Handling Procedures of Interest Rate Swap 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の取扱い

Note : 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 the event of
any inconsistency between the original Japanese document and this reference English
translation, the original Japanese document will prevail.
(*) Please note that this does not apply to Exhibit Forms 3-2 and 4-2, for which the original
version is English.

TABLE OF CONTENTS
Chapter 1 General Provisions (Articles 1 - 13) ................................................................... 2
Chapter 2 Clearing Participant (Article 14 - 25) ................................................................ 11
Chapter 3 Clearing Brokerage (Article 26 - 26-2) ............................................................. 25
Chapter 4 Clearing and Cleared Contracts (Article 27 – 35-6) ......................................... 28
Chapter 5 Margin, etc. (Article 36 - 42) ............................................................................ 47
Chapter 5-2 Cross Margining (Article 42-2 – 42-9) ........................................................... 53
Chapter 5-3 Customer Buffer Framework(Article 42-10 – 42-11) ..................................... 57
Chapter 6 Cash Settlement (Article 43 – 43-2) ................................................................. 58
Chapter 7 Clearing Deposit (Article 44 - 44-3).................................................................. 61
Chapter 8 Miscellaneous Provisions (Article 45 - 48) ....................................................... 65<Appendix 1> Schedule of Prices Used to Determine Value of Eligible Securities Collateral ........ 81<Appendix 2> Required Initial Margin Calculation Method ............................................................ 84<Appendix 3> Notional Amount related to Criteria for Clearing ..................................................... 94<Exhibit Form 1> Form of Guarantee............................................................................................... 95<Exhibit Form 2> Clearing Participant Agreement .......................................................................... 96<Exhibit Form 3> Clearing Brokerage Agreement (Japanese language original format)................. 98<Exhibit Form 3-2> Clearing Brokerage Agreement (English language original format) ............... 99<Exhibit Form 4> Letter of Undertaking (Japanese language original format) .............................. 153<Exhibit Form 4-2> Letter of Undertaking (English language original format)............................. 154

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Chapter 1 General Provisions (Articles 1 - 13)
Article 1. Purpose
The purpose of these Handling Procedures of Interest Rate Swap Business Rules (“IRS
Procedures”) is to stipulate the matters to be prescribed by JSCC pursuant to the Interest
Rate Swap Clearing Business Rules (“Business Rules”) established by Japan Securities
Clearing Corporation (“JSCC”).
Article 2. Definitions
Unless otherwise set forth herein, the terms used in these IRS Procedures shall have themeanings used in the Business Rules. In addition, the following terms shall have themeanings defined below:(1) “Upfront Fee” means the Cash other than Fixed Rates and Floating Rates that isdue pursuant to the agreement between the parties upon execution of an IRS
Transaction ;(2) “IRS Clearing System” means the system used for exchange of information between
JSCC and Clearing Participants in respect of the IRS Clearing Business;(2)-2 “CFTC Regulation” means Code of Federal Regulations TITLE 17 Commodity andSecurities Exchanges CHAPTER I COMMODITY FUTURES AND TRADINGCOMMISSION;(3) “Additional Required Initial Margin” means the amount to be added to Required
Initial Margin when JSCC increases a Clearing Participant’s Required Initial
Margin in accordance with the Rules;(4) “Backload Transaction” means an Eligible IRS Transaction applied for Clearing by
a Clearing Participant to JSCC during a period from 7:00 p.m. through 8:00 p.m. on
a JSCC Business Day whose trade date is 10 JSCC Business Days preceding thedate of such application or earlier.
(4)-2 “Package Trade” means, when a Clearing Participant applies for Clearing of avoluntary combination of multiple Eligible IRS Transactions in bulk, the group of
relevant Eligible IRS Transactions.

(5) “2000 ISDA Definitions” means the 2000 ISDA Definitions published by ISDA in
2000, including changes, amendments, or supplements published by ISDA in2

writing, but excluding those specified by JSCC in a public notice.
(5)-2 “2006 ISDA Definitions” means the 2006 ISDA Definitions published by ISDA in
2007, including changes, amendments, or supplements published by ISDA in
writing, but excluding those specified by JSCC in a public notice.
(6) “Contract Month Contract” means a contract for a contract month set forth in Article
73-6.1 of the Securities and Similar Contracts Business Rules.
(7) “Settlement Price” means the settlement price of JGB Futures Contract andInterest Rate Futures Contract set forth in Article 73-7 of the Securities and Similar
Contracts Business Rules;(8) “Large JGB Futures Contract” means a Physically-delivered Futures Contract set
forth in Article 73-11 of the Securities and Similar Contracts Business Rules;(9) “Mini JGB Futures Contract” means a Cash-settled JGB Futures Contract (referringto the cash-settled futures contracts related to JGB Futures Contract prescribed by
the Designated Market Operator).
Article 3. Form of Guarantee
The form prescribed under Article 2.1.(4) and Article 8.5 of the Business Rules shall be
the form attached hereto as Exhibit Form 1.
Article 3-2. JGB Futures Contracts and Interest Rate Futures Contracts Eligible to be
Covered under Cross Margining
JGB Futures Contracts and Interest Rate Futures Contracts to be prescribed by JSCC
under Article 2.1.(13)-5 of the Business Rules shall be the following:(1) Contract Month Contract of Large JGB Futures Contract of which the last trading
day arrives the earliest and Contract Month Contract of Large JGB Futures
Contract of which last trading day arrives the next; provided that if the last trading
day arrives within 3 JSCC Business Days, such Contract Month Contract shall not
be eligible for cross margining;(2) Contract Month Contract of Mini JGB Futures Contract whose last trading day
arrives in the same month as the Large JGB Futures Contract set forth in Item (1);provided that if the last trading day arrives within 2 JSCC Business days, such
Mini JGB Futures Contract shall not be eligible for cross margining. and(3) Contract Month Contract of Interest Rate Futures Contract designated by JSCC
in the public notice.
Article 3-3.

Designated Market Operator
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The Designated Market Operator to be designated by JSCC under Article 2.1.(23)-2 ofthe Business Rules shall be Osaka Exchange, Inc.
Article 4. Method of Calculation of Net Present Value
The method prescribed under Article 2.1.(26) of the Business Rules shall be prescribedby JSCC in a public notice.
Article 5. Customer
For the purpose of Article 2.1.(27) of the Business Rules, a Customer shall be a user of
either the affirmation method prescribed by JSCC in a notification or a public notice, or anelectronic trading platform, as described in Article 27.1.(2).
Article 5-2. Outsourcing Participation in Default Settlement Procedures
1 The qualifications prescribed under Article 9.1.(3).b. of the Business Rules shall be thatsuch person is a Clearing Participant.
2 When a participation in the procedures for the liquidation of a defaulting Clearing
Participant’s Cleared Contracts is outsourced pursuant to Article 9.1.(3).b. of the Business
Rules, the outsourcee shall participate in the Default Auction, and if it has made successful
bid on the Auction Transactions therein, shall execute such Auction Transactions on behalfof the outsourcer.
3 The agreement concerning the outsourcing set forth in Paragraph 2 shall provide formatters concerning the participation by the outsourcee in the default settlement drill set
forth in Article 9.1 of the IRS Default Management Committee Rules, the method foravoiding conflict of interests, the confidentiality regarding the default settlement
procedures in respect of a Defaulting Clearing Participant, and the outsourcee’s
agreement to comply with the provisions of the Rules relating to such procedures, andany other matters specified by JSCC on a case-by-case basis in connection with suchprocedures. The “confidentiality” referred to above shall mean to keep confidential facts
that are not otherwise available to general public and may have significant commercial
impact.
4 Participation in default settlement procedures may not be outsourced to any person who
has already become the outsourcee for another Clearing Participant.
Article 5-3. Procedures for Changing Default Settlement Procedures Participation
Outsourcing
1 A Clearing Participant which no longer desires to outsource its participation in default
settlement procedures shall submit to JSCC a document evidencing its businesscapability required under Article 9.1.(3).b. of the Business Rules in the form prescribed by
JSCC, and must obtain prior approval of JSCC.

42 A Clearing Participant which desires to outsource its participation in default settlement
procedures shall submit to JSCC a document stating the name of the person to which theparticipation in the default settlement procedures is outsourced and evidencing that suchproposed outsourcee has the business capability required under Article 9.1.(3).b. of theBusiness Rules, and an agreement concerning such outsourcing, in advance, and mustobtain prior approval of JSCC.
3 When an agreement concerning the outsourcing of participation in default settlement
procedures has been terminated without approval from JSCC, as set forth in Paragraph 1of this Article, the Clearing Participant that has outsourced its participation in default
settlement procedures shall inform JSCC of that fact in writing in the form prescribed by
JSCC.
Article 6. Clearing Participant Agreement
The form prescribed under in Article 2.1.(30) and Article 11 of the Business Rules shall be
the form attached hereto as Exhibit Form 2.
Article 7. Clearing Brokerage Agreement
1 The form prescribed under Article 2.1.(31) of the Business Rules shall be the form
attached hereto as Exhibit Form 3 or Exhibit Form 3-2.
2 When JSCC intends to make an amendment to Exhibit Form 3 or Exhibit Form 3-2, itshall notify details of such amendment to Clearing Participants at least one month prior
to the effective date of such amendment; provided that if such amendment does not affectthe claims or obligations of Clearing Participants and Customers or if it is immaterial, such
notice may be given promptly after such amendment.
3 Upon receipt of the notification from JSCC as to an amendment to the provisions of
Exhibit Form 3 or Exhibit Form 3-2 pursuant to the provisions of Paragraph 2, Clearing
Participants shall promptly notify details of such amendment to their Customers withwhom they have concluded the Clearing Brokerage Agreement.
4 When JSCC has amended provisions of Exhibit Form 3 or Exhibit Form 3-2, the Clearing
Brokerage Agreements that have already been concluded shall be amended as a matterof course according to such amended provisions of Exhibit Form 3 and Exhibit Form 3-2
as of the effective date of such amendment.
Article 8. Types of Eligible Securities Collateral
1 The securities specified under Article 2.1.(45) of the Business Rules shall be as follows:(1) Japanese Government Bonds; and(2) United States Treasury Security.
52 Notwithstanding the provisions of Paragraph 1 above, the securities prescribed in Article
2.1.(45) of the Business Rules shall not be specified for Initial Margin to be deposited as
Customer Buffer.
Article 9. Requirements of Eligible IRS Transaction
The requirements prescribed under Article 2.1.(47) of the Business Rules shall be all of
the following, or, in respect of the IRS Transactions between Clearing Brokers executedfor Clearing Brokerage and the Hedge Transactions, all of the following requirements
except for Items (1); provided, however, that a handling of the matters listed in Item (5).
g. to i. shall be prescribed by JSCC in a public notice:(1) It shall be an IRS Transaction governed by the ISDA Definitions, the 2006 ISDA
Definitions or the 2000 ISDA Definitions;(2) Deleted;(3) Both of the Clearing Participants that are the parties to the IRS Transaction shallhave requested Clearing for such IRS Transaction to JSCC pursuant to Article 48of the Business Rules ;(4) The transaction involves an exchange of a fixed rate and a floating rate or an
exchange of a floating rate and another floating rate;(5) The Floating Rate Option is any of those listed in a. to i. below, with the DesignatedMaturity specified in such sub-item:a. JPY-Euroyen TIBOR with Designated Maturity of 1 month, 3 months or 6months;b. JPY-TIBOR with Designated Maturity of 1 month, 3 months or 6 months;c. JPY-TONA-OIS Compound with Designated Maturity of one day;d. JPY-TIBOR-ZTIBOR with Designated Maturity of 1 month, 3 months or 6months;e. JPY-TIBOR-17097 with Designated Maturity of 1 month, 3 months or 6 months;
f. JPY-TONA-OIS-COMPOUND with Designated Maturity of one day;g. USD-LIBOR-BBA with Designated Maturity of 1 month, 3 months or 6 months;
h. EUR-EURIBOR-Telerate or EUR-EURIBOR-Reuters with Designated Maturityof 3 months or 6 months; ori. AUD-BBR-BBSW with Designated Maturity of 3 months or 6 months;(6) Deleted;6(7) The Notional Amount and the settlement currency of the IRS Transaction shall be
the currency specified in below items by each of below-listed Floating Rate Options:a. For JPY-Euroyen TIBOR, JPY-TIBOR, JPY-TONA-OIS Compound, JPYTIBOR-ZTIBOR,JPY-TIBOR-17097
or
JPY-TONA-OIS-COMPOUND:
Japanese yen;b. For USD-LIBOR-BBA: United States dollars;c. For EUR-EURIBOR-Telerate or EUR-EURIBOR-Reuters: Euro; andd. For AUD-BBR-BBSW: Australian dollars.
(8) The Term shall be not less than the number of days specified in a. and b. below inrespect of each Floating Rate Option:
a. JPY-TONA-OIS Compound or JPY-TONA-OIS-COMPOUND: 7 days;b. All other Floating Rate Options: 28 days;(9) The remaining period to the Termination Date as of the date Clearing is requested
shall be the period specified in a. to d. below:
a. IRS Transaction referencing AUD-BBR-BBSW:
Not less than 3 days and not more than 3,666 days;b.

