provisions of Article 103-2.2 deposited by
the Clearing Participants required to participate in the Default Auction related to
the Defaulting Clearing Participant’s Cleared Contracts in the currency subject
to such allocation and the Re-Allocated Second Tier IRS Settlement Guarantee
Reserve; and(4)Application of the Re-Allocated IRS Clearing Fund to be allocated to recover
Excess Default Loss pursuant to the provisions of Article 103-2.2 deposited by
the Clearing Participant not required to participate in the Default Auction related
to the Defaulting Clearing Participant’s Cleared Contracts in the currency
subject to such allocation.

2

If the funds set forth in Paragraph 1.(2) are sufficient to recover the remaining

Losses Resulting from Default Settlement, the amount and the order of the IRS Clearing
Fund deposited by each Clearing Participant other than the Defaulting Clearing
Participant with JSCC and the Second Tier IRS Settlement Guarantee Reserve to be
used for such recovery shall be determined in the following manner:

247

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 19.4.
155

(1)

The total of the IRS Clearing Fund allocated by each currency of the Defaulting
Clearing Participant’s Cleared Contracts pursuant to the provisions ofParagraph 1.(2) to be used for this purpose (referred to as “Second Tier Clearing
Participants Contributions” in this paragraph) and the amount of the Second Tier
IRS Settlement Guarantee Reserve allocated by each currency of the Defaulting
Clearing Participant’s Cleared Contracts pursuant to the provisions ofParagraph 1.(2) to be used for this purpose shall be determined by prorating theremaining Excess Default Loss according to the ratio of the total sum of theSecond Tier Clearing Participant Caps for the relevant currency of the
Defaulting Clearing Participant’s Cleared Contracts applicable to all Clearing
Participants other than the Defaulting Clearing Participant and the amount of
the Second Tier IRS Settlement Guarantee Reserve so allocated.

(2)

The IRS Clearing Fund deposited with JSCC by each Clearing Participant otherthan the Defaulting Clearing Participant required to participate in the relevant
Default Auction, and allocated pursuant to the provisions of Paragraph 1.(2)shall be used in the following order:a.

IRS Clearing Fund deposited with JSCC by a Clearing Participant who isrequired but failed to participate in either:i)the Default Auction in respect of such Defaulting Clearing
Participant; orii)

any other Default Auction conducted earlier during the Default
Settlement Period in which the Default Determination Date of the
Defaulting Clearing Participant occurs,

unless the Clearing Participant made a successful bid in any of the earlier
Default Auctions during the said Default Settlement Period and, if there
are any, has participated in all subsequent Default Auctions:
The amount of the Clearing Participant’s contribution to the IRS Clearing
Fund used shall be determined by prorating the Second Tier Clearing
Participants Contributions according to the Second Tier Clearing
Participant Cap of each Clearing Participant captured by this item but
limited to the Second Tier Clearing Participant Cap of each Clearing
Participant.

156

b.

IRS Clearing Fund deposited with JSCC by a Clearing Participant required
to participate in the Default Auction whose bid price at the Default Auction
in respect of such Defaulting Clearing Participant or any other Default
Auction conducted earlier during the Default Settlement Period in which
the Default Determination Date in respect of the relevant Defaulting
Clearing Participant occurs and in which the Clearing Participant isrequired to participate falls on the prices prescribed in the Subordinate
Rules248 as significant deviation from the prevailing market price (referred
to as “Deviated Price” in this sub-item b. and Paragraph 4.(2)), provided
that if a Clearing Participant falling under this b. made a successful bid on
Auction Transactions in any of the above-mentioned earlier Default
Auctions and its bid price at all Default Auctions conducted thereafter does
not fall on the Deviated Price, or if a Clearing Participant falls under a.
above, such Clearing Participant shall not be subject to this b. :The amount to be used shall be determined by prorating the Second Tier
Clearing Participants Contributions less the total sum of the amounts
applied to loss recovery pursuant to a. above according to the Second Tier
Clearing Participant Cap of each Applicable Clearing Participant, but
limited to the Second Tier Clearing Participant Cap of each Clearing
Participant.

c.

IRS Clearing Fund deposited with JSCC by each Clearing Participant
other than the Defaulting Clearing Participant not subject to a. or b. above
or d. below:
The amount to be used shall be determined by prorating Second Tier
Clearing Participants Contributions minus the amounts used for loss
recovery pursuant to a. and b. above according to the Second Tier
Clearing Participant Cap of each Clearing Participant, but limited to theSecond Tier Clearing Participant Cap of each Clearing Participant.

d.

IRS Clearing Fund deposited with JSCC by the Clearing Participant who
made a successful bid on Auction Transactions in the Default Auction in248

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 19.3.
157

respect of the relevant Defaulting Clearing Participant, provided that if
such Clearing Participant is subject to a. or b. above, or if such Clearing
Participant would have been subject to a. or b. above had its Clearing
Fund been used, in respect of the most recent Default Auction held prior
to the relevant Default Auction during the relevant Default Determination
Period, IRS Clearing Fund of that Clearing Participant shall be included inthis d.:The amount to be used shall be Second Tier Total Amount Borne by
Clearing Participants remaining after loss recovery as set forth in a.
through c. above.
3

If the funds set forth in Paragraph 1.(3) are sufficient to recover the remaining

Excess Default Loss, the amount of the Re-Allocated IRS Clearing Fund and the ReAllocated Second Tier IRS Settlement Guarantee Reserve to be used for such recovery
pursuant to Paragraph 1.(3) shall be determined in the following manner:(1)

The amount to be applied from the Re-Allocated IRS Clearing Fund depositedby Clearing Participants other than the Defaulting Clearing Participant and theRe-Allocated Second Tier IRS Settlement Guarantee Reserve shall be suchremaining amount prorated according to the ratio of the total amount of the ReAllocated IRS Clearing Fund under Paragraph 1.(3) and (4) and the amount of
the Re-Allocated Second Tier IRS Settlement Guarantee Reserve;(2)

The provisions of Paragraph 2.(2) shall apply mutatis mutandis when applying
the Re-Allocated IRS Clearing Fund under Paragraph 1.(3) out of the IRS
Clearing Fund deposited with JSCC by Clearing Participants other than the
Defaulting Clearing Participant required to participate in the relevant Default
Auction, whereby the reference to “IRS Clearing Fund” and “Second Tier
Clearing Participant Cap” in Paragraph 2.(2) shall be deemed to be replacedwith “the amount of the Re-Allocated IRS Clearing Fund” and the “Second Tier
Total Amount Borne by Clearing Participants” shall be deemed to be replacedwith “the remaining Excess Default Loss.”4.

If the funds set forth in Paragraph 1.(4) are sufficient to recover the remaining

Excess Default Loss, the amount of the Re-Allocated IRS Clearing Fund under158

Paragraph 1.(4) to be used for such recovery shall be the amount specified below
according to the order of the Re-Allocated IRS Clearing Fund below:(1)

Re-Allocated IRS Clearing Fund deposited with JSCC by a Clearing Participant
not required to participate and had not participated in the Default Auction:
The greater of the remaining Excess Default Loss prorated according to the ReAllocated IRS Clearing Fund Contribution Cap in respect of each Clearing
Participant subject to this item, and the Re-Allocated IRS Clearing FundContribution Cap in respect of the relevant Clearing Participant.