IRS Transaction referencing EUR-EURIBOR-Telerate or EUR-EURIBORReuters:
Not less than 3 days and not more than 7,318 daysc.

IRS Transaction referencing JPY-Euroyen TIBOR, JPY-TIBOR, JPY-TIBORZTIBOR, JPY-TIBOR-17097 or USD-LIBOR-BBA but does not qualify b. above:
Not less than 3 days and not more than 10,971 daysd.

IRS Transaction other than those qualifying any of a. through c. above:
Not less than 3 days and not more than 14,623 days;(10) The Notional Amount of the IRS Transaction is constant throughout the Term, or
has feature of periodic step-down or step-up, wherein the method of such periodic
step-down or step-up is agreed at the execution of the IRS Transaction and will not
be changed during the term of such IRS Transaction, and the Notional Amountsatisfies the following criteria according to Floating Rate Option of the IRS
Transaction;a. For IRS Transaction referencing JPY-Euroyen TIBOR, JPY-TIBOR, JPY-TONAOIS Compound, JPY-TIBOR-ZTIBOR, JPY-TIBOR-17097 or JPY-TONA-OISCOMPOUND: 1 JPY or more and up to 4 trillion JPY (4,000,000,000,000 JPY)
without any fraction less than 1 JPY;b.

For IRS Transaction referencing USD-LIBOR-BBA, EUR-EURIBOR-Telerate,7

EUR-EURIBOR-Reuters or AUD-BBR-BBSW: One hundredth of the currency
unit or more and less than 4 trillion currency unit of the currency of denominationof the IRS Transaction without any fraction less than 2 decimal places. ;(11) The Day Count Fraction is those set forth in Section 4.6.1 (ii) through Section
4.6.1(viii) of the ISDA Definitions, those set forth in Section 4.16(b) through Section
4.16(h) of the 2006 ISDA Definitions or those set forth in Article 4.16(b) throughArticle 4.16(f) of Annex to the 2000 ISDA Definitions;(12) The Business Day Convention shall be Following Business Day Convention,
Modified Following Business Day Convention or Preceding Business Day
Convention;(13) As Business Day applicable to the Payment Date, below listed city, which may beother than Tokyo, or Settlement Day is designated for below-listed Floating Rate
Option:a. IRS Transaction referencing JPY-Euroyen TIBOR, JPY-TIBOR, JPY-TONA-OIS
Compound, JPY-TIBOR-ZTIBOR, JPY-TIBOR-17097 or JPY-TONA-OISCOMPOUND: Tokyob. IRS Transaction referencing USD-LIBOR-BBA: New Yorkc. IRS Transaction referencing EUR-EURIBOR-Telerate or EUR-EURIBORReuters: TARGET Settlement Day
d. IRS Transaction referencing AUD-BBR-BBSW: Sydney.
(14) As Business Day applicable to the Reset Date, below listed city, which may beother than Tokyo, or Settlement Day is designated for below-listed Floating Rate
Option:a. IRS Transaction referencing JPY-Euroyen TIBOR, JPY-TIBOR, JPY-TONA-OIS
Compound, JPY-TIBOR-ZTIBOR, JPY-TIBOR-17097 or JPY-TONA-OISCOMPOUND: Tokyob. IRS Transaction referencing EUR-EURIBOR-Telerate or EUR-EURIBORReuters: TARGET Settlement Day
c. IRS Transaction referencing AUD-BBR-BBSW: Sydneyd. IRS Transaction referencing USD-LIBOR-BBA: London(15) In addition to those set forth above, it shall be an IRS Transaction which satisfies
any other requirements prescribed by JSCC in a public notice.
Article 10. Designation of Documents Setting Forth Handling of ISDA-Based Documents
The documents prescribed under Article 2.1.(70) of the Business Rules shall be thedocuments designated by JSCC in a notification to Clearing Participants or a public noticein respect of the below listed matters pursuant to the relevant provisions of these IRS
Procedures below:8(1) Article 29.2.(1): Matters deemed to have been set forth in Schedule defined in the
ISDA Master Agreement; and(2) Article 29.2.(2): Matters concerning the replacement of words in the provisions of
the ISDA Master Agreement and the ISDA Definitions which are necessary for theapplication thereof to Cleared Contracts.
Article 11. Designation by JSCC in respect of Changes, Amendments, or Supplements of
ISDA Definitions
Changes, amendments, or supplements to the 2021 ISDA Interest Rate Derivatives
Definitions specified under Article 2.1.(72) of the Business Rules shall be changes,
amendments, or supplements published by ISDA, unless specifically excluded by JSCC
in a public notice.
Article 12. Measures to Let Clearing Participant or Customer Know Declaration of Intent
The method prescribed under Article 6.2 of the Business Rules shall be a notification by
JSCC via the IRS Clearing System.
Article 13. Eligible Securities Collateral
1 The prices used to determine the value of Eligible Securities Collateral specified under
Article 7.1 of the Business Rules shall be the market price listed in the column under“Market Price” multiplied by the rate listed in the column under “Market Price Multiplier”
according to the classification of securities listed in the column under “Type of Eligible
Securities Collateral” in Appendix 1hereto.
The prices used to determine the value of Eligible Securities Collateral deposited as
Customer Initial Margin shall be the values agreed between the Clearing Broker and theCustomer, provided that such price shall not exceed the price obtained as above.
2 The manner of deposit of Eligible Securities Collateral and other necessary matters in
respect of Eligible Securities Collateral set forth in Article 7.2 of the Business Rules shallbe as follows:(1) Manner of deposit and other handling of Japanese Government Bonds
a.
Where a Clearing Participant deposits Japanese Government Bonds with
JSCC as Eligible Securities Collateral, whether for itself or as agent for a
Customer, the Clearing Participant shall deposit such securities through abook-entry transfer to the account in the name of JSCC opened with the
Bank of Japan under the Act on Transfer of Bonds, Shares, etc. (Act No.
75 of 2001) using the Bank of Japan financial network system (“BOJNET”);

9b.

A Clearing Participant may deposit or withdraw the Japanese Government
Bonds set forth in Item (1).a. above through its agent, if the Clearing
Participant has submitted to JSCC a document stating the matters requiredby JSCC and obtained the prior approval of JSCC. In this case, suchdeposit and withdrawal shall be carried out through the account in thename of the agent opened with the Bank of Japan or Participant in the JGB
Book-Entry System.

(2) Manner of deposit and other handling of United States Treasury Securitya.
If a Clearing Participant desires to deposit United States Treasury Security(“US Treasuries”) with JSCC as Eligible Securities Collateral, whether for
itself or as agent for a Customer, it must obtain JSCC’s prior consent at
each time in the manner specified in a notification;b.

Where a Clearing Participant deposits US Treasuries with JSCC pursuant
to a. above, the Clearing Participant shall transfer the US Treasuries to theaccount in the name of JSCC opened with a bank located in New York City,
New York, the United States of America by 2:00 p.m. (Eastern Standard
Time) on the day immediately preceding the day on which such deposit is
to be made, and shall notify JSCC of such transfer by 4:00 p.m. on thedate of the book-entry transfer. In such case, unless the transfer is madewithin the same bank, the book-entry transfer shall be carried out throughthe Federal Reserve Communications System in the United States ofAmerica;c.

When a Clearing Participant requests withdrawal of US Treasuries
deposited as Eligible Securities Collateral, for itself or as agent for a
Customer, the Clearing Participant shall notify such request to JSCC by
11:00 a.m. on the date of requested withdrawal;d.

A Clearing Participant may use its agent for such deposit or withdrawal of
the US Treasuries set forth in Item (2).a. through c. above if the Clearing
Participant submits to JSCC a document stating the matters required by
JSCC and obtains the prior approval of JSCC. In this case, such deposit
and withdrawal shall be carried out through the account in the name of theagent.

(3) Liquidation
If:a.
JSCC has determined that a Clearing Participant is in Default;b.

JSCC has determined the Failure of Settlement of a Clearing Participant;

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c.

JSCC uses the IRS Clearing Fund deposited with JSCC by a Clearing
Participant in accordance with Article 103.1 or Article 110.1 of the Business
Rules; ord.

The due date for the performance of the obligations of a Clearing
Participant to JSCC is accelerated or arrives,

JSCC may liquidate the Eligible Securities Collateral deposited with JSCC by the
Clearing Participant or a Customer as it deems appropriate, convert the liquidation
proceeds of Eligible Securities Collateral into another currency or liquidate Eligible
Securities Collateral in another currency, or directly exercise the rights in such
Eligible Securities Collateral, and may apply the proceeds remaining after thepayment of the expenses of such liquidation to the performance of the obligationof such Clearing Participant to JSCC or to the recovery of the loss pursuant to
Article 103.1 or Article 110.1 of the Business Rules(4) Application of Item (3) to Eligible Securities Collateral deposited as Customer Initial
Margin:The provisions of Item (3) above shall apply mutatis mutandis to Eligible
Securities Collateral deposited with a Clearing Broker by a Customer as
Customer Initial Margin.
Chapter 2 Clearing Participant (Article 14 - 25)
Article 14. Application for IRS Clearing Qualification
1 When applying for IRS Clearing Qualification as set forth in Article 8.1 or 8.3 of theBusiness Rules, an Applicant shall submit to JSCC an application form prescribed by
JSCC stating the following items:(1) Trading name or company name (including the trading name or company name in
English);(2) Address of its headquarters or principal office;(3) Name of the representative; and(4) Any other matters which JSCC deems necessary to carry out the examination of
an Applicant set forth in the Business Rules.
However, for the application under Article 8.3 of the Business Rules, Item (4) above
does not need to be stated in the application form.
2 The following documents shall be attached to the application form set forth in Paragraph111:(1) A certificate of registered matters or any alternative document related to theApplicant;(2) A seal registration certificate of the Applicant’s representative, who is to sign on
and whose seal is affixed to the Clearing Participant Agreement, or any alternative
document approved by JSCC;(3) A document stating the name of the Officer supervising the business related to IRS
Transactions, or, if there is no such Officer, a person responsible for the business
related to IRS Transactions;(4) A document stating the risk management method in respect of clearing businessof IRS Transactions and any other business procedures; and(5) Any other documents which JSCC deems necessary for the examination of the
Applicant.
3 An Applicant that is a Specified Successor Financial Institution may be exempted from
submission of any of the above documents as JSCC considers appropriate.
Article 15. IRS Clearing Qualification Procedures
1 The procedures required by JSCC under Article 10.1 of the Business Rules are (i) the
payment of the initial fee for IRS Clearing Qualification, (ii) the registration of therepresentative of Clearing Participant prescribed Article 13.1 of the Business Rules, (iii)the registration of a person in charge of the settlement operation prescribed in Article 14of the Business Rules, (iv) the notification to identify the current account at Bank of Japanprescribed in Article 18.1 or 18.2 hereof and (v) other procedures JSCC deems necessary
in granting IRS Clearing Qualification to the Applicant.
2 The amount of the initial fee for IRS Clearing Qualification described in Paragraph 1 shallbe 1 million JPY (1,000,000 JPY), and the Applicant shall pay such initial fee together withthe amount equal to the consumption tax and local consumption tax thereon.
3 The provisions of Paragraph 1 shall apply mutatis mutandis to the IRS Clearing
Qualification acquisition procedures prescribed by JSCC under Article 10.3 of theBusiness Rules. In this case, the phrase “(i) the payment of the initial fee for IRS Clearing
Qualification, (ii) the registration of the representative of Clearing Participant prescribed
Article 13.1 of the Business Rules” in Paragraph 1 shall be replaced with “(i) the
registration of the representative of Clearing Participant prescribed Article 13.1 of theBusiness Rules.”12Article 15-2. Application for Client Clearing Authorization
1 When applying for Client Clearing authorization set forth in Article 12-2.1 of the Business
Rules, a Clearing Participant shall submit to JSCC an application form prescribed by
JSCC stating the following:(1) Trading name or company name (including the trading name or company name in
English);(2) Address of its headquarters or principal office;(3) Name of the representative; and(4) Any other matters which JSCC deems necessary for Client Clearing authorization.
2 The documents stating following items concerning the Client Clearing shall be attachedto the application form set forth in Paragraph 1 above:(1) An operational flow related to the settlement of Cleared Contracts and Clearing
Brokerage Contracts;(2) Risk management procedures against Customer risk; and(3) A procedures for prevention of conflict of interests.
3 Notwithstanding the provisions of Paragraph 2 above, a Specified Successor Financial
Institution which applies for an authorization to handle Client Clearing is exempted from
submission of documents required under Paragraph 2 above.
Article 16. Notification Method
1 The notification to JSCC prescribed in Articles 13.1, 14, 19, 27-6, 27-7, 44 and 45 of theBusiness Rules shall be made in the form prescribed by JSCC accompanied bydocuments which JSCC deems necessary.
2 The notification to JSCC prescribed in Articles 13.1, 14, 19, 27-6, 27-7 and 44 of theBusiness Rules shall be made by the time designated by JSCC on each occasion.
Article 17. Procedures for Consultation
The procedures for the consultation set forth in Article 15.2 of the Business Rules(including the cases to which such provisions apply mutatis mutandis in Article 35) shallbe as follows:(1) JSCC shall give the Clearing Participant prior notice covering the consultation
matters, place and date of the consultation;13

(2) The Clearing Participant shall have its representative or delegate attend theconsultation and answer JSCC’s questions truthfully and in full;(3) The Clearing Participant shall have the right to make a statement at theconsultation; and(4) JSCC shall keep a record of the consultation matters, details of the answers andthe statements of the Clearing Participant and other necessary details.
Article 18. Funds Settlement Method
1 The settlement of Cash under Article 17.1, Article 71, or Article 107.1.(1) of the Business
Rules shall be performed through a bank account transfer between the current accountopened in the name of JSCC with the Bank of Japan and the current account opened in
the name of the relevant Clearing Participant with the Bank of Japan through BOJ-NET.
2 A Clearing Participant may remit or receive Cash described in Paragraph 1 through its
agent if the Clearing Participant submits to JSCC a document stating the matters requiredby JSCC and obtains the prior approval of JSCC. Such remittance and receipt shall bemade through the current account in the name of the agent opened with the Bank of Japan.
Article 19. Exception to Limits of Liability
Damages separately prescribed under Article 18 of the Business Rules shall be thedamages incurred by a Clearing Participant from a breach of the obligations set forth in
Article 5 of the Rules on Inspection of Clearing Participant in relation to IRS Clearing
Business by the Inspector (as such term defined in the Rules on Inspection of Clearing
Participant in relation to IRS Clearing Business) or the assistant (as such term used in theRules on Inspection of Clearing Participant in relation to IRS Clearing Business).
Article 20. Matters to be Reported
1 Events prescribed under Article 20 of the Business Rules shall be any of the following
events on the part of a Clearing Participant. The Clearing Participant shall report such
event to JSCC in the form prescribed by JSCC together with the documents which JSCC
deems necessary:(1) When the Clearing Participant establishes or changes its risk management
methods, business operations or any other aspects of its business pursuant to
Article 29-2.2.(2) or Article 33-3.2.(2) of the Financial Instruments and Exchange
Act (Act No. 25 of 1948), or, in the case of a foreign bank, when it changes any
item stated in the document prescribed in Article 18.2.(4) to be submitted with theapplication for IRS Clearing Qualification pursuant to Article 18.2, unless suchchange is immaterial;

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(2) When the Clearing Participant learns that its Designated Parent Company (as suchterm defined in Article 57-12.3 of the Financial Instruments and Exchange Act) filed
notification pursuant to the provisions of Article 57-14 of said Act in respect of thematters listed in Article 57-13.1.(6) of said Act;
(3) If the Clearing Participant is a Financial Instruments Business Operator, when it
suspends or resumes its Financial Instruments Business; and, if the Clearing
Participant is a Registered Financial Institution, when it suspends or resumes thebusiness which required registration under the Financial Instruments andExchange Act;
(4) When the Clearing Participant files a petition for the commencement of bankruptcy
proceedings, the commencement of rehabilitation proceedings, thecommencement of reorganisation proceedings, the commencement of special
liquidation or the recognition of foreign insolvency proceedings 1, including petitions
equivalent to the foregoing under any foreign laws and regulations, or when the
Clearing Participant becomes aware of the fact that the petition for any of theforegoing was filed against it;(5) When the Clearing Participant becomes aware of a filing of a petition for thecommencement of bankruptcy proceedings, the commencement of rehabilitation
proceedings, the commencement of reorganisation proceedings, thecommencement of special liquidation or the recognition of foreign insolvency
proceedings in respect of the Designated Parent Company;(6) When the Clearing Participant becomes, or is likely to become, insolvent;(6)-2 When the Clearing Participant set forth under Article 2.1.(59).g. of the Business
Rules had its obligations accelerated pursuant to the provisions of the Agreement
for Setting up Futures/Options Trading Account or the Contract for Commissioning
Clearance of JGB Futures Contracts;(6)-3 If, with respect to a Clearing Participant, the Cross Margined JGB Futures Cleared
Contracts or the Cross Margined Interest Rate Futures Cleared Contracts arerecorded on its Clearing Participant Account and the Cross Margining User for such
Cross Margined JGB Futures Cleared Contracts or Cross Margined Interest Rate
Futures Cleared Contracts falls under Article 2.1.(13)-9.d. of the Business Rules,
when the JGB Futures Non-Clearing Participant to which the Cross Margining User
requested brokerage of the JGB Futures Contracts or the Interest Rate Futures
Contracts had its obligation accelerated as a matter of course under the
AGREEMENT FOR SETTING UP FUTURES/OPTIONS TRADING ACCOUNT.
1

cf. Act on Recognition of and Assistance for Foreign Insolvency Proceedings (Act No. 129 of 2000).

15

(7) When the Designated Parent Company becomes, or is likely to become, insolvent;(8) When the Clearing Participant becomes unable to meet the requirements under in
Article 9.1. (2). a. or b. of the Business Rules;(9) When the Clearing Participant learns that the majority of the voting rights of theshareholders, excluding the voting rights that may only be exercised with respect
to limited matters to be resolved at general meetings of 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 (Act No. 86 of 2005), or voting rights
attached to the equity investment, is held by a single person or another single legal
entity or other institution;(10) When the Clearing Participant becomes aware of any change in respect of the top
ten major shareholders. For this purpose, top ten major shareholders shall be
determined by reference to the number of shares held in their own name or in otherperson’s name. Such change shall be reported at each interval prescribed in a
notice by JSCC;(11) When the Clearing Participant learns that any sanction or punishment is imposedon the Clearing Participant in accordance with the Financial Instruments andExchange Act, laws and regulations related thereto, and any foreign laws andordinances equivalent thereto, and in the case of such sanction or punishment
under foreign laws and ordinances, when it involves businesses related to IRS
Transaction;(12) When the Clearing Participant learns that any sanction or punishment is imposedon the Designated Parent Company or Specified Major Shareholders (as such term
defined in Article 32.4 of the Financial Instruments and Exchange Act) inaccordance with the provisions of the laws and regulations;(12)-2 In association with a sanction set forth in Item (11) or (12) above, when the
Clearing Participant reports improvement plan or other action plan to an
administrative agency;(13) If the Clearing Participant is a Financial Instruments Business Operator, when it
learns that any of its Officers has fallen under the provisions of Article 29-4.1.(2).
a) to i) of the Financial Instruments and Exchange Act; and if the Clearing
Participant is a Registered Financial Institution, when it learns the fact (i) that adecision of the commencement of bankruptcy proceedings was made in respect toany of its Officers supervising the business relating to IRS Transactions, or, if there
is no such Officer, in respect of a person responsible for the business relating to
16

IRS Transactions, or (ii) that any Officer supervising the business relating to IRS
Transactions, or, if there is no such Officer, a person responsible for the business
relating to IRS Transactions, was sentenced to imprisonment or more severe
punishment, or punished by a fine pursuant to the Financial Instruments andExchange Act, or (iii) that any similar event under foreign laws or ordinances
occurred;(14) When the Clearing Participant learns that any Officer of its Designated Parent
Company has fallen under the provisions of Article 29-4.1.(2). a) to i) of the
Financial Instruments and Exchange Act;
(15) When the Clearing Participant learns that the Major Shareholders (as such term
defined in Article 29-4.2 of the Financial Instruments and Exchange Act) of a
Financial Instruments Business Operator have fallen under the provisions of Article
29-4.1.(5). d) or e) of the Financial Instruments and Exchange Act, or, in the caseof a foreign entity which is a Financial Instruments Business Operator, when it
learns that those similar to Major Shareholders have fallen under Article 29-4.1.(5).
f of the Financial Instruments and Exchange Act;
(16) When the Clearing Participant learns that the Major Shareholders of its DesignatedParent Company have fallen under the provisions of Article 29-4.1.(5). d) or e) of
the Financial Instruments and Exchange Act;
(17) When the Clearing Participant learns that a legal action in a civil case involving anamount in dispute of not less than 50 billion JPY is filed against it or that a court
decision is made in the said case, including an appeal, or that a petition for
conciliation in the economic value not less than 50 billion JPY is filed against it
under the Civil Conciliation Act (Act No. 222 of 1951) or that such conciliation has
been closed;(18) When the Clearing Participant learns that a legal action in a civil case is filed
against its Designated Parent Company or that a court decision is made in the saidcase including an appeal, or a petition for conciliation under the Civil Conciliation
Act is filed against the Designated Parent Company or that such conciliation has
been closed;(18)-2 In the case of a Financial Instruments Business Operator, when it prepared areport regarding its affiliated companies pursuant to the provisions of Paragraph 2
of Article 46-3 of the Financial Instruments and Exchange Act; in the case of a
Registered Financial Institution, when it prepared a report regarding its affiliatedcompanies pursuant to the provisions of Paragraph 2 of Article 48-2 of the Financial
Instruments and Exchange Act; or, in the case of a foreign Financial Instruments
Business Operator, when it prepared a report regarding its affiliated companies
17

pursuant to the provisions of Paragraph 2 of Article 49-3 of the Financial
Instruments and Exchange Act;
(19) When the Clearing Participant prepares documents for the Monitoring
Questionnaires pursuant to Article 56-2 of the Financial Instruments and ExchangeAct, or, in the case of a Registered Financial Institution, a Statement of Major
Accounts prescribed by JSCC in a notification;(20) When the Clearing Participant prepares the “document stating the soundmanagement of the company available for public inspection” pursuant to theprovisions of Article 57-5.3 of the Financial Instruments and Exchange Act;
(21) When the Ultimate Designated Parent Company (as such term defined in Article
57-12.3 of the Financial Instruments and Exchange Act) prepares the “document
stating the sound management of the company available for public inspection”
pursuant to Article 57-5.3 of the Financial Instruments and Exchange Act;
(22) If the Clearing Participant is a Financial Instruments Business Operator, when it
prepares a business status report set forth in Article 46-3 of the Financial
Instruments and Exchange Act; or if the Clearing Participant is a Registered
Financial Institution, when it prepares a non-consolidated or consolidated business
operations report or a mid-term business operations report set forth in Article 19 of
the Banking Act (Act No. 59 of 1981), or when the Clearing Participant prepares anon-consolidated or consolidated business operations report or a mid-termbusiness operations report set forth in Article 110 of the Insurance Business Act(Act No. 105 of 1995); or if the Clearing Participant is a Registered Financial
Institution which is a foreign entity, when it prepares a report equivalent thereto;(23) When the Clearing Participant prepares a business report pursuant to Article 573.1 of the Financial Instruments and Exchange Act;
(24) When the Ultimate Designated Parent Company prepares the business report;(25) When the Clearing Participant prepares a financial result overview report or a midterm financial result overview report prescribed by JSCC in a notification;(26) If the Clearing Participant is a Financial Instruments Business Operator which is aforeign entity, when it prepares the balance sheet, the profit and loss statement
and any other financial statements set forth in Article 49-3.1 of the Financial
Instruments and Exchange Act;(27) (Deleted)18

(28) When the Clearing Participant amends the Clearing Brokerage Agreement with a
Customer, except for the case where the Clearing Brokerage Agreement isamended pursuant to the provisions of Article 7.4;(28)-2 When the Clearing Participant learns that a Customer of the Clearing Participantchanges in the trading name or company name, including changes to the trading
name or company name in English;(29) When a Customer of the Clearing Participant fails to perform any settlement;(30) When the Clearing Participant learns that the Designated Parent Company
changed the address of its headquarters or principal office;(31) When the Clearing Participant filed a notification pursuant to Article 57-2.1 or Article
57-2.6 (only when it falls under Article 57-2.6(2)) of the Financial Instruments andExchange Act;(32) When the Clearing Participant learns that its parent company is designated as
Designated Parent Company, or that such designation is cancelled or has become
ineffective;(33) When the Clearing Participant learns that the Designated Parent Company mergedwith another entity (excluding the case where the Designated Parent Company
ceases to exist as a result of the merger);(34) When the Clearing Participant learns that a person newly became, or ceased tobe, a Specified Major Shareholder; or(35) When Officer supervising the business related to IRS Transactions, or, if there isno such Officer, a person responsible for the business related to IRS Transactions,
was changed.
(36) When the Clearing Participant changes its fiscal year end date.
2 When reporting the matter described in Paragraph 1.(22), the Clearing Participant shallattach an audit report prepared by the accounting auditor, or its equivalent which JSCC
considers appropriate, concerning the financial statements attached to the businessstatus reports, non-consolidated business operations reports, or other equivalent
documents prescribed in Paragraph 1.(22).
3 Where a Clearing Participant is under Parental Guarantee, events prescribed under Article
20 of the Business Rules shall be, in addition to those listed in Paragraph 1 (excluding
Item (8)), those listed in the following items, and the Clearing Participant shall report such
19

event using the form prescribed by JSCC together with documents which JSCC deems
necessary:(1) When any of the events set forth in Paragraph 1.(4), 1.(6), 1.(11) and 1.(17) has
occurred on the part of the Parent Company other than the Designated Parent
Company;(2) When any of the events set forth in Paragraph 1.(19), 1.(22), 1.(25) and 1.(26) has
occurred on the part of the Parent Company;(3) When the Clearing Participant or its Parent Company no longer satisfies therequirements set forth Article 9.2 of the Business Rules; and(4) If the Parent Company is neither a Financial Instruments Business Operator nor a
Registered Financial Institution, when any of the following events has occurred on
the part of such Parent Company:a.
when it suspended or resumed all of its businesses; orb.

when it prepared a balance sheet, profit and loss statement or any otherfinancial documents.