For thepurpose of this paragraph, the “Re-Allocated IRS Clearing Fund Contribution
Cap” means the amount of the Re-Allocated IRS Clearing Fund to be applied
pursuant to the provisions of Paragraph 1.(4) less the amount which havealready been applied to recover loss arising against JSCC in respect of other
Default the occurrence of which was determined during the same Default
Settlement Period pursuant to the provisions of this Article, if any.
(2)

Re-Allocated IRS Clearing Fund deposited with JSCC by a Clearing Participant
not required to participate, but participated in the Default Auction with theDeviating Price:
The greater of the amount remaining after the application made under Item (1)above prorated according to the Re-Allocated IRS Clearing Fund Contribution
Cap in respect of each Clearing Participant subject to this item and the ReAllocated IRS Clearing Fund Contribution Cap in respect of the relevant
Clearing Participant.

(3)

Re-Allocated IRS Clearing Fund deposited with JSCC by a Clearing Participant
not required to participate in the Default Auction other than those mentioned in
Items (2) and (4):The greater of the amount remaining after the application made under Item (2)above prorated according to the Re-Allocated IRS Clearing Fund Contribution
Cap in respect of each Clearing Participant subject to this item and the ReAllocated IRS Clearing Fund Contribution Cap in respect of the relevant
Clearing Participant.
159

(4)

Re-Allocated IRS Clearing Fund deposited with JSCC by the Clearing
Participant not required to participate, but participated in the Default Auction andwon the bid on the Auctioned Transaction:
The amount remaining after the application made under Item (3).

5The use of the IRS Clearing Fund deposited by each Clearing Participant with

JSCC as well as the Re-Allocated IRS Clearing Fund under Paragraph 1.(3) and (4) for
loss recovery under Paragraphs 2, 3 and 4 shall constitute the payment obligation of therelevant Clearing Participant owed to JSCC in the amount so used. The IRS Clearing
Fund and the Re-Allocated IRS Clearing Fund under Paragraph 1.(3) and (4) shall bedeemed to have been contributed for loss recovery pursuant to Paragraphs 1 to 4 on theInitial Loss-Determination Date without any further instruction from JSCC or any Clearing
Participant and through an offset of the claim of JSCC in the above mentioned obligation
against the Non-Defaulting Clearing Participant’s right to claim a return of IRS Clearing
Fund and the Re-Allocated IRS Clearing Fund under Paragraph 1.(3) and (4) in theamount equal to such obligations.
6

The IRS Clearing Fund deposited by a Clearing Participant that is a Specified

Successor Financial Institution will be used as the IRS Clearing Fund falling underParagraph 2.(2).c. according to the order as set forth in Paragraph 2.(2).c.
7

The provisions of this Article 103.2.(2) (including the case where theseprovisions apply mutatis mutandis pursuant to the provision of Paragraph 3) and Article
103.4 shall apply to the Clearing Participant when another person is acting on its behalf
in the default settlement as set forth in Article 9.1.(3).b.

In this case, the following terms

shall be construed as follows:(1)

Participation in a Default Auction shall include a bid by another person acting on
behalf of the Clearing Participant.

(2)

A successful bid shall include a successful bid made by another person in a
Default Auction on behalf of the Clearing Participant.

(3)

A Clearing Participant’s bid in the Default Auction evaluated against the160

acceptable price set by JSCC shall include a bid made in a Default Auction byanother person on behalf of the Clearing Participant.
Article 103-2. Allocation of IRS Settlement Guarantee Reserve and other Resources
for Defaulting Clearing Participant’s Cleared Contracts in Different Currencies
1

When the Defaulting Clearing Participant’s Cleared Contracts are comprised of

JPY Cleared Contracts and Foreign Currency Cleared Contracts or Foreign Currency
Cleared Contracts in multiple currencies, and if the First Tier IRS Settlement Guarantee
Reserve applied pursuant to Article 103.1.(1) in respect of the Defaulting Clearing
Participant’s Cleared Contracts in a certain currency was sufficient to recover the Excess
Default Loss, the remaining amount of the First Tier IRS Settlement Guarantee Reserve
prorated in the manner prescribed by JSCC in the Subordinate Rules 249 shall beallocated as the Re-Allocated First Tier IRS Settlement Guarantee Reserve set forth in
Article 103.1.(1)-2 to be applied to recover the Excess Default Loss arising from theDefaulting Clearing Participant’s Cleared Contracts in other currencies, other than the
Defaulting Clearing Participant’s Cleared Contracts in the currency for which calculationof loss pursuant to the provisions of Article 102.1 has been completed and the Defaulting
Clearing Participant’s Cleared Contracts in the same currency as the Cleared Contracts
terminated pursuant to the provisions of Article 97.1.
2

When the Defaulting Clearing Participant’s Cleared Contracts are comprised of

JPY Cleared Contracts and Foreign Currency Cleared Contracts or Foreign Currency
Cleared Contracts in multiple currencies, and if the IRS Clearing Fund and the Second
Tier IRS Settlement Guarantee Reserve applied pursuant to Article 103.1.(2) in respectof the Defaulting Clearing Participant’s Cleared Contracts in a certain currency were
sufficient to recover the Excess Default Loss, the remaining amount of the IRS Clearing
Fund and the Second Tier IRS Settlement Guarantee Reserve prorated in the mannerprescribed by JSCC in the Subordinate Rules250 shall be allocated as the Re-Allocated
IRS Clearing Fund and the Re-Allocated Second Tier IRS Settlement Guarantee
Reserve set forth in Article 103.1.(3) and (4) to be applied to recover the Excess Default
Loss arising from the Defaulting Clearing Participant’s Cleared Contracts in other249

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 19-2.
250
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 19-2.
161

currencies, other than the Defaulting Clearing Participant’s Cleared Contracts in thecurrency for which calculation of loss pursuant to the provisions of Article 102.1 has been
completed and the Defaulting Clearing Participant’s Cleared Contracts in the same
currency as the Cleared Contracts terminated pursuant to the provisions of Article 97.1.
Article 104. Special Provisions for IRS Clearing Fund in Default Settlement Period
1

Notwithstanding the Subordinate Rules referred to in Article 17.2 hereof, theRequired IRS Clearing Fund for each Clearing Participant during the Default Settlement
Period shall remain unchanged from the Required IRS Clearing Fund for each Clearing
Participant applicable on the JSCC Business Day immediately preceding the first day ofsuch Default Settlement Period, except as set forth in Paragraph 3.
2

If the IRS Clearing Fund is used in whole or in part for a loss recovery during

the Default Settlement Period pursuant to Article 103.1.(2) to (4), notwithstanding theprovisions of Paragraph 2 of Article 17, a Clearing Participant shall not be required tomake additional deposit to the IRS Clearing Fund.
3

Notwithstanding the provisions of Paragraph 1 above, the Required IRS

Clearing Fund for each Clearing Participant as of the last day of the Default Settlement
Period shall be, for each Clearing Participant, the amount calculated on the last day ofsuch Default Settlement Period.