4 The provisions of Paragraph 2 shall apply mutatis mutandis when the Clearing Participant
reports the event set forth in Paragraph 1.(22) or Paragraph 3.(4).b. concerning its Parent
Company providing Parental Guarantee to such Clearing Participant.
Article 21. Application to Renounce IRS Clearing Qualification
1 When renouncing its IRS Clearing Qualification as set forth in Article 22 of the Business
Rules, the Clearing Participant shall submit the form prescribed by JSCC stating thefollowing:(1) Trading name or company name (including the trading name or company name in
English);(2) Address of its headquarters or principal office;(3) Name of the representative; and(4) The reason for renunciation of its IRS Clearing Qualification.
2 The form set forth in Paragraph 1 shall accompany necessary documents required by
JSCC.
Article 22. IRS Clearing Qualification Renunciation Timing
20

The time to be designated under of Article 23.1 of the Business Rules shall be the time
when JSCC has confirmed, in accordance with Article 28.2, the satisfaction of the Clearing
Requirements in accordance with Article 27.2 in respect of all of the requests for Clearing
JSCC receives.
Article 22-2. Request for Cancellation of Client Clearing Authorization
1 The cancellation of Client Clearing authorization set forth in Article 27-2 of the Business
Rules shall be requested by a submission by a Clearing Participant of the request form
prescribed by JSCC stating the following:(1) Trading name or company name (including the trading name or company name in
English);(2) Address of its headquarters or principal office; and(3) Name of the representative.
2 The request form set forth in Paragraph 1 shall accompany necessary documents
required by JSCC.
Article 23. Increase in Required Initial Margin where Risk is High
1 When applying Article 29.2 of the Business Rules, JSCC shall measure the risk by PV01,
which is the change in net present value calculated by the method prescribed by JSCC ina notification, calculated by category designated by JSCC in a notification with respect to
JPY Cleared Contracts, AUD Cleared Contracts, USD Cleared Contracts or EUR Cleared
Contracts recorded on each Proprietary Account or Customer Account of a Clearing
Participant. The threshold to be set by JSCC under Article 29.2 of the Business Rules
shall be set in a notification.
2 When applying Paragraph 1 to a Proprietary Account of a Clearing Participant which is a
Cross Margining User or a Customer Account established for a Customer who is a Cross
Margining User, the provisions of Paragraph 1 shall be deemed to have been revised in
the following manner:a. The reference to “JPY Cleared Contract” shall be replaced with “JPY Cleared
Contracts, Cross Margined JGB Futures Cleared Contracts and Cross MarginedInterest Rate Futures Cleared Contracts”; andb. The reference to “net present value” shall be replaced with “net present value or
present value of the Cross Margined JGB Futures Cleared Contract and the Cross
Margined Interest Rate Futures Cleared Contracts, which is the value obtained for
JGB Futures Contract related to the Cross Margined JGB Futures Cleared Contracts
and the Interest Rate Futures Contracts related to the Cross Margined Interest Rate
Futures Cleared Contracts based on expected future cash flow through a method21prescribed by JSCC through a notice or public notice.”
3 When JSCC increases Required Initial Margin as set forth in Article 29.2 of the Business
Rules, the Additional Required Initial Margin shall be the amount obtained by multiplying
the excess of PV01 as set forth in Paragraphs 1 and 2 above the threshold prescribed in
Paragraphs 1 and 2, by the interest rate fluctuation risk corresponding to the level of PV01
set by JSCC in a notification, and then reflecting the interest rate fluctuation risk correlation
by category designated by JSCC pursuant to the provisions of Paragraph 1 in the mannerprescribed by JSCC through public notice. For Foreign Currency Cleared Contracts,
above mentioned excess of PV01 shall be converted into JPY by using foreign exchange
rate prescribed by JSCC through public notice.
Article 23-2. Increase in Required Initial Margin where Risk is Relatively High Comparing
to Net Capital
The increase in the Required Initial Margin set forth in Article 29-2.1 of the Business Rules
shall apply by each Proprietary Account or Customer Account (referred to as “Transaction
Account” in this Article). The Additional Required Initial Margin shall be determined bymultiplying the Required Initial Margin of the Transaction Account by the below statedmultiplier according to the percentage of the Required Initial Margin for such Transaction
Account to the Net Capital of the Clearing Participant:

(1)
(2)
(3)
(4)
(5)

Percentage of Required
Initial Margin to Net CapitalOver 50% up to 60%:
Over 60% up to 70%:
Over 70% up to 80%:
Over 80% up to 90%:
Over 90%:

Multiplier
0.2
0.4
0.6
0.8
1.0

Article 24. Measures against Clearing Participants Due to Creditworthiness
1 When increasing the Required Initial Margin under Article 32 of the Business Rules, theAdditional Required Initial Margin shall be the amount determined according to themultiplier set by JSCC in a notification.
2 Under Article 32.1.(1).a. of the Business Rules, the level shall be the Capital-to-Risk Ratioof the Clearing Participant, or, if the Clearing Participant is a Special Operator, its Capitalto-Risk Ratio and Consolidated Capital-to-Risk Ratio, of 250%. The deterioration of
creditworthiness shall be the Clearing Participant falling under the situation prescribed by
JSCC in a notification or a public notice as the case where such Clearing Participant may
not be sufficiently creditworthy.
3 The level and the deterioration of creditworthiness under Article 32.1.(1).b. of the Business
Rules shall be, depending upon the category, as follows:22

(1) Where the Clearing Participant is a Registered Financial Institution subject toUniform International Standards:
As specified in a. to c. below, or, in the case of a foreign bank, their equivalent:a. Level: Its non-consolidated or consolidated Common Equity Tier 1 ratio, or, for an
institution which operates with investments from its members, its nonconsolidated or consolidated common investment Tier 1 ratio, of 5.625%, andDeterioration of Creditworthiness: The Clearing Participant falling under thesituation prescribed by JSCC in a notification or a public notice as the case wheresuch Clearing Participant may not be sufficiently creditworthy;b.

Level: Its non-consolidated or consolidated Tier 1 ratio of 7.5%, andDeterioration of Creditworthiness: The Clearing Participant falling under thesituation prescribed by JSCC in a notification or a public notice as the case wheresuch Clearing Participant may not be sufficiently creditworthy;c.

Level: Its non-consolidated or consolidated Total Capital ratio of 10%, andDeterioration of Creditworthiness: the Clearing Participant falling under thesituation prescribed by JSCC in a notification or a public notice as the case wheresuch Clearing Participant may not be sufficiently creditworthy;(2) Where the Clearing Participant is a Registered Financial Institution other than thosesubject to Uniform International Standards, foreign banks and insurance companies(“Financial Institution subject to Japanese Standard”):
The non-consolidated or consolidated capital adequacy ratio under JapaneseStandard of 5%, and the Clearing Participant falling under the situation prescribedby JSCC in a notification or a public notice as the case where such Clearing
Participant may not be sufficiently creditworthy.
4 The level under Article 32.1.(1).c. of the Business Rules shall be the non-consolidated orconsolidated Solvency Margin Ratio of 500%, and the deterioration of the creditworthinessshall be the Clearing Participant falling under the situation prescribed by JSCC in a
notification or a public notice as the case where such Clearing Participant may not be
sufficiently creditworthy.
5 The level under Article 32.1.(2).a of the Business Rules shall be the Risk-to-Capital Ratioof the Clearing Participant of 250%, the deterioration of the creditworthiness of the Parent
Company shall be the Parent Company falling under the situation prescribed by JSCC ina notification or a public notice as the case where such Parent Company may not be
sufficiently creditworthy.
6 The level and the deterioration of creditworthiness under Article 32.1.(2).b. of the Business
Rules shall be, depending upon the category, as follows:(1) Where the Clearing Participant is a Registered Financial Institution subject to23

Uniform International Standards:
As specified in a. to c. below, or, in the case of a foreign bank, their equivalent:a. Level: Its non-consolidated or consolidated Common Equity Tier 1 ratio of 5.625%,
andDeterioration of Creditworthiness: The Parent Company falling under thesituation prescribed by JSCC in a notification or a public notice as the casewhere such Parent Company may not be sufficiently creditworthy;b.

Level: Its non-consolidated or consolidated Tier 1 ratio of 7.5%, andDeterioration of Creditworthiness: The Parent Company falling under the situationprescribed by JSCC in a notification or a public notice as the case where such
Parent Company may not be sufficiently creditworthy;c.

Level: Its non-consolidated or consolidated Total Capital ratio of 10%, andDeterioration of Creditworthiness: The Parent Company falling under the situationprescribed by JSCC in a notification or a public notice as the case where such
Parent Company may not be sufficiently creditworthy;(2) Where the Clearing Participant is a Financial Institution subject to JapaneseStandard:
The level shall be the non-consolidated or consolidated capital adequacy ratio underJapanese Standard of 5%, and the deterioration of creditworthiness of the Parent
Company shall be the Parent Company falling under the situation prescribed by
JSCC in a notification or a public notice as the case such Parent Company may not
be sufficiently creditworthy.
7 The level under Article 32.1.(2).c. of the Business Rules shall be the non-consolidated orconsolidated Solvency Margin Ratio of 500%, and the deterioration of creditworthiness of
the Parent Company shall be the Parent Company falling under the situation prescribedby JSCC in a notification or a public notice as the case where such Parent Company may
not be sufficiently creditworthy.
8 The events under Article 32.1.(2).a. through c. of the Business Rules shall be, depending
upon the category the Parent Company of the Clearing Participant falls, the event set forth
below:(1) If the Parent Company is a Financial Instruments Business Operator:
Its Capital-to-Risk Ratio becomes less than 250%.
(2)

If the Parent Company is a Registered Financial Institution subject to Uniform
International Standards, events specified in a. to c. below, or, in the case of aforeign bank, an equivalent event:24

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 becomes less than 7.5%;
orc. when its non-consolidated or consolidated Total Capital ratio becomes lessthan 10%;(3) If the Parent Company is a Financial Institution subject to Japanese Standards:
Its non-consolidated or consolidated capital adequacy ratio under the Standard inJapan becomes less than 5%;(4) If the Parent Company is an insurance company which is a Registered Financial
Institution:
When its non-consolidated or consolidated Solvency Margin Ratio becomes lessthan 500%.
(5) If the Parent Company is other than the above:
When any equivalent event occurs.
Article 25. Increase in Required Initial Margin to Accumulate
Where Required Initial Margin of a Clearing Participant is increased for multiple reasons,the aggregate of the Additional Required Initial Margin shall apply.
Chapter 3 Clearing Brokerage (Article 26 - 26-2)
Article 26. Letter of Undertaking in respect of Clearing Brokerage Agreement
The form of a letter of undertaking prescribed under Article 43.2 of the Business Rules
shall be the form attached hereto as Exhibit Form 4 or Exhibit Form 4-2.
Article 26-2. Designation of Backup Clearing Broker
1 When giving notification set forth in Article 45-2.3 of the Business Rules, if a Customer
designates a separate Backup Clearing Broker by each currency of denomination ofCleared Contract, it shall make clear such effect in the notification.
2 The report to JSCC under Article 45-2.4 of the Business Rules shall be as follows:(1)

The Backup Clearing Broker shall promptly report to JSCC the following:a. When the Customer who designates the Backup Clearing Broker and the
Backup Clearing Broker have agreed on the conditions to transfer the
Customer’s Cleared Contracts and Clearing Brokerage Contracts, entirely orin part, to such Backup Clearing Broker, the Backup Clearing Broker shall25

promptly report the details of such conditions to JSCC;
b. When the Customer who designates the Backup Clearing Broker and the
Backup Clearing Broker have agreed on the establishment of the framework
for transferring the Customer’s Cleared Contracts and the Clearing BrokerageContracts, entirely or in part, smoothly to such Backup Clearing Broker, theBackup Clearing Broker shall promptly report the details of such framework.
(2)

When changing or cancelling the agreement on the matters listed in a. or b. above,
the Backup Clearing Broker shall promptly report such change with its details orreport cancellation to JSCC.

3 The details of the structure prescribed under Article 45-2.5 of the Business Rules shallbe all of the following:(1)

To agree in advance on the conditions set forth in Paragraph 1.(1).a.;(2)

Both the Customer and the Backup Clearing Broker to periodically check to see if
the transfer of the Customer’s Cleared Contracts and the Clearing BrokerageContracts to the Backup Clearing Broker pursuant to the agreement set forth in
Item (1) is possible;(3)

To establish the operational flow related to the payment and/or receipt of Funds
to be performed daily after the Position Transfer, including the communication
related to the Customer’s Cleared Contracts and the Clearing BrokerageContracts, and accounts to be used for the settlement; and(4)

To conduct periodic training based on the agreement set forth in Item (1) assuming
the situation in which the Customer’s Cleared Contracts and the Clearing
Brokerage Contracts are to be transferred.

Article 26-3. Designation of Listed Futures Backup Clearing Broker
1 The report to JSCC under Article 45-3.4 of the Business Rules shall be as follows:(1)

The Listed Futures Backup Clearing Broker shall promptly report to JSCC via the
Cross Margining Accepting Party the following:a. When the Cross Margining User who designates the Listed Futures Backup
Clearing Broker (and the JGB Futures Non-Clearing Participant, when JGB
Futures Contracts or Interest Rate Futures Contracts of the Cross Margining
User are traded through a brokerage of a JGB Futures Non-Clearing
Participant) and the JGB Futures Clearing Participant have agreed on theconditions of the Listed Futures Position Transfer in respect of all or a part ofthe claims and obligations related to JGB Futures Cleared Contracts and the26like and the claims and obligations related to Interest Rate Futures Cleared
Contracts and the like to the JGB Futures Clearing Participant, the Listed
Futures Backup Clearing Broker shall promptly report the details of theconditions for Listed Futures Position Transfer to JSCC;
b. When the Cross Margining User who designates the Listed Futures Backup
Clearing Broker (and the JGB Futures Non-Clearing Participant, when JGB
Futures Contracts or Interest Rate Futures Contracts of the Cross Margining
User are traded through a brokerage of a JGB Futures Non-Clearing
Participant) and the JGB Futures Clearing Participant have agreed on theestablishment of the framework for Listed Futures Position Transfer in respectof all or a part of the claims and obligations related to such JGB Futures
Cleared Contracts and the like and the claims and obligations related to such
Interest Rate Futures Cleared Contracts and the like to such JGB Futures
Clearing Participant, the Listed Futures Backup Clearing Broker shall promptly
report the details of such framework to JSCC.
(2)

When changing or cancelling the agreement on the matters listed in a. or b. above,
the Listed Futures Backup Clearing Broker or the JGB Futures Non-Clearing
Participant, as applicable, shall promptly report such change with its details orreport cancellation to JSCC via the Cross Margining Accepting Party.

For the purpose of these Handling Procedures, the claims and obligations related to
JGB Futures Cleared Contracts and the like means the claims and obligations related
to the JGB Futures Cleared Contracts, a Clearing brokerage for JGB Futures Contracts
and a brokerage for JGB Futures Contracts and the claims and obligations related toInterest Rate Futures Cleared Contracts and the like means the claims and obligations
related to the Interest Rate Futures Cleared Contracts, a Clearing brokerage for Interest
Rate Futures Contracts and a brokerage for Interest Rate Futures Contracts.
2 The details of the structure prescribed under Article 45-3.5 of the Business Rules shallbe all of the following:(1)

To agree in advance on the conditions set forth in Paragraph 1.(1).a.;(2)

Both the Cross Margining User and the Listed Futures Backup Clearing Broker toperiodically check to see if the Listed Futures Position Transfer in respect of theclaims and obligations related to JGB Futures Cleared Contracts and the like andthe claims and obligations related to Interest Rate Futures Cleared Contracts andthe like to the Listed Futures Backup Clearing Broker pursuant to the agreement
set forth in Item (1) is possible;(3)

To establish the operational flow related to the payment and/or receipt of Funds
27

to be performed daily after the Listed Futures Position Transfer in respect of theclaims and obligations related to JGB Futures Cleared Contracts and the like andthe claims and obligations related to Interest Rate Futures Cleared Contracts andthe like, including the communication concerning the claims and obligations
related to JGB Futures Cleared Contracts and the like and the claims andobligations related to Interest Rate Futures Cleared Contracts and the like, andaccounts to be used for the settlement of Funds; and(4)

To conduct periodic training based on the agreement set forth in Item (1) assuming
the situation in which the Listed Futures Position Transfer in respect of the claims
and obligations related to JGB Futures Cleared Contracts and the like and theclaims and obligations related to Interest Rate Futures Cleared Contracts and thelike is effected.
Chapter 4 Clearing and Cleared Contracts (Article 27 – 35-6)

Article 27. Request for Clearing
1
The request for Clearing as set forth in Article 48.1 of the Business Rules shall be
made, depending upon the situation, in the following manner:(1)

When requesting Clearing for an Eligible IRS Transaction executed for an
unaffiliated Customer:
Acceptance by the Clearing Broker of Clearing Brokerage for that Eligible IRS
Transaction as set forth in Article 54-2.3 of the Business Rules;(2)

Other request for Clearing:Affirmation in the manner prescribed by JSCC in a notification or a public noticeor a use of an electronic trading platform.

2 JSCC will receive notifications set forth in Article 48.1 of the Business Rules during theperiods from 9:00 a.m. to noon, from 1:00 p.m. to 4:00 p.m. and from 5:30 p.m. to 7:00
p.m. on a JSCC Business Day.
3 Notwithstanding the provisions of Paragraph 2, when a request for Clearing of Backload
Transaction is made, JSCC will receive a notice of such request by 8:00 a.m. on the JSCC
Business Day immediately following the date of such request.
Article 28. Requirements for Clearing
1 The requirements prescribed under Article 49.1 of the Business Rules shall be that the
Eligible IRS Transaction described in Article 49.1 of the Business Rules satisfies both of
the following conditions, or, in the case of the Eligible IRS Transaction executed between
Clearing Brokers, it satisfies Item (1) below:28

(1) Requirements set forth in Article 9 hereof are met; and(2) In respect of a request for Clearing set forth in Paragraph 2 below, no date during
the period from the day on which JSCC confirms the satisfaction of the Clearing
Requirements in accordance with Article 49.1 of the Business Rules to the next
JSCC Business Day falls on a Payment Date or the settlement date of the Upfront
Fee.
In addition, the Eligible IRS Transaction described in Article 49.1 of the Business Rules
which comprises a part of a Package Trade should also satisfy both of the following
conditions:(3) In respect of the Eligible IRS Transactions which comprise a Package Trade, theparties are the same for each of such Eligible IRS Transaction, and such Eligible
IRS Transaction satisfies other requirements prescribed by JSCC in a notification
or a public notice; and(4) Information necessary to identify the Package Trade of which it comprises a part is
attached.
2 JSCC shall confirm the satisfaction of the Clearing Requirements in accordance with
Article 49.1 of the Business Rules in the following manner according to the below-listedclassification of the request for Clearing:(1) Request for Clearing of Backload Transaction:
By 8:00 a.m. on the date of receipt of the request for Clearing;(2) Request for Clearing of Transaction other than Backload Transaction:
Promptly after its receipt of the request for Clearing, or, for a Package Trade, itsreceipt of the request for Clearing of all Eligible IRS Transactions comprising the
Package Trade..
3 The time prescribed under Article 49.1 of the Business Rules shall be the time when JSCC
confirms the satisfaction of the Clearing Requirements in accordance with Article 49.1 of
the Business Rules, including such confirmation carried out during the time temporarilychanged pursuant to Article 49.4.
4 The calculation method prescribed under Article 49.1 of the Business Rules shall be set
forth in Appendix 2 attached hereto.
5 The amount prescribed under Article 49.1.(1) of the Business Rules shall be the amountset forth in Appendix 3 attached hereto.

29

6 The cap prescribed under Article 49.1.(2) of the Business Rules shall be JPY 1 billion.
7 The method prescribed under Article 49.1.(2).b. of the Business Rules shall be a
notification via the IRS Clearing System, and contents of the notification shall be reflectedon the next JSCC Business Day following the date of notification.
8 The notification of JSCC as set forth in Article 49.2 and 49.3 of the Business Rules shallbe given as soon as possible in line with the provisions of CFTC Regulation 39.12 (b)(7)(ii)and (iii).
9 Notwithstanding the provisions of Paragraph 5, JSCC will give notice set forth in Articles
49.2 and 49.3 of the Business Rules concerning the request for Clearing received by
JSCC pursuant to the provisions of Article 27.3 at or after 8:05 a.m. as soon as possibleon the date of receipt of the notification of request for such Clearing.
10
In the event of a failure of the IRS Clearing System or any other necessary system
of JSCC or other institution for the IRS Clearing Business or when JSCC deems it
extremely necessary for any other reason, JSCC may change the time during which it will
receive requests for Clearing. When JSCC changes such time, JSCC shall notify the
Clearing Participants of the new time without delay.
Article 29. Details of Cleared Contracts
1 The other forms of master agreement to be separately prescribed under Article 51.1 of theBusiness Rules shall be as follows:(1) 1987 ISDA Interest Rate and Currency Exchange Agreement (including the
Schedule);(2) 1987 ISDA Interest Rate Swap Agreement (including the Schedule);(3) 1992 ISDA Master Agreement (including the Schedule);(4) 2002 ISDA Master Agreement (including the Schedule); and(5) A master agreement designated by JSCC in a public notice.
2 In applying the ISDA Master Agreement and the ISDA Definitions to a Cleared Contract
pursuant to the provisions of Article 51.1 of the Business Rules, the necessary
replacement of terms and other matters shall be as follows:(1) The matters prescribed in the Rules and other matters prescribed by JSCC in a
public notice shall be deemed to have been set forth in the Schedule;30(2) Out of the Floating Rate Options, JPY-TIBOR-ZTIBOR, JPY-TIBOR-17097 and
JPY-TONA-OIS-COMPOUND shall be deemed to have been replaced by JPYEuroyen TIBOR, JPY-TIBOR and JPY-TONA-OIS Compound, respectively; and(3) Other replacement of terms that would become necessary in applying the ISDA
Master Agreement and the ISDA Definitions to a Cleared Contract shall beprescribed by JSCC in a public notice.
3 The rules to be separately prescribed under Article 51.2 of the Business Rules shall be
specified in a public notice.
Article 29-2. Method of Application for Exchanging Mark-to-Market Difference And
Adjustment Amount
1 The manner to be prescribed under Article 51-2.1 and 4 of the Business Rules shall bethose prescribed by JSCC in a notification or a public notice.
2 With respect to Applications for Exchanging Mark-to-Market Difference And Adjustment
Amount set forth in Article 51-2.1 of the Business Rules, when a Clearing Participant
intends to apply for exchanging Mark-to-Market Difference And Adjustment Amountsubject to all the Cleared Contracts (Collateral Type) to be recorded in Proprietary Accountor Customer Account, it must notify in advance such effect to JSCC. In this case, Cleared
Contracts (Collateral Type) which will be newly recorded in Proprietary Account or
Customer Account on and after the date of acceptance of such application shall bedeemed to be applied for exchanging Mark-to-Market Difference And Adjustment Amountto JSCC on the date of such recording pursuant to the provisions of Paragraph 1 above.
3 Conditions prescribed by JSCC under Article 51-2.2 of the Business Rules shall be thosethat there are no claims nor obligations related to Variation Margin of Cleared Contracts(Collateral Type) subject to the Application for Exchanging Mark-to-Market Difference And
Adjustment Amount of which deposit or payment has been already due or has not been
completed at the time of JSCC’s confirmation.
4 When JSCC receives the Application for Exchanging Mark-to-Market Difference And
Adjustment Amount set forth in Article 51-2.1 of the Business Rules, it shall confirm thesatisfaction of VM-as-Settlement Requirements pursuant to Article 51-2.2 of the Business
Rules promptly after 4:00 p.m. on the day of receipt (“the time of JSCC’s confirmation,” if
JSCC confirms the satisfaction of Per Trade Compression Conditions pursuant to Article
53.2 of the Business Rules; “the time of JSCC’s confirmation” if JSCC confirms thesatisfaction of Blended Rates Compression Conditions pursuant to Article 53-2-2 of theBusiness Rules; “the time of JSCC’s confirmation,” if JSCC confirms the satisfaction ofMember-Initiated Compression Conditions pursuant to Article 53-2-3.2 of the Business
Rules; “the time of JSCC’s confirmation,” if JSCC confirms the satisfaction of JSCC31