Such Required IRS Clearing Fund shall apply until the

day immediately preceding the date of resumption of the calculation of the Required IRS
Clearing Fund251 pursuant to Article 17.2 hereof. In this case, if the amount of IRS
Clearing Fund and the Default Contingent Margin deposited by a Clearing Participant
with JSCC as of the last day of the Default Settlement Period falls short of the Required
IRS Clearing Fund applicable on the last day of the Default Settlement Period, such
Clearing Participant shall deposit with JSCC an amount at least equal to such shortfall
by 2:00 p.m. on the next JSCC Business Day following the last day of the Default
Settlement Period.
Article 105. Recovery of Losses with Third Tier Special Clearing Charge
1

If Excess Default Loss is not fully recovered in the manner set forth in Article

103, Clearing Participants other than the Defaulting Clearing Participant existing as of
the Default Determination Date (referred to as “Participant(s) Bearing Third Tier Special
Clearing Charge”) shall assume the obligation to pay the Third Tier Special Clearing251

cf. Rules on Required IRS Clearing Fund, Appendix
162

Charge to JSCC in the manner prescribed in the Subordinate Rules252. In such case,
JSCC shall apply such Third Tier Special Clearing Charges paid by the Participants
Bearing Third Tier Special Clearing Charge to the recovery of Excess Default Lossremaining after application of funds set forth in Article 103.
2

The amount of the Third Tier Special Clearing Charge set forth in Paragraph 1

shall be determined for each Participant Bearing Third Tier Special Clearing Charge
according to the Subordinate Rules253 in respect of each, provided that such amountshall not be more than the Required IRS Clearing Fund as of the JSCC Business Day
immediately preceding the first day of the prevailing Default Settlement Period prorated
in respect of each currency of the Defaulting Clearing Participant’s Cleared Contracts inthe manner prescribed by JSCC in the Subordinate Rules254.
Article 105-2. Allocation of Third Tier Special Clearing Charge for Defaulting Clearing
Participant’s Cleared Contracts in Different Currencies
When the Defaulting Clearing Participant’s Cleared Contracts are comprised of JPY
Cleared Contracts and Foreign Currency Cleared Contracts or Foreign Currency Cleared
Contracts in multiple currencies, and if the Third Tier Special Clearing Charge in respectof the Defaulting Clearing Participant’s Cleared Contracts in a certain currency was
sufficient to recover the Excess Default Loss under Article 105.1, the remaining amountof the Third Tier Special Clearing Charge prorated in the manner prescribed by JSCC in
the Subordinate Rules 255 shall be allocated as the Re-Allocated Third Tier Special
Clearing Charge to be applied to recover the Excess Default Loss arising from theDefaulting Clearing Participant’s Cleared Contracts in other currencies, other than the
Defaulting Clearing Participant’s Cleared Contract in the currency for which calculationof loss pursuant to the provisions of Article 102.1 has been completed and the Defaulting
Clearing Participant’s Cleared Contracts in the same currency as the Cleared Contracts
terminated pursuant to the provisions of Article 97.1.

252

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 20.
253
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 21.1.
254
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 21.2.
255
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 21-2.
163

Article 106. Recovery of Losses with Fourth Tier Special Clearing Charge
1If, as a result of the recovery of losses as set forth in Article 105, Excess Default

Loss still remains unrecovered, the Fourth Tier Special Clearing Charge (defined in
Paragraph 2 below) by each type of currency related to the relevant Defaulting Clearing
Participant’s Cleared Contracts shall be paid by Participants Bearing Fourth Tier Special
Clearing Charge (defined below) to JSCC in the manner prescribed by JSCC in the
Subordinate Rules256.

JSCC shall apply such Fourth Tier Special Clearing Charges

paid by the Participants Bearing Fourth Tier Special Clearing Charge to recover theremaining Excess Default Loss, other than loss designated by JSCC in the Subordinate
Rules257.
As used herein, the “Participants Bearing Fourth Tier Special Clearing Charge” means
the Clearing Participants other than the Defaulting Clearing Participant existing as of the
Default Determination Date whose aggregate receiving Cash Settlement Amount isgreater than its aggregate paying Cash Settlement Amount in respect of all Cleared
Contracts in the same currency as the Defaulting Clearing Participant’s Cleared
Contracts given rise to such Excess Default Loss that have existed from the Default
Determination Date through the Initial Loss-Determination Date, including the Cleared
Contracts that have come into effect after the Default Determination Date and theCleared Contracts that have been terminated before the Initial Loss-Determination Date.
2

The Fourth Tier Special Clearing Charge by each type of currency related to

the relevant Defaulting Clearing Participant’s Cleared Contracts shall be the amountdetermined as set out in the Subordinate Rules258 for each Participant Bearing Fourth
Tier Special Clearing Charge, provided that such amount shall not be more than theamount calculated according to the following formula, over the period from the Default
Determination Date, or, if the settlement of the Defaulting Clearing Participant’s
Clearing Contracts in the relevant currency between JSCC and the Defaulting Clearing
Participant have been completed as of the Default Determination Date, the next JSCC
256

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 20.
257
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 21-4.
258
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 22.
164

Business Day following the Default Determination Date, to the Initial LossDetermination Date:
The sum of the total Cash Settlement Amount which JSCC could not receive from theDefaulting Clearing Participant in respect of the Defaulting Clearing Participant’s Cleared
Contracts in each currency and the total Cash Settlement Amount payable by JSCC to
Clearing Participants in respect of any Hedge Transactions for each currency deemedas Clearing Contracts pursuant to the provisions of Article 93.2 and any Cross Margining
Liquidation Transactions less the Cash Settlement Amount receivable by JSCC fromsuch Clearing Participant, prorated according to each Clearing Participant’s proportionof the net Cash Settlement Amount paid by JSCC to all Participants Bearing Fourth Tier
Special Clearing Charge as a result of all Cleared Contracts259 of Participants Bearing
Fourth Tier Special Clearing Charge.
3

JSCC shall recover the loss to be excluded from the Excess Default Lossremaining after recovery under Article 105 as set forth in Paragraph 1 in the mannerprescribed in the Securities and Similar Contracts Business Rules.
Article 107. Deposit of Special Clearing Charge Collateral
1

A Clearing Participant shall be required to deposit Special Clearing Charge

Collateral with JSCC in the manner prescribed in the Subordinate Rules 260 , for the
purpose of securing the obligation set forth below (referred to as “Secured Obligations”
in this Article107.3).
(1)

That collateral is broken down into:

Third Tier Special Clearing Charge Collateral, to secure obligation relating to
the Third Tier Special Clearing Charge; and(2)

Fourth Tier Special Clearing Charge Collateral, to secure obligation relating to
the Fourth Tier Special Clearing Charge.

2259

No interest shall accrue on Fourth Tier Special Clearing Charge Collateral.

For avoidance of doubt, all Cleared Contracts include all Hedge Transactions under Article

93.
260

cf. Handling Procedures of IRS Clearing Business, Article 18, as well as Rules on Default
Settlement Regarding Clearing Participants in Relation to IRS Clearing Business, Articles 23 and
24.
165

3

JSCC may apply Special Clearing Charge Collateral to the performance of the

Secured Obligations in the manner prescribed in the Rules261.
4

Deposit of Third Tier Special Clearing Charge Collateral shall be deemed to bedeposit for consumption (shohi kitaku) for collateral purpose and deposit of Forth Tier
Special Clearing Charge Collateral shall be deemed to be deposit for consumption (shohi
kitaku) without compensation for collateral purpose.
5

Notwithstanding the provisions of the Civil Code or the Commercial Code, a

Clearing Participant shall have the right to claim return of Special Clearing Charge
Collateral and assert any other claim, only as prescribed in the Rules.
Article 108. Deposit of Default Contingent Margin
1

A Clearing Participant other than the Defaulting Clearing Participant shalldeposit Default Contingent Margin with JSCC for the purpose of securing the obligationsof such Clearing Participant to JSCC in connection with Cleared Contracts, including theobligations arising from the termination of such Cleared Contracts.
2

JSCC may apply the Default Contingent Margin it receives remaining after

deduction of costs of conversion of Cash into another currency or liquidation of Eligible
Securities Collateral to the performance of the Secured Obligations or offset the right toclaim the return of Default Contingent Margin against JSCC’s claims with respect toSecured Obligations in the same amount, pursuant to the provisions of the provisions of
the Rules.
3

The calculation method for the required amount of Default Contingent Margin

applicable to a non-Defaulting Clearing Participant shall be set forth in the Subordinate
Rules262.
4

JSCC shall notify a non-Defaulting Clearing Participant of the required amountof Default Contingent Margin in the manner specified in the Subordinate Rules263.
261

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 25.
262
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 26.1.
263
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 26.2.
166

5

Where the sum of the cash and the value of Eligible Securities Collateraldeposited with JSCC as Default Contingent Margin falls short of the required amount of
Default Contingent Margin, the Clearing Participant shall deposit the amount equal tosuch shortfall by 11:00 a.m. of the next JSCC Business Day following the day on whichsuch shortfall occurs with JSCC.
6

If at the end of a Default Settlement Period, a balance of deposited Default

Contingent Margin remains, that amount shall be credited to the IRS Clearing Fund on
behalf of the Clearing Participant and shall be deemed to have been returned to theClearing Participant at that time.
7

The provisions of Article 61.3, Article 62 and Article 71 shall apply mutatis

mutandis to Default Contingent Margin.
Article 109. Failure to Deposit Special Clearing Charge Collateral
If a Clearing Participant fails to deposit the Special Clearing Charge Collateral pursuant
to the provisions of Article 107.1, such failure shall be deemed a Default of such Clearing
Participant and the provisions set forth in this Chapter shall apply.
Article 110. Adjustment upon Determination of Final Loss
1

When the amount of JSCC’s claim against a Defaulting Clearing Participant isdetermined pursuant to the provisions of Article 101.2 and the amount of such claim
exceeds the total amount of Excess Default Loss in respect of such Defaulting Clearing
Participant, JSCC shall recover its loss in the amount equal to such excess, separately
by each currency of the relevant Defaulting Clearing Participant’s Cleared Contracts, inthe order and in the manner set forth in the following items, on the day on which theamount of such claim is determined:(1)

Application of the First Tier IRS Settlement Guarantee Reserve allocated bycurrencies pursuant to the provisions of Article 103.1.(1);(2)

Application of IRS Clearing Fund deposited by each Clearing Participant otherthan the Defaulting Clearing Participant with JSCC and the Second Tier IRS
Settlement Guarantee Reserve allocated by currencies pursuant to theprovisions of Article 103.1.(2).
167

The maximum amount of such IRS Clearing Fund that can be used for thispurpose shall be the amount of the Required IRS Clearing Fund for the relevant
Clearing Participant as of the JSCC Business Day immediately preceding thefirst date of the Default Settlement Period relating to the relevant Default minus
the amount applied pursuant to Article 103;
(3)

Use of the Third Tier Special Clearing Charge payable by each Participant
Bearing Third Tier Special Clearing Charge.
The maximum amount that can be used for this purpose shall be the amount of
the Third Tier Special Clearing Charge calculated pursuant to the provisions ofArticle 105.2 as if JSCC’s claim were the Excess Default Loss, minus theamount of the Third Tier Special Clearing Charge that has been already paid bysuch Participant Bearing Third Tier Special Clearing Charge pursuant to theprovisions of Article 105.1; and(4)

Use of the Fourth Tier Special Clearing Charge payable by each Participant
Bearing Fourth Tier Special Clearing Charge.
The maximum amount that can be used for this purpose shall be the amount of
the Fourth Tier Special Clearing Charge calculated pursuant to the provisionsof Article 106.2 as if JSCC’s claim were the Excess Default Loss, minus theamount of the Fourth Tier Special Clearing Charge that has been already paidby such Participant Bearing Fourth Tier Special Clearing Charge pursuant to theprovisions of Article 106.1.

2

Matters necessary in connection with the recovery of loss set forth in theprovisions of Paragraph 1 shall be set forth in the Subordinate Rules264.
Article 110-2. Adjustment of Resources for Loss Recovery between Currencies after
Determination of Final LossIf, as a result of recovery of Excess Default Loss determined pursuant to the provisions
264

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 27.
168

of Article 110, the Resources for Loss Recovery is used to recover the Excess Default
Loss in respect of any of the currencies of the Defaulting Clearing Participant’s Cleared
Contracts, JSCC may make adjustment of the Resources for Loss Recovery among
types of currencies in the manner prescribed by JSCC in Subordinate Rules265.
Article 111.
1

Distribution of Amount Collected from Defaulting Clearing Participant

After default settlement procedures in respect of a Defaulting Clearing

Participant, JSCC shall make the below listed distributions to the persons designated by
JSCC in the Subordinate Rules266 in the manner prescribed in the Subordinate Rules267:(1)

When JSCC receives any payment or dividend in respect of its claim against
the Defaulting Clearing Participant under the provisions of Article 101.2:
The amount of such payment and dividend(2)

When the final amount of JSCC’s claim against the Defaulting Clearing
Participant under the provisions of Article 101.2 is determined and the amountof the Excess Default Loss is greater than the amount of such claim:

The amount equal to the difference between Excess Default Loss and such final amount.
2

If there is no person entitled to the distribution set forth in Paragraph 1, thetreatment of such amount shall be subject to the Subordinate Rules268.
Section 5 Delegation to Subordinate Rules (Article 112)
Article 112. Delegation to Subordinate Rules
In addition to the provisions set forth in this Chapter, matters necessary for settlement of
Defaulting Clearing Participant’s Cleared Contracts and losses in connection with Default

265

cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 27-2.
266
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 28.
267
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 29.
268
cf. Rules on Default Settlement Regarding Clearing Participants in Relation to IRS Clearing
Business, Article 30.
169

of a Clearing Participant shall be prescribed in the Subordinate Rules.

Chapter 10 Miscellaneous Provisions (Articles 113 – 127)
Article 113. Temporary Change to Settlement Cutoff Time
JSCC may temporarily change the time by which the obligations related to Cleared
Contracts are to be performed (“Settlement Cutoff Time”), only when JSCC determines
it necessary due to failure of the systems

necessary for settlement of the Cleared

Contracts between JSCC and Clearing Participants or any other reason. In such case,
JSCC shall notify all Clearing Participants of the change in advance.
Article 114. Postponement of Settlement Date Due to System Failure1

If JSCC determines it impossible or difficult to perform the obligations relating to

the Cleared Contracts in whole or in part on the day when such obligations are to be
performed (“Settlement Date”) due to failure of the systems necessary for the settlementof the Cleared Contracts between JSCC and Clearing Participants or othercircumstances beyond JSCC’s reasonable control, JSCC may defer the Settlement Dateaffected by such reason.