Initiated Compression Conditions pursuant to Article 53-2-4.4 of the Business Rules; “thetime of JSCC’s acceptance,” if JSCC accepts a request of transfer or position transferfrom a Clearing Participant pursuant to Article 53-4.1, Article 58-3.1, Article 58-5.1 or
Article 58-7.1 of the Business Rules), provided that with respect to Applications for
Exchanging Mark-to-Market Difference And Adjustment Amount submitted after 4:00 p.m.
(including Applications for Exchanging Mark-to-Market Difference And Adjustment Amountsubject to Cleared Contracts which have been newly recorded in Proprietary Account or
Customer Account between 5:30 p.m. and 7:00 p.m., pursuant to the provisions in
Paragraph 2), JSCC shall confirm the satisfaction of VM-as-Settlement Requirements
promptly after 7:00 p.m.
5 Under the netting prescribed by JSCC in Article 51-2.3, JSCC and a Clearing Participant
shall deduct the amount calculated as the amount equivalent to Variation Margin to bedeposited to the counterparty, with respect to the Cleared Contracts that satisfies the VMas-Settlement-Requirement, up to the date of confirmation of the satisfaction of VM-asSettlement Requirements for Cleared Contracts (referred to as “Subject Amount of VMas-Settlement”) from the net Variation Margin to be deposited by such date (amountdeducting the gross receipts from the gross payments of Variation Margin). If the net
Variation Margin after the deduction is positive, such amount shall be deemed as depositwith the counterparty. If such amount is negative, the amount equivalent to the absolutevalue of such negative amount shall be deemed as deposit from the counterparty. In thiscase, JSCC and the relevant Clearing Participant shall appropriate Cash equivalent to the
Subject Amount of VM-as-Settlement to settle the payment obligation related to Mark-toMarket Difference at the time when such obligation comes into effect.
6 When JSCC deems it necessary due to causes such as failure of IRS Clearing System orother system of JSCC or other organization necessary to carry out IRS Clearing Business,
JSCC may forgo confirmation of the satisfaction of VM-as-Settlement Requirements for
the Application for Exchanging Mark-to-Market Difference And Adjustment Amount or may
change the time of such confirmation. In this case, JSCC shall promptly notify the relevant
Clearing Participants of its determination of forgoing such confirmation, or changing thetime of such confirmation and the time so changed, without delay.
Article 30. Method of Application for Per Trade Compression of Cleared Contracts
1 The method to be separately prescribed under Article 53.1 and 53.5 of the Business Rules
shall be the method of designating the Cleared Contracts recorded on the Proprietary
Account or Customer Account of which it intends to conduct Per Trade Compression byusing IRS Clearing System.
2 The requirements prescribed under Article 53.2 of the Business Rules shall be, according
to the type of Cleared Contract, those set forth below;(1) Cleared Contract subject to Application for Per Trade Compression:a. No date during the period from the date of JSCC’s confirmation of the Per Trade
Compression Conditions to the next JSCC Business Day is a Payment Date,32

b.

Deleted.

c.

economic terms designated by JSCC through a notice or public notice, such as
Floating Rate Option or otherwise, are consistent with any of the other Cleared
Contracts for which Per Trade Compression is applied;(2) Cleared Contract which comes into effect as a result of Per Trade Compression:
satisfies the conditions set forth in Article 9.1.(10).
3 With respect to applications for Per Trade Compression set forth in Article 53.1 of theBusiness Rules submitted by 4:00 p.m. on a JSCC Business Day, JSCC shall confirm thesatisfaction of the Per Trade Compression Conditions in accordance with Article 53.2 of
the Business Rules promptly after 4:00 p.m. on the same day.
4 Economic terms of new Cleared Contract to come into effect as a result of Per Trade
Compression that should be identical to the Cleared Contract subject to the application
for the Per Trade Compression and other matters relating to new Cleared Contract tocome into effect as a result of Per Trade Compression shall be prescribed by JSCC
through a notice or public notice.
5 Claims and obligations to be designated by JSCC under Article 53.3 of the Business Rules
are claims and obligations which have already been due at the time of confirmation of thesatisfaction of the Per Trade Compression Conditions set forth in Article 53.2 of theBusiness Rules, listed below:(1) Claims and obligations related to Upfront Fee which have already been due has notbeen completed; and(2) In respect of an application for Per Trade Compression of Foreign Currency Cleared
Contracts, claims and obligations related to Cash Settlement Amount of which depositor payment related to Foreign Currency Cleared Contract subject to the application for
Per Trade Compression which have already been due has not been completed
6 When JSCC deems it necessary due to causes such as failure of IRS Clearing System orother system of JSCC or other organization necessary to carry out IRS Clearing Business,
JSCC may forgo confirmation of the satisfaction of Per Trade Compression Conditions orchange the time to confirm the satisfaction of Per Trade Compression Conditions. In thiscase, JSCC shall promptly notify Clearing Participants of its determination of forgoingsuch confirmation or changing time of such confirmation, and the time so changed, without
delay.
Article 30-2. Method of Application for Blended Rates Compression of Cleared Contracts
1 The method to be separately prescribed under Article 53-2.1 and 53-2.5 of the Business
Rules shall be the method of designating the Cleared Contracts recorded on the33

Proprietary Account or Customer Account of which it intends to conduct Blended Rates
Compression by using IRS Clearing System.
2 The requirements prescribed under Article 53-2.2 of the Business Rules shall be,according to the type of Cleared Contract, those set forth below;(1) Cleared Contract subject to Application for Blended Rates Compression:a. No date during the period from the date of JSCC’s confirmation of the Blended
Rates Compression Conditions to the next JSCC Business Day is a Payment
Date,
b.

Deleted ,c.

economic terms designated by JSCC through a notice or public notice, such as
Floating Rate Option or otherwise, are consistent with any of the other Cleared
Contracts for which Blended Rates Compression is applied,d.

the transaction involves an exchange of a fixed rate and a floating rate, ande.

the Notional Amount is constant throughout the Term

(2) Cleared Contract which comes into effect as a result of Blended Rates Compression:
satisfies the conditions set forth in Article 9.1.(10).
3 With respect to applications for Blended Rates Compression pursuant to the provisions ofArticle 53-2.1 of the Business Rules submitted by 4:00 p.m., JSCC shall confirm thesatisfaction of the Blended Rates Compression Conditions in accordance with Article 532.2 of the Business Rules promptly after 4:00 p.m. on the date of receipt of suchapplication.
4 Economic terms of new Cleared Contract to come into effect as a result of Blended Rates
Compression that should be identical to the Cleared Contract subject to the application
for the Blended Rates Compression and other matters relating to new Cleared Contract
to come into effect as a result of Blended Rates Compression shall be prescribed by JSCC
through a notice or public notice.
5 Claims and obligations to be designated by JSCC under Article 53-2.3 of the Business
Rules are claims and obligations, which have already been due at the time of confirmationof the satisfaction of the Blended Rates Compression Conditions set forth in Article 532.3 of the Business Rules, listed below:(1) Claims and obligations related to Upfront Fee which have already been due has notbeen completed; and(2) In respect of an application for a Blended Rates Compression of Foreign Currency
34

Cleared Contracts, claims and obligations related to Cash Settlement Amount of
which deposit or payment related to Foreign Currency Cleared Contract subject tothe application for Blended Rates Compression which have already been due has
not been completed.
6 When JSCC deems it necessary due to causes such as failure of IRS Clearing System orother system of JSCC or other organization necessary to carry out IRS Clearing Business,
JSCC may forgo confirmation of the satisfaction of Blended Rates Compression
Conditions or change the time to confirm the satisfaction of Blended Rates Compression
Conditions. In this case, JSCC shall promptly notify Clearing Participants of its
determination of forgoing such confirmation or changing time of such confirmation, andthe time so changed, without delay.
Article 30-3. Method of Application for Vendor-Initiated Compression of Cleared Contracts
1 A manner to be prescribed by JSCC under Article 53-2-2.1 of the Business Rules shallbe the manner of making application through triReduce service provided by TriOptima AB
or a service provided by Quantile Technologies Limited.
2 The requirement prescribed under Article 53-2-2.2 of the Business Rules shall be as
follows:(1)

No date during the period from the date of confirmation of the satisfaction of the
Vendor-Initiated Compression Conditions to the next JSCC Business Day falls on
a Payment Date of the Cleared Contracts for which the Vendor-InitiatedCompression is applied and new Cleared Contracts to be executed as a result ofVendor-Initiated Compression or the settlement date of Upfront Fee; and(2)

New Cleared Contracts to be executed as a result of Vendor-InitiatedCompression satisfy the requirements for Eligible IRS Transactions set forth in
Article 9.

3 JSCC shall confirm the satisfaction of the Vendor-Initiated Compression Conditions
pursuant to the provisions of Article 53-2-2.2 of the Business Rules by 3:30 p.m. on the
day of application.
4 Upon JSCC’s confirmation of deposit with or delivery to JSCC of the Required Intraday
Margin prescribed in Article 53-2-2.2 of the Business Rules with respect to Customer’s
Cleared Contracts subject to the application for the Vendor-Initiated Compression, theamount of Customer Buffer allocated to the Customer Account related to such Customer’s
Cleared Contracts shall be included in the deposited amount for the purpose ofconfirmation of shortfall.
5 Claims and obligations to be designated by JSCC under Article 53-2-2.3 of the Business
35

Rules are claims and obligations related to Cash Settlement Amount of which deposit or
payment related to Foreign Currency Cleared Contracts subject to the application for
Vendor-Initiated Compression which have already been due has not been completed at
the time of confirmation of the satisfaction of the Vendor-Initiated Compression
Conditions set forth in Article 53-2-2.2 of the Business Rules.
6 The time prescribed under Article 53-2-2.4 of the Business Rules shall be 3:30 p.m. on
the date of JSCC’s confirmation of the satisfaction of the Vendor-Initiated Compression
Conditions.
7 The hours prescribed by JSCC during which JSCC does not receive any request for
Clearing under Article 53-2-2.5 of the Business Rules shall be from 1:00 p.m. to 3:30 p.m.
on the date of Vendor-Initiated Compression, provided that if JSCC confirms a conclusionof Vendor-Initiated Compression during such hours, then JSCC shall promptly resumereceipt of notifications of request for Clearing.
8 The Unwind Fee set forth in Article 53-2-2.6 of the Business Rules shall be settled on thesecond JSCC Business Day following the conclusion of Vendor-Initiated Compression
between JSCC and the Clearing Participant which is the party to the Cleared Contracts
terminated as a result of the Vendor-Initiated Compression.
9 Notwithstanding the provisions of Paragraphs 3, 6 and 7, JSCC may temporarily change
the cut-off time set forth in said Paragraphs as JSCC deems necessary. In such case,
JSCC shall notify all Clearing Participants of such temporary change and the new cut-off
time.
Article 30-4. Method of Application for Member-Initiated Compression of Cleared Contracts
1 A manner to be prescribed by JSCC under Article 53-2-3.1 of the Business Rules shallbe the manner prescribed by JSCC through a notice or public notice.
2 The requirement prescribed under Article 53-2-3.2 of the Business Rules shall be as
follows:(1)

No date during the period from the date of confirmation of the satisfaction of theMember-Initiated Compression Conditions to the next JSCC Business Day falls
on a Payment Date of the Cleared Contracts for which the Member-InitiatedCompression is applied and new Cleared Contracts to be executed as a result ofMember-Initiated Compression;(2)

New Cleared Contracts to be executed as a result of Member-InitiatedCompression satisfy the requirements for Eligible IRS Transactions set forth in
Article 9 (other than that set forth in Article 9.(10);

36

(3)

The Notional Amount of new Cleared Contracts to be executed as a result ofMember-Initiated Compression is constant throughout the Term;(4)

The settlement date of Upfront Fee for the Cleared Contracts for which theMember-Initiated Compression is applied and new Cleared Contracts to be
executed as a result of Member-Initiated Compression is on or before the date ofconfirmation of Member-Initiated Compression Conditions; and(5)Within the sum total of an expected future cashflow and other economic terms,
those designated by JSCC through a notice or public notice of the Cleared
Contracts to terminate as a result of Member-Initiated Compression and newCleared Contract to be executed as a result of Member-Initiated Compression
match.