In such case, JSCC shall notify the relevant Clearing

Participants of such change in advance.
2

Other matters connected with the change of the Settlement Date set forth inParagraph 1 shall be prescribed by JSCC on each occasion.
Article 115. Act of God
1

If JSCC determines that performance of obligations under Cleared Contracts

has become impossible or extremely difficult due to an act of God, economic upheaval
or other unavoidable reasons, JSCC may modify due date, methods of performance, orother conditions for performance of such obligations by a resolution of the board of
directors of JSCC.
2

Where JSCC has modified the conditions for performance of the obligations

related to Cleared Contracts pursuant to the provisions of Paragraph 1, the Clearing
Participants shall observe the conditions so modified.
3

In the case set forth in Paragraph 1, if there is an urgent need, JSCC may modify

the conditions for performance of the obligations under Cleared Contracts without a170resolution of the board of directors of JSCC.
Article 116.

Use of Excess Collateral Delivered in relation to IRS Clearing Business for

Other Clearing Business Following Clearing Participant Default
JSCC may use any excess collateral delivered by a Defaulting Clearing Participant inrelation to IRS Clearing Business to satisfy the Defaulting Clearing Participant’s
obligation owed to an Other Clearing Business in accordance with the business rules of
the Other Clearing Business.

Excess collateral is the amount of Initial Margin, Variation

Margin, IRS Clearing Fund, Default Contingent Margin and Special Clearing Charge
Collateral, or, if they are deposited in the form of Eligible Securities Collateral, the net
proceeds from liquidation of such securities after the payment of liquidation costs, ofwhich the Defaulting Clearing Participant otherwise has the right to claim return from
JSCC in connection with IRS Clearing Business, that remains after satisfaction of the
Defaulting Clearing Participant’s obligations in relation to IRS Clearing Business inaccordance with the Rules
Article 117. No Assignment of Claims
Clearing Participants and Customers are prohibited from assigning or committing toassign any of the claims prescribed in these Business Rules, including, but not limited
to, the right to claim return of the IRS Clearing Fund or any Margin, to a third party, or
furnishing the same as collateral, unless JSCC’s written approval has been obtained inadvance, the request for which shall be made using the JSCC’s prescribed form.
Article 118. Outsourcing
1

JSCC may outsource activities related to the IRS Clearing Business specified

by JSCC269 to a person designated by JSCC270.
2

In addition to these Business Rules, Clearing Participants shall comply with therules and procedures prescribed by the person designated pursuant to Paragraph 1 inconnection with the activities set forth in Paragraph 1 and so approved by JSCC.
3

The provisions of Article 18 shall apply mutatis mutandis when the activities areoutsourced pursuant to the provisions of Paragraph 1 as if such designated person is
JSCC.
269
270

cf. Handling Procedures of IRS Clearing Business, Article 45.1.
cf. Handling Procedures of IRS Clearing Business, Article 45.2.
171Article 119. Provision concerning Matters Necessary in connection with IRS Clearing
Business
In addition to the matters prescribed in these Business Rules, when JSCC determines it
necessary, JSCC may set Subordinate Rules covering other matters relating to the IRS
Clearing Business.
Article 120. Associated Business Activities
JSCC shall conduct businesses associated with the Clearing Service set forth in Article
3.
Article 121. Changes to these Business Rules1

Any changes to the Rules, establishment of new Subordinate Rules or abolitionof any existing Rule shall be implemented by JSCC through a resolution of the board of
directors of JSCC; provided that in the case of changes to any Rules other than theseBusiness Rules or in the case of any immaterial change, JSCC may implement suchchange without a board resolution.
2

If JSCC makes a rule change pursuant to the provisions of Paragraph 1, JSCC

shall notify the Clearing Participants of the details thereof before it takes effect in themanner separately prescribed by JSCC; provided that such rule change does not affectthe claims or obligations of Clearing Participants and Customers or if it is immaterial,
such notice may be given promptly after such rule change.
3

When a Clearing Participant receives the notice set forth in Paragraph 2 from

JSCC, it shall promptly notify its Customers of the details of the rule change.
4

On and after the effective date of the rule change in accordance with Paragraph

1, JSCC, the Clearing Participants and the Customers shall comply with the provisionsof the Rules after such rule change.
Article 122. IRS Management Committee
1

When JSCC intends any rule change as set forth in Article 121 and if suchchange relates to any of the matters set forth in the following items, JSCC shall consult
with the IRS Management Committee about whether such change is appropriate or not,and take account of the IRS Management Committee’s opinions, unless such change is172

insignificant:(1)

Matters related to Subject Transactions for Clearing set forth in Article 4;(2)

Matters related to the eligibility requirements of IRS Clearing Qualification set
forth in Article 9;(3)

Matters related to IRS Clearing Fund set forth in Article 17;(4)Matters related to the renunciation of IRS Clearing Qualification by request of
the Clearing Participant set forth in Chapter 2, Section 4;
Matters related to the actions that may be taken against Clearing Participants(5)

set forth in Chapter 2, Section 6;(6)

Matters related to Clearing Brokerage set forth in Chapter 3;(7)Matters related to Margins set forth in Chapter 6;(8)Matters related to Clearing Deposit set forth in Chapter 8;(9)Matters related to the actions to be taken in case of Clearing Participant’s Failureof Settlement set forth in Chapter 9;(10)Matters related to the method for changing the Rules as set forth in Article 121;
and

(11)

Matters related to consultation with the IRS Management Committee as set forthin this Article.

2

In addition to the matters set forth in Paragraph 1, matters related to the IRS

Management Committee shall be prescribed in the Subordinate Rules271.
Article 123. Nature of Rules
Each provision of the Rules shall, within the applicable scope set forth therein, bind JSCC,
271

IRS Management Committee Rules.
173

the Clearing Participants and the Customers collectively. Each Clearing Participant andeach Customer hereby agree that either by executing a Clearing Participant Agreement
or by submitting a letter of undertaking set forth in Article 43.2, they will assume claims
and obligations vis-à-vis other Clearing Participants or other Customers, including those
who become Clearing Participants or Customers in the future, in accordance with theRules without having any separate agreement with such other Clearing Participants orother Customers.
Article 124. Standard TimeAny reference to year, month, day and time in the Rules shall be the reference to year,
month, day and time in Japanese Standard Time unless otherwise prescribed in the
Rules
Article 125. Method of Notification
JSCC shall separately prescribe the methods of notifications, public notices and publicannouncements to be given by JSCC in accordance with the provisions of the Rules272.
Article 126. Governing Law
The Rules, including Clearing Participant Agreements and other agreements which are
executed in accordance with the Rules, shall be governed by and construed inaccordance with Japanese law.
Article 127. Jurisdiction
The Tokyo District Court of Japan shall have the exclusive jurisdiction for the first instanceover any legal action which may become necessary between JSCC and any Clearing
Participant or Customer in connection with the Rules
Supplementary Provisions
1.

These Business Rules shall come into force as of October 9, 2012 (hereinafterreferred to as “Date of Enforcement”), except the provisions of Section 1 of Chapter 2
and Article 122 which shall come into force as of August 20, 2012.
2.

In the case where JSCC approves the acquisition of IRS Clearing Qualification272

cf. Handling Procedures of IRS Clearing Business, Article 46.1, for notification, and Article
46.2 for public notices and public announcements.
174

by an Applicant pursuant to Article 8.2 hereof and the date on which the Applicant isgranted the IRS Clearing Qualification falls before the Date of Enforcement, theprovisions of Article 10 shall apply by replacing the phrase “deposit IRS Clearing Funds
and follow the other procedures as required by JSCC on or before the JSCC Business
Day immediately preceding the Qualification Date” in Article 10.1 with “deposit IRS
Clearing Funds by the JSCC Business Day immediately preceding the Date of
Enforcement and follow the other procedures as required by JSCC on or before the
JSCC Business Day immediately preceding the Qualification Date” and the phrase “theprocedures prescribed in Paragraph 1” in Article 10.2 with “the procedures for acquisitionof IRS Clearing Qualification prescribed in Paragraph 1 or otherwise prescribed by
JSCC”.
3.

JSCC may carry out the matters set forth in Items (1) through (3) below even

before the date prescribed in the proviso to Paragraph 1 above and the matters set forthin Items (4) through (6) below and necessary procedures and any other acts and thingsin relation thereto even before the Date of Enforcement pursuant to the applicableprovisions of these Rules.
(1) Grant of IRS Clearing Qualification to the Applicant thereof pursuant to theprovisions of Article 8.2 hereof;(2) Conducting the examination pursuant to the provisions of Article 9 hereof;(3) Execution of a Clearing Participant Agreement pursuant to the provisionsof Article 11 hereof;(4) Acceptance of notification of the Clearing Participant representative
pursuant to the provisions of Article 13 hereof;(5) Acceptance of notification of person in charge of supervising the settlementof Clearing Contracts pursuant to the provisions of Article 14 hereof; and(6) Acceptance of deposit of IRS Clearing Funds from Clearing Participants
pursuant to the provisions of Article 17 hereof.
4.

The provisions of Article 80 hereof shall not apply until the lapse of nine (9)months from the Date of Enforcement.
Supplementary Provisions
These amendments shall come into force as of February 25, 2013.
175

Supplementary Provisions
1.

These amendments shall come into force as of March 31, 2013.

2.

During the period from March 31, 2013 to March 30, 2014, in applying Article

9.1.(2).b.(b), Article 28.3.(1).b. and (2).b., Article 28.4.(2), Article 28.5.(1).d. and Article
28.6.(2), all as amended, the references to “4.5%” in Article 9.1.(2).b.(b) (i), Article
28.5.(1).d.(a) and Article 28.6.(2).a. shall be read as “3.5%,” the references to “5.625%”
in Article 9.1.(2).b.(b).(i), Article 28.3.(1).b.(a) and (2).b.(a), and Article 28.4.(2).a. shallbe read as “4.375%,” the references to “6%” in Article 9.1.(2).b.(b).(ii), Article
28.5.(1).d.(b) and Article 28.6.(2).b. shall be read as “4.5%,” and the references to “7.5%”
in Article 9.1.(2).b.(b)(ii), Article 28.3.(1).b.(b) and (2).b.(b) and Article 28.4.(2).b. shall beread as “5.625%.”
3.

During the period from March 31, 2014 to March 30, 2015, in applying Article

9.1.(2). b.(b), Article 28.3.(1).b. and (2).b., Article 28.4.(2), Article 28.5.(1).d. and Article
28.6.(2), all as amended, the references to “4.5%” in Article 9.1.(2).b.(b).(i), Article
28.5.(1).d.(a) and Article 28.6.(2).a. shall be read as “4%,” the references to “5.625%” in
Article 9.1.(2).b.(b).(i), Article 28.3.(1).b.(a) and (2).b.(a) and Article 28.4.(2).a. shall beread as “5%,” the references to “6%” in Article 9.1.(2).b.(b).(ii), Article 28.5.(1).d.(b) and
Article 28.6.(2).b. shall be read as “5.5%”, and the references to “7.5%” in Article
9.1.(2).b.(b).(ii), Article 28.3.(1).b.(b) and (2).b.(b) and Article 28.4.(2).b. shall be read as“6.875%.
Supplementary Provisions
These amendments shall come into force as of May 15, 2013.
Supplementary Provisions
1.

These amendments shall come into force as of February 24, 2014.

2.

Handling of Clearing and other necessary matters at the time when theseBusiness Rules comes into force shall be determined by JSCC at each time.
Supplementary Provisions
These amendments shall come into force as of the date prescribed by JSCC.
176

(Note: The date prescribed by JSCC is March 7, 2014.)
Supplementary Provisions
These amendments shall come into force as of March 31, 2014.
Supplementary Provisions
These amendments shall come into force as of April 1, 2014.
Supplementary Provisions
These amendments shall come into force as of November 4, 2014.
Supplementary Provisions
1.

These amendments shall come into force as of September 24, 2015.

2.

Notwithstanding the provisions of Paragraph 1, if JSCC considers it

inappropriate to apply amended rules due to an unavoidable reason, such as failure of
the system installed by JSCC which is necessary for settlements between JSCC andClearing Participants in relation to Cleared Contracts, these amendments shall come into
force as of the date designated by JSCC which is on or after 24 September 2015.
Supplementary Provisions
1.

These amendments shall come into force as of October 19, 2015.

2.

Notwithstanding the provisions of Paragraph 1, the provisions of Article 2.1.(1)and (1)-2, Article 53-4.6, Article 58-4, Article 58-6 and Article 58-7, as amended, shallcome into force as of the date prescribed by JSCC.
(Note: The date prescribed by JSCC is April 11, 2016.)
Supplementary Provisions
1.

These amendments shall come into force as of April 11, 2016.
177

2.

Notwithstanding the provisions of Paragraph 1, if JSCC considers it

inappropriate to apply amended rules due to an unavoidable reason, such as failure of
the system installed by JSCC which is necessary for settlements between JSCC andClearing Participants in relation to Cleared Contracts, these amendments shall come into
force as of the date designated by JSCC which is on or after April 11, 2016.
Supplementary Provisions
These amendments shall come into force as of December, 19, 2016.
Supplementary Provisions
1.

These amendments shall come into force as of January 30, 2017.

2.

Notwithstanding the provisions of Paragraph 1, if JSCC considers it

inappropriate to apply amended rules due to an unavoidable reason, such as failure of
the system installed by JSCC which is necessary for settlements between JSCC andClearing Participants in relation to Cleared Contracts, these amendments shall come into
force as of the date designated by JSCC which is on or after January 30, 2017.
Supplementary Provisions
These amendments shall come into force as of April 6, 2018.
Supplementary Provisions
1.

These amendments shall come into force as of September 25, 2018.

2.

Notwithstanding the provisions of Paragraph 1, if JSCC considers it

inappropriate to apply amended rules due to an unavoidable reason, such as failure of
the system installed by JSCC which is necessary for settlements between JSCC andClearing Participants in relation to Cleared Contracts, these amendments shall come into
force as of the date designated by JSCC which is on or after September 25, 2018.
Supplementary Provisions
178

These amendments shall come into force as of April 15, 2019.
Supplementary Provisions
These amendments shall come into force as of September 1, 2019.
Supplementary Provisions
These amendments shall come into force as of August 1, 2020.
Supplementary Provisions
1.

These amendments shall come into force as of May 17, 2021.

2.

Notwithstanding the provisions of Paragraph 1, if JSCC considers it

inappropriate to apply amended rules due to an unavoidable reason, such as failure of
the system installed by JSCC which is necessary for settlements between JSCC andClearing Participants in relation to Cleared Contracts, these amendments shall come into
force as of the date designated by JSCC which is on or after May 17, 2021.
Supplementary Provisions
1.

These amendments shall come into force as of December 6, 2021.

2.