3 JSCC shall confirm the satisfaction of the Member-Initiated Compression Conditions
pursuant to the provisions of Article 53-2-3.2 of the Business Rules promptly after 4:00
p.m. on the day of JSCC’s receipt of an application for Member-Initiated Compression
made pursuant to the provisions of Article 53-2-3.1 of the Business Rules.
4 Upon JSCC’s confirmation of deposit with or delivery to JSCC of the Margin Required toClear prescribed in Article 53-2-3.2 of the Business Rules with respect to Customer’s
Cleared Contracts subject to the application for the Member-Initiated Compression, theamount of Customer Buffer allocated to the Customer Account related to such Customer’s
Cleared Contracts shall be included in the deposited amount for the purpose ofconfirmation of shortfall.
5 Claims and obligations to be designated by JSCC under Article 53-2-3.3 of the Business
Rules are claims and obligations related to Cash Settlement Amount of which deposit or
payment related to Foreign Currency Cleared Contracts subject to the application for
Member-Initiated Compression which have already been due has not been completed at
the time of confirmation of the satisfaction of the Member-Initiated Compression
Conditions set forth in Article 53-2-3.2 of the Business Rules.
6 The Unwind Fee set forth in Article 53-2-3.5 of the Business Rules shall be settled on thesecond JSCC Business Day following the conclusion of Member-Initiated Compression
between JSCC and the Clearing Participant or the Representative Clearing Participant
and the Collaborating Clearing Participants, as applicable, which is(are) the party to theCleared Contracts terminated as a result of the Member-Initiated Compression.
7 When JSCC deems it necessary due to causes such as failure of IRS Clearing Systemor other system of JSCC or other organization necessary to carry out IRS Clearing
Business, JSCC may forgo confirmation of the satisfaction of Member-InitiatedCompression Conditions or change the time to confirm the satisfaction of Member37

Initiated Compression Conditions. In this case, JSCC shall promptly notify Clearing
Participants (or Representative Clearing Participant and Collaborating Clearing
Participants) of its determination of forgoing such confirmation or changing time of suchconfirmation, and the time so changed, without delay.
Article 30-4-2. Method of Application for JSCC-Initiated Compression of Cleared Contracts
1 To express its intention to JSCC as set forth in Article 53-2-4.1 of the Business Rules, theClearing Participant shall submit the form prescribed by JSCC by the time designated by
JSCC at each occasion for the Cleared Contract to be covered by JSCC-InitiatedCompression which shall be Proprietary Cleared Contract or Cleared Contract ofCustomer in the same Corporate Group as the Clearing Broker.
2 A manner to be prescribed by JSCC under Articles 53-2-4.2 and 53-2-4.7 of the Business
Rules shall be the manner of designating the Cleared Contracts recorded on the Propriety
Account or Customer Account in respect of which it intends to carry out the JSCC-InitiatedCompression by using IRS Clearing System.
3 A manner to be prescribed by JSCC under Article 53-2-4.4 of the Business Rules shallbe the manner of the Clearing Participant submitting the form prescribed by JSCC to
JSCC by 10:00 a.m. on the day on which JSCC confirms a satisfaction of JSCC-InitiatedCompression Conditions.
4 The requirement prescribed under Article 53-2-4.4 of the Business Rules shall be as
follows:(1)

The Cleared Contracts covered by the application for JSCC-InitiatedCompression and the Cleared Contracts to come into effect as a result of JSCCInitiated Compression are JPY Cleared Contracts with constant Notional Amountexchanging Fixed Amount and Floating Amount;(2)

No date during the period from the date of confirmation of the satisfaction of the
JSCC-Initiated Compression Conditions to the next JSCC Business Day falls on
a Payment Date of the Cleared Contracts for which the JSCC-InitiatedCompression is applied and new Cleared Contracts to be executed as a result of
the JSCC-Initiated Compression;(3)

The upfront fee settlement date in respect of the Cleared Contracts for which
JSCC-Initiated Compression is applied and new Cleared Contracts to be executed
as a result of JSCC-Initiated Compression is before the deadline for expressionof intention related to utilization of JSCC-Initiated Compression;(4)

The Cleared Contracts covered by the application for JSCC-InitiatedCompression are those cleared before the time separately designated by JSCC
38

at each occasion;(5)

New Cleared Contracts to be executed as a result of the JSCC-InitiatedCompression satisfy the requirements for Eligible IRS Transactions set forth in
Article 9 (other than that set forth in Article 9.1.(3));

5 JSCC shall confirm the satisfaction of JSCC-Initiated Compression Conditions pursuant
to the provisions of Article 53-2-4.4 of the Business Rules promptly after 4:00 p.m. on the
day JSCC designates in the notice.
6 Upon JSCC’s confirmation of deposit with or delivery to JSCC of the Margin Required toClear prescribed in Article 53-2-4.4 of the Business Rules with respect to Customer’s
Cleared Contracts subject to the application for the JSCC-Initiated Compression, theamount of Customer Buffer allocated to the Customer Account related to such Customer’s
Cleared Contracts shall be included in the deposited amount for the purpose ofconfirmation of shortfall.
7 The Unwind Fee set forth in Article 53-2-4.8 of the Business Rules shall be settled on thesecond JSCC Business Day following the conclusion of JSCC-Initiated Compression
between JSCC and the Clearing Participant which is the party to the Cleared Contracts
terminated as a result of the JSCC-Initiated Compression.
8 If, at the time when JSCC confirmed the satisfaction of JSCC-Initiated Compression
Conditions as set forth in Article 53-2-4.4 of the Business Rules, an application for PerTrade Compression under Article 53.1 of the Business Rules or an application for Blended
Rates Compression under Article 53-2.1 of the Business Rules has been submitted in
respect of the Cleared Contracts for which application for JSCC-Initiated Compression
has been made, JSCC shall give priority to the application for JSCC-InitiatedCompression.
9 When agreement of all Clearing Participants who applied for JSCC-Initiated Compression
pursuant to Article 53-2-4.2 of the Business Rules cannot be obtained as set forth in
Article 53-2-4.4 of the Business Rules or when JSCC deems it necessary due to causessuch as failure of IRS Clearing System or other system of JSCC or other organizationnecessary to carry out IRS Clearing Business or other unavoidable cause, JSCC may
forgo confirmation of the satisfaction of JSCC-Initiated Compression Conditions orchange the time to confirm the satisfaction of JSCC-Initiated Compression Conditions.
In this case, JSCC shall promptly notify Clearing Participants of its determination offorgoing such confirmation or changing time of such confirmation, and the time sochanged, without delay.
Article 30-5. Matters related to Funds to be Settled upon Position Transfer of Proprietary
Cleared Contracts
39

1 The Early Termination Charge and the amount to be paid upon Position Transfer set forthin Article 53-4.1 of the Business Rules shall be calculated separately by the classificationsof Cleared Contracts, namely, JPY Cleared Contracts, AUD Cleared Contracts, USD
Cleared Contracts and EUR Cleared Contracts, in the following manner:(1)

The Early Termination Charge shall be equal to net Variation Margin to bedeposited with the Clearing Participant by JSCC with respect to each of such
Cleared Contracts up to the date of such termination (amount deducting the grossreceipts from the gross payments of Variation Margin; the same applies in this
Article 30-5) plus or minus the interest on the Variation Margin to be paid or
received on the JSCC Business Day immediately following such termination (ifeach of such Cleared Contracts is a Cleared Contract (Settlement Type),
Adjustment Amount related to Mark-to-Market Difference to be paid or received
on the JSCC Business Day immediately following such termination). If suchamount is positive, then JSCC shall pay the Clearing Participant the Early
Termination Charge, and if negative, the Clearing Participant shall pay JSCC the
Early Termination Charge.

(2)

The amount to be paid upon Position Transfer, which is equal to net Variation
Margins deposited with JSCC by the Requesting Clearing Participant (as suchterm defined in Article 53-3.1) up to the date of termination of the Position Transfer
Requested Cleared Contracts (as such term defined in Article 53-4.1 of theBusiness Rules) plus or minus the interest on the Variation Margin to be paid or
received on the JSCC Business Day immediately following such termination, shallbe settled between JSCC and the Successor Clearing Broker. (If such Position
Transfer Requested Cleared Contracts are Cleared Contracts (Settlement Type),
the amount to be paid upon Position Transfer, which is equal to the net Mark-toMarket Difference (amount deducting the gross receipts from the gross paymentsof Mark-to-Market Difference) paid to JSCC by the Requesting Clearing
Participant up to the date of such termination plus or minus the Adjustment
Amount related to Mark-to-Market Difference to be paid or received on the JSCC
Business Day immediately following such termination, shall be settled. In thiscase, if such amount is positive, then the amount to be paid upon Position Transfer
shall be paid by JSCC to the Successor Clearing Broker, and if negative, it shallbe paid by the Successor Clearing Broker to JSCC.

2 JSCC, the Successor Clearing Broker and the Requesting Clearing Participant shallsettle the amount to be paid upon Position Transfer and the Early Termination Charge
calculated in accordance with the provisions of Paragraph 1 after netting the Cash
Settlement Amount on the JSCC Business Day immediately following the date of
termination of the Position Transfer Requested Cleared Contract, pursuant to theprovisions of Article 53-4.4. (3) of the Business Rules.

40

3 The provisions of Paragraphs 1 and 2 above shall apply mutatis mutandis to the casewhere JSCC calculates the Early Termination Charge and the amount to be paid upon
Position Transfer pursuant to the provisions of Articles 58-5.5 and 58-5.7 of the Business
Rules. In this case, the reference to “Article 53-4.1” in the main body of Paragraph 1
shall be deemed to be the reference to “Articles 58-5.5 and 58-5.7,” and, in Paragraph1.(2), the reference to “Successor Clearing Broker” in the first sentence shall be deemed
to be the reference to “Receiving Clearing Participant (or, in case of Transfer to the
Receiving Customer whose Clearing Broker is not the Clearing Broker for the Transferring
Customer, the Clearing Broker for the Receiving Customer; the same applies in this
Article)”; the reference to “Position Transfer Requested Cleared Contracts (as such term
defined in Article 53-4.1of the Business Rules)” shall be deemed to be the reference to“Customer’s Cleared Contracts that shall terminate pursuant to the provisions of thesecond sentence of Article 58-5.4 of the Business Rules (or, in case of Transfer to the
Receiving Customer whose Clearing Broker is not the Clearing Broker for the Transferring
Customer, the Customer’s Cleared Contracts that shall terminate pursuant to theprovisions of the second sentence of Article 58-5.6; the same applies in this Article); thereference to “Requesting Clearing Participant (as such term defined in Article 53-3.1)”
shall be deemed to be the reference to “the Clearing Broker for the Transferring
Customer”; the reference to “such Position Transfer Requested Cleared Contracts” shallbe deemed to be the reference to “Customer’s Cleared Contracts that shall terminate
pursuant to the provisions the second sentence of Article 58-5.4 of the Business Rules”;
the reference to “by the Requesting Clearing Participant” shall be deemed to be thereference to “by the Clearing Broker for the Transferring Customer”; the reference to “tothe Successor Clearing Broker” shall be deemed to be the reference to “to the Receiving
Clearing Participant”; the reference to “by the Successor Clearing Broker” shall bedeemed to be the reference to “by the Receiving Clearing Participant,” and, in Paragraph
2, the reference to “Successor Clearing Broker” shall be deemed to be the reference to“Clearing Broker for the Transferring Customer”; the reference to “Requesting Clearing
Participant” shall be deemed to be the reference to “Receiving Clearing Participant (or, incase of Transfer to a Receiving Customer whose Clearing Broker is not the Clearing
Broker for the Transferring Customer, the Clearing Broker for the Receiving Customer)”;the reference to “Article 53-4.4.(3) of the Business Rules” shall be deemed to be thereference to “Articles 58-5.5 and 58-5.7 of the Business Rules”; and the reference to“Position Transfer Requested Cleared Contract” shall be deemed to be “Customer’s
Cleared Contracts that shall terminate pursuant to the provisions of the second sentenceof Article 58-5.4 of the Business Rules.”
4 The provisions of Paragraphs 1 and 2 above shall apply mutatis mutandis to the casewhere JSCC calculates the Early Termination Charge and the amount to be paid upon
Position Transfer pursuant to the provisions of Articles 58-7.6 of the Business Rules. In
this case, the reference to “Article 53-4.1” in the main body of Paragraph 1 shall bedeemed to be the reference to “Articles 58-7.6,” and, in Paragraph 1.(2), the reference to“Successor Clearing Broker” shall be deemed to be the reference to “Clearing Broker for41