Notwithstanding the provisions of Paragraph 1, if JSCC considers it

inappropriate to apply amended rules due to an unavoidable reason, such as failure of
the system installed by JSCC which is necessary for settlements between JSCC andClearing Participants in relation to Cleared Contracts, these amendments shall come into
force as of the date designated by JSCC which is on or after December 6, 2021.
Supplementary Provisions
1.

These amendments shall come into force as of September 19, 2023.

179

2.

Notwithstanding the provisions of Paragraph 1, if JSCC considers it

inappropriate to apply amended rules due to an unavoidable reason, such as failure of
the system installed by JSCC which is necessary for settlements between JSCC andClearing Participants in relation to Cleared Contracts, these amendments shall come into
force as of the date designated by JSCC which is on or after September 19, 2023.

Supplementary Provisions
1.

These amendments shall come into force as of March 4, 2024.

2.

Notwithstanding the provisions of Paragraph 1, if JSCC considers it

inappropriate to apply amended rules due to an unavoidable reason, such as failure of
the system installed by JSCC which is necessary for settlements between JSCC andClearing Participants in relation to Cleared Contracts, these amendments shall come into
force as of the date designated by JSCC which is on or after March 4, 2024.

180

AnnexTerm
Confirmation
Business Day
Fixed Rate Payer
Floating Rate Payer
Term
Termination Date
Trade Date
Fixed Amount
Floating Amount
Notional AmountPayment Date
Business Day Convention
Day Count Fraction
Fixed Rate
Floating Rate
Reset Date
Floating Rate Option
Designated Maturity

Section
1.1.9
2.2.1
5.1.3
6.1.2
3.2.1
3.1.3
3.1.1
5.1.2
6.1.3
4.4.2
3.1.8
2.3.1
4.6.1
5.3
6.3.1
6.5.5
6.5.1
6.7.4

ISDA Definitions
Confirmation
Business Day
Fixed Amount Payer
Floating Amount Payer
Term
Termination Date
Trade Date
Fixed Amount
Floating Amount
Notional AmountPayment Date
Business Day Convention
Day Count Fraction
Fixed Rate
Floating Rate
Reset Date
Floating Rate Option
Designated Maturity

181

Attachment 1 : Article 2 (Definition)- Sequenced in Alphabetical order“Adjustment Amount related to Mark-to-Market Difference (Art. 2, Para. 1, Item (36)-5)
AUD Cleared Contract (Art. 2, Para. 1, Item (15)-2)
Backup Clearing Broker (Art. 2, Para. 1, Item (60)-2)
Blended Rates Compression (Art.2, Para. 1, Item (13)-2)
Business Holiday (Art. 2, Para. 1, Item (9))
Capital-to-Risk Ratio (Art. 2, Para. 1, Item (22))
Cash (Art. 2, Para. 1, Item (9)-2)
Cash Settlement Amount (Art. 2, Para. 1, Item (63)-2)
Cleared Contract (Art. 2, Para. 1, Item (34))
Cleared Contract (Collateral Type) (Art. 2, Para. 1, Item (36)-2)
Cleared Contract (Settlement Type) (Art. 2, Para. 1, Item (35)-2)
Clearing (Art. 2, Para. 1, Item (19))
Clearing Broker (Art. 2, Para. 1, Item (24))
Clearing Brokerage Account (Art. 2, Para. 1, Item (33))
Clearing Brokerage Agreement (Art. 2, Para. 1, Item (31))
Clearing Brokerage Contract (Art. 2, Para. 1, Item (28))
Clearing Brokerage Contract (Collateral Type) (Art. 2, Para. 1, Item (28)-3)
Clearing Brokerage Contract (Settlement Type) (Art. 2, Para. 1, Item (28)-2)
Clearing Brokerage Original Transaction (Art. 2, Para. 1, Item (32))
Clearing Participant (Art. 2, Para. 1, Item (29))
Clearing Participant Agreement (Art. 2, Para. 1, Item (30))
Client Clearing (Art. 2, Para. 1, Item (13)-2-2)
Compression (Art. 2, Para. 1, Item (18)-2)
Consolidated Capital-to-Risk Ratio (Art. 2, Para. 1, Item (67))
Corporate Group (Art. 2, Para. 1, Item (5))
Cross Margined JGB Futures Cleared Contract (Art. 2, Para. 1, Item (13)-6)
Cross Margining (Art. 2, Para. 1, Item (13)-5)
Cross Margining Acceptance (Art. 2, Para. 1, Item (13)-7)
Cross Margining Accepting Party (Art. 2, Para. 1, Item (13)-3)
Cross Margining Requestor (Art. 2, Para. 1, Item (13)-4)
Cross Margining User (Art. 2, Para. 1, Item (13)-8)
Customer (Art. 2, Para. 1, Item (27))
Customer Account (Art. 2, Para. 1, Item (2))
Customer Initial Margin (Art. 2, Para. 1, Item (1)-2)
182

Customer's Cleared Contract (Art. 2, Para. 1, Item (35))
Default (Art. 2, Para. 1, Item (59))
Default Auction (Art. 2, Para. 1, Item (57))
Default Contingent Margin (Art. 2, Para. 1, Item (55))
Default Determination Date (Art. 2, Para. 1, Item (60))
Default Settlement Period (Art. 2, Para. 1, Item (56))
Defaulting Clearing Participant (Art. 2, Para. 1, Item (58))
Designated Market Operator (Art. 2, Para. 1, Item (23)-2)Documents Setting Forth Handling of ISDA-Based Documents (Art. 2, Para. 1, Item
(70))
Early Termination (Art. 2, Para. 1, Item (6))
Early Termination Charge (Art. 2, Para. 1, Item (7))
Eligible IRS Transaction (Art. 2, Para. 1, Item (47))
Eligible Securities Collateral (Art. 2, Para. 1, Item (45))
EUR Cleared Contract (Art. 2, Para. 1, Item (68)-2)
Failure of Settlement (Art. 2, Para. 1, Item (15))
First Tier IRS Settlement Guarantee Reserve (Art. 2, Para. 1, Item (38))
Fixed Resources for Loss Recovery (Art. 2, Para. 1, Item (18))
Foreign Currency Cleared Contract (Art. 2, Para. 1, Item (4)-3)
Foreign Currency Home Business Day (Art. 2, Para. 1, Item (4)-4)Foreign Currency Home Holiday (Art. 2, Para. 1, Item (4)-5)
Fourth Tier Special Clearing Charge (Art. 2, Para. 1, Item (43))
Fourth Tier Special Clearing Charge Collateral (Art. 2, Para. 1, Item (44))
Funds (Art. 2, Para. 1, Item (10))
Hedge Account (Art. 2, Para. 1, Item (62)-3)
Initial Margin (Art. 2, Para. 1, Item (50))
Intraday Margin (Art. 2, Para. 1, Item (54))
IRS Clearing Fund (Art. 2, Para. 1, Item (11))
IRS Clearing Qualification (Art. 2, Para. 1, Item (12))
IRS Transaction (Art. 2, Para. 1, Item (13))
ISDA (Art. 2, Para. 1, Item (69))
ISDA Definitions (Art. 2, Para. 1, Item (72))
ISDA Master Agreement (Art. 2, Para. 1, Item (71))
Japanese Standard (Art. 2, Para. 1, Item (17))
JGB Futures Backup Clearing Broker (Art. 2, Para. 1, Item (15)-8)
JGB Futures Cleared Contract (Art. 2, Para. 1, Item (15)-5)
183

JGB Futures Clearing Participant (Art. 2, Para. 1, Item (15)-6)
JGB Futures Contract (Art. 2, Para. 1, Item (15)-9)
JGB Futures Non-Clearing Participant (Art. 2, Para. 1, Item (15)-7)
JGB Futures Position Transfer (Art. 2, Para. 1, Item (15)-3)
JGB Futures Successor Clearing Broker (Art. 2, Para. 1, Item (15)-4)
JPY Cleared Contract (Art. 2, Para. 1, Item (2)-3)
JSCC Business Day (Art. 2, Para. 1, Item (49))
JSCC-Initiated Compression (Art. 2, Para. 1, Item (72)-2)
Legal Entity (Art. 2, Para. 1, Item (64))
Liquid Resources for Loss Recovery (Art. 2, Para. 1, Item (66))
Margin (Art. 2, Para. 1, Item (25))
Mark-to-Market Difference (Art. 2, Para. 1, Item (36)-3)
Mark-to-Market Difference And Adjustment Amount (Art. 2, Para. 1, Item (36)-4)
Member-Initiated Compression (Art.2, Para. 1, Item (20)-2)
Net Capital (Art. 2, Para. 1, Item (21))
Net Present Value (Art. 2, Para. 1, Item (26))
New York Business Day (Art. 2, Para. 1, Item (54)-2)
Non-hedge Account (Art. 2, Para. 1, Item (54)-4)
Non-resident (Art. 2, Para. 1, Item (62))
Officer (Art. 2, Para. 1, Item (68))
Other Clearing Business (Art. 2, Para. 1, Item (46))
Parent Company (Art. 2, Para. 1, Item (3))
Parental Guarantee (Art. 2, Para. 1, Item (4))
Per Trade Compression (Art. 2, Para. 1, Item (52)-2)
Position (Art. 2, Para. 1, Item (45)-2)
Position Transfer (Art. 2, Para. 1, Item (24)-2)
Proprietary Account (Art. 2, Para. 1, Item (23))
Proprietary Cleared Contract (Art. 2, Para. 1, Item (36))
Resources for Loss Recovery (Art. 2, Para. 1, Item (37))
Rules (Art. 2, Para. 1, Item (65))
Second Tier Clearing Participant Cap (Art. 2, Para. 1, Item (40))
Second Tier IRS Settlement Guarantee Reserve (Art. 2, Para. 1, Item (39))
Securities and Similar Contracts Business Rules (Art. 2, Para. 1, Item (24)-4)Settlement Amount (Art. 2, Para. 1, Item (14))
Special Clearing Charge (Art. 2, Para. 1, Item (51))
Special Clearing Charge Collateral (Art. 2, Para. 1, Item (52))
184

Subordinate Rules (Art. 2, Para. 1, Item (8))
Substituted Initial Margin (Art. 2, Para. 1, Item (20))
Successor Clearing Broker (Art. 2, Para. 1, Item (24)-3)Sydney Business Day (Art. 2, Para. 1, Item (23)-3)
TARGET Settlement Day (Art. 2, Para. 1, Item (73))
Third Tier Special Clearing Charge (Art. 2, Para. 1, Item (41))
Third Tier Special Clearing Charge Collateral (Art. 2, Para. 1, Item (42))
Transaction Side (Art. 2, Para. 1, Item (53))
Transfer (Art. 2, Para. 1, Item (1))
Uniform International Standard (Art. 2, Para. 1, Item (16))
Unwind Fee (Art. 2, Para. 1, Item (4)-2)
USD Cleared Contract (Art. 2, Para. 1, Item (62)-2)
Variation Margin (Art. 2, Para. 1, Item (63))
Vendor-Initiated Compression (Art. 2, Para. 1, Item (2)-2)

Note : Some of the terminology used in Japan Financial Instruments andExchange Act, such as such “Assumption of Obligation” or “Brokerage for
Securities, etc.”(English Translation of the corresponding Japanese word) are
replaced with commonly used terminology, such as “Clearing” or “Clearing
Brokerage”, so that non-Japanese readers could understand easily.

185

Attachment 2 : Terms not Defined in Article 2
Definition

Provision in which it

Provisions to which

is definedsuch definition apply

Subject Transaction for Clearing

Article 4

All

Applicant

Article 8.2

All

Qualification Date

Article 8.4

Articles 8 to 12

Guaranteed Applicant

Article 8.5

Articles 8 to 12

Special Operator

Article 9.1.(2).a.(c)AllFinancial Institution subject to

Article 9.1.(2).b.(c)All

Required IRS Clearing Fund

Article 17.2

All

Instruction to Improve

Article 28.1

All

Suspension of Cross Margining /Article 28.1

All

Margin Required to Clear

Article 49.1

All

Clearing Requirements

Article 49.1

AllFirst Clearing Participant

Article 49.1

Article 49

Second Clearing Participant

Article 49.1

Article 49

Application for Exchanging Mark-

Article 51-2.1

All

VM-as-Settlement Requirements

Article 51-2.2

All

Per Trade Compression

Article 53.2

All

Article 53-2.2

All

Article 53-2-2.2

All

Article 53-2-3.2

All

Affiliated Customer

Articles 54

Articles 54, 55 & 57

Designated Counterparty

Article 54.1

All

Original Counterparty

Article 54.4

Articles 54, 54-2 & 58

Carrying Clearing Broker

Article 58-2.3

All

Relevant Cleared Contracts

Article 58-2.3

Articles 58-2 to 58-5

Japanese Standard

Suspend Cross Margining)

to-Market Difference, etc.

Conditions
Blended Rates Compression
Conditions
Vendor-Initiated Compression
Conditions
Member-Initiated Compression
Conditions

186

Position Transfer Request Date

Article 58-3.1

All

Position Transfer Date

Article 58-3.4.(1)All

Receiving Customer

Article 58-4.1

AllTransferring Customer

Article 58-4.1

Articles 58-4 & 58-5

Transfer Request Date

Article 58-5.1

All

Clearing Participant Account

Article 59.1

All

Proprietary Account

Article 59.2

All

Customer Account

Article 59.2

All

Sub-Accounts

Article 59.5

All

Clearing Brokerage Account

Article 60.1

All

Obligations to be Collateralized

Article 61.1

Article 61.2

Initial Margin Deposited Amount

Article 66.1

All

Cross Margining MtM Difference

Article 77-2.1

All

Clearing Yield Curve

Article 79.3

All

Clearing Participant Net Payable

Article 85-2.1

Article 85-2

Unpaid Amount

Article 85-5.1

All

Clearing Participant Failing

Article 85-5.2

All

Failed Participant

Article 89.1

All

Matters for Consultation

Article 92.1

Article 92.2

Hedge Transaction

Article 93.1

All

Default Auction

Article 95.1

All

Auction Transactions

Article 95.3

All

Defaulting Clearing Participant

Article 101.1.(2).a.

All

Initial Loss Determination Date

Article 102.1

All

Excess Default Loss

Article 103.1

All

Second Tier Clearing Participants

Article 103.2.(1)Article 103.2

Article 105.1

Article 105

Article 106.1

Article 106

Secured Obligations

Article 107.1

Article 107.3

Rule Change

Article 121.1

Article 121 & 122

Settlement

Payment AmountContributions
Participants Bearing Third Tier
Special Clearing Charge
Participants Bearing Fourth Tier
Special Clearing Charge187

188