the Receiving Customer”; the reference to “Position Transfer Requested Cleared
Contracts (as such term defined in Article 53-4.1 of the Business Rules)” shall be deemed
to be the reference to “Proprietary Cleared Contracts that shall terminate pursuant to theprovisions of the second sentence of Article 58-7.4 of the Business Rules”; the reference
to “Requesting Clearing Participant (as such term defined in Article 53-3.1)” shall bedeemed to be the reference to “Transferring Clearing Participant”; the reference to “suchPosition Transfer Requested Cleared Contracts” shall be deemed to be the reference to“such Proprietary Cleared Contracts”; the reference to “by the Requesting Clearing
Participant” shall be deemed to be the reference to “by the Transferring Clearing
Participant”; the reference to “to the Successor Clearing Broker” shall be deemed to be
the reference to “to the Clearing Broker for the Receiving Customer”; the reference to “bythe Successor Clearing Broker” shall be deemed to be the reference to “by the Clearing
Broker for the Receiving Customer,” and, in Paragraph 2, the reference to “Successor
Clearing Broker” shall be deemed to be the reference to “Clearing Broker for the Receiving
Customer”; the reference to “Requesting Clearing Participant” shall be deemed to be thereference to “Transferring Clearing Participant”; the reference to “Article 53-4.4.(3) of theBusiness Rules” shall be deemed to be the reference to “Articles 58-7.6 of the Business
Rules”; and the reference to “Position Transfer Requested Cleared Contracts” shall bedeemed to be the reference to “Proprietary Cleared Contracts that shall terminate
pursuant to the provisions of the second sentence of Article 58-7.4 of the Business Rules.”Article 30-6. Matters related to Claims and Obligations Arising as a Result of Position
Transfer of Proprietary Cleared Contracts
The terms and conditions designated by JSCC under Article 53-4.2. of the Business
Rules shall be designated in a notification or a public notice.
Article 31. Notification related to Clearing Brokerage.
1 The notification in respect of the Clearing Brokerage pursuant to Article 54.1 or Article 542.1.(1) of the Business Rules shall be made by the affirmation method prescribed in a
notification or a public notice or by using electronic trading platform, set forth in Article
27.1.(2).
2 The matters prescribed under Article 54.1 or Article 54-2.1.(1) of the Business Rules shallbe those specified by JSCC in a notification or a public notice.
Article 31-2. Skip Notifications concerning Clearing Brokerage Request
1 The notification to be given in a manner prescribed by JSCC under Article 54-2.4 of theBusiness Rules, including any notification of a revision of the notified matters, shall begiven through a submission to JSCC of the document prescribed by JSCC.
2

When a Clearing Broker ceases the treatment of skipping the notifications of Articles 542.2 and 54-2.3 of the Business Rules as per the provisions of Article 54-2.4, it shallsubmit to JSCC the document prescribed by JSCC.

42

Article 32. Requirements for Clearing Brokerage Original Transaction
The requirements prescribed under Article 54.3.(1).c. or Article 54-2.1.(3) of the Business
Rules shall be as follows:(1) It shall be an IRS Transaction which satisfies the requirements set forth in Article
9, except for those set forth in Article 9.(3); and(2) It shall be an IRS Transaction which satisfies any other requirements prescribedby JSCC in a public notice.
Article 33. Execution of IRS Transaction through Clearing Brokerage.
1 The IRS Transaction between the Clearing Broker acting for the account of a Customer
and the Designated Counterparty as set forth in Article 55.1 or Article 55-2.(1) of theBusiness Rules shall come into effect in accordance with Article 55.1 or Article 55-2.(1) of
the Business Rules, as the case may be, on condition that such Customer and such
Designated Counterparty, or, if such Designated Counterparty is a Clearing Broker for
another Customer, such another Customer, notify JSCC, by the affirmation method
prescribed by JSCC in a notification or a public notice or by using an electronic trading
platform, as set forth in Article 27.1.(2), of the matters specified by JSCC in a notification
or a public notice, and that JSCC confirms the satisfaction of the Clearing Requirements,
effective as of the time of JSCC’s such confirmation.
Article 33-2. Application for Exchanging Mark-to-Market Difference
The method to be prescribed by JSCC under Article 55-3 of the Business Rules shall beprescribed by JSCC in a notification or a public notice.
Article 34. Terms and Conditions to be Identical to Those of Clearing Brokerage Original
Transaction
1 The criteria for limits to be set by JSCC under Article 54.3.(2) or Article 54-2.1.(3) of theBusiness Rules shall be the limits on risk inherent to each Customer Account as set by
JSCC in a notification.
2 The terms and conditions prescribed by JSCC under Article 54.4.(1) or 54-2.1.(4).i. andArticle 55.1 or Article 55-2.1.(1) of the Business Rules shall be prescribed by JSCC in a
public notice.
Article 35. Treatment of Customer’s Cleared Contracts upon Termination of Clearing
Brokerage Contracts
1 An event under Article 55.4 or Article 55-2.(4) of the Business Rules shall be thetermination of all Clearing Brokerage Contracts in accordance with the Clearing Brokerage
Agreement.
2 The point of time prescribed under Article 55.4 or Article 55-2.(4) of the Business Rules
43shall be the next JSCC Business Day following the day on which JSCC receives a
notification from a Clearing Broker of the termination of Clearing Brokerage Contracts.
Article 35-2. Application for Vendor-Initiated Compression in respect of Customer’s
Cleared Contracts
1 The method to be prescribed under Article 57.1 of the Business Rules shall be prescribedby JSCC in a notification or a public notice.
2 The substance to be prescribed under Article 57-2.2 of the Business Rules shall beprescribed by JSCC in a notification or a public notice.
Article 35-2-2. Application for Member-Initiated Compression in respect of Customer’s
Cleared Contracts
1 The method to be prescribed under Article 57-3.1 of the Business Rules shall beprescribed by JSCC in a notification or a public notice.
2 The substance to be prescribed under Article 57-4.2 of the Business Rules shall beprescribed by JSCC in a notification or a public notice.
Article 35-3. Matters related to Funds to be Settled upon Position Transfer
1 The Early Termination Charge and the amount to be paid upon Position Transfer set forthin Article 58-3.1 of the Business Rules shall be calculated separately by the classificationsof Cleared Contracts, namely, JPY Cleared Contracts, AUD Cleared Contracts, USD
Cleared Contracts and EUR Cleared Contracts, in the following manner:(1)

The Early Termination Charge shall be equal to net Variation Margin (amountdeducting the gross receipts from the gross payments of Variation Margin; thesame applies in this Article 35-3) to be deposited with the Clearing Participant by
JSCC with respect to each of such Cleared Contracts up to the date of suchtermination plus or minus the interest on the Variation Margin to be paid or
received on the JSCC Business Day immediately following such termination (ifeach of such Cleared Contracts is a Cleared Contract (Settlement Type), theamount plus or minus the Adjustment Amount related to Mark-to-Market
Difference to be paid or received on JSCC’s Business Day immediately following
such termination). If such amount is positive, then JSCC shall pay the Clearing
Participant the Early Termination Charge, and if negative, the Clearing Participant
shall pay JSCC the Early Termination Charge.

(2)

The amount to be paid upon Position Transfer, which is equal to net Variation
Margins deposited with the Carrying Clearing Broker by the Customer up to thedate of termination of the Relevant Cleared Contracts (as such term defined in
Article 58-2.3 of the Business Rules) plus or minus the interest on the Variation
Margin to be paid or received on the JSCC Business Day immediately following
44

such termination (If such Position Transfer Requested Cleared Contracts are
Cleared Contracts (Settlement Type), the amount to be paid upon Position
Transfer which is equal to the net Mark-to-Market Difference posted to JSCC by
the Requesting Clearing Participant up to the date of such termination (amountdeducting the gross receipts from the gross payments of Mark-to-Market
Difference) plus or minus the Adjustment Amount related to Mark-to-Market
Difference to be paid or received on JSCC Business Day immediately following
such termination), shall be settled among JSCC, the Successor Clearing Broker
and the Customer. In this case, if such amount is positive, then the amount tobe paid upon Position Transfer shall be paid by JSCC to the Successor Clearing
Broker and by the Successor Clearing Broker to the Customer, and if negative, it
shall be paid by the Customer to the Successor Clearing Broker and by the
Successor Clearing Broker to JSCC.
2 JSCC, the Successor Clearing Broker, the Carrying Clearing Broker and the Customer
shall settle the amount to be paid upon Position Transfer and the Early Termination
Charge calculated in accordance with the provisions of Paragraph 1 after netting theCash Settlement Amount on the JSCC Business Day immediately following the date of
termination of the Relevant Cleared Contract, pursuant to the provisions of Article 58-3.4.
(3) of the Business Rules.
Article 35-4. Matters related to Claims and Obligations Arising as a Result of Position
Transfer of Customer’s Cleared Contracts
The terms and conditions designated by JSCC under Article 58-3.2.(1) and (2) of theBusiness Rules shall be designated in a notification or a public notice.
Article 35-4-2. Matters related to Claims and Obligations upon Position Transfer orTransfer
The claims and obligations to be designated by JSCC under Articles 53-4.3, 58-3.3, 585.4, 58-5.6 and 58-7.4 of the Business Rules shall be, according to the classification
specified in below items, claims and obligations specified below which has alreadybecome due at the time of confirmation of a deposit or delivery of Margin Required toClear to JSCC as set forth in Articles 53-4.1, 58-3.1,58-5.1 and 58-7.1 of the Business
Rules:(1) Foreign Currency Cleared Contract
Claims and obligations related to Cash Settlement Amount of which deposit or
payment related to such Cleared Contract has not been completed;(2) Clearing Brokerage Contract related to Foreign Currency Cleared Contract
Claims and obligations related to Settlement Amount for which payment under the
relevant Clearing Brokerage Contract has not been completed.
Article 35-4-3. Matters related to Claims and Obligations Arising as a Result of Transfer ofClearing Brokerage Contracts or Proprietary Cleared Contracts
45

The terms and conditions to be prescribed by JSCC as set forth in Articles 58-5.4, 58-5.6
and 58-7.4 of the business Rules shall be designated in a notification or a public notice.
Article 35-4-4. Matters related to Margin Required to Clear upon Position Transfer orTransfer)
1 Upon confirmation of deposit with or delivery to JSCC of the Margin Required to Clear asprescribed in Article 58-3.1 of the Business Rules, for each of the Carrying Clearing Broker
and Successor Clearing Broker, the amount of Customer Buffer allocated to the Customer
Account related to the Customer’s Cleared Contracts subject to Position Transfer shall be
included in the deposited amount for the purpose of confirmation of shortfall.
2 Upon confirmation of deposit with or delivery to JSCC of the Margin Required to Clear asprescribed in Article 58-5.1 of the Business Rules, the amount of Customer Buffer
allocated to the Customer Account related to the Transferring Customer (and theReceiving Customer when the transfer is made to a Receiving Customer) shall be includedin the deposited amount for the purpose of confirmation of shortfall.
3 Upon confirmation of deposit with or delivery to JSCC of the Margin Required to Clear as
set forth in Article 58-7.1 of the Business Rules, the amount of Customer Buffer allocatedto the Customer Account related to the Receiving Customer shall be included in thedeposited amount for the purpose of confirmation of shortfall.
Article 35-5. Hedge Account and Non-Hedge AccountFor the purpose of Article 59.7 of the Business Rules, if the Customer mainly trades
hedging transactions (such term has the same meaning as the “hedging transaction” asused in CFTC Regulation 1.3), the account of such Customer shall be a Hedge Account,and if the Customer mainly trades for purposes other than hedge transactions, the accountof such Customer shall be Non-hedge Account, and the notification to JSCC shall be madeunder Article 59.7 of the Business Rules accordingly.
Article 35-6. Time related to Mark-to-Market Difference
The case prescribed by JSCC under Article 61-2.2 of the Business Rules is the casewhere the Application for Exchanging Mark-to-Market Difference And Adjustment Amountpursuant to Article 51-2.1 of the Business Rules is submitted after 4:00 p.m. (including
Application for Exchanging Mark-to-Market Difference And Adjustment Amount deemedsubmitted for Cleared Contracts newly recorded between 5:30 p.m. and 7:00 p.m.,
pursuant to the provisions in Article 29-2.4), and where the Net Present Value is to be
calculated on the day of such Application for Exchanging Mark-to-Market Difference And
Adjustment Amount and the time prescribed by JSCC shall be at the time when JSCC
confirms satisfaction of VM-as-Settlement Requirements pursuant to the provisions in
Article 29-2.4 for such Application for Exchanging Mark-to-Market Difference And
Adjustment Amount submitted.

46

Chapter 5 Margin, etc. (Article 36 - 42)
Article 36. Required Initial Margin Calculation Method
1 The calculation methods for Required Initial Margin under Article 64.1 of the Business
Rules, for Required Initial Margin of a Customer under Article 65.1 of the Business Rules,
for Required Intraday Margin under Article 68.1 of the Business Rules and for Required
Intraday Margin of a Customer under Article 69.1 of the Business Rules shall be set forthin Appendix 2 hereto.
2 The notification to a Clearing Participant of the Required Initial Margin under Article 64.4of the Business Rules or of the Required Intraday Margin under Article 68.4 of theBusiness Rules shall be made via the IRS Clearing System.
Article 36-2. Notification of Increase of Required Initial Margin for Customer under
Agreement between Clearing Broker and Customer
1

The notification to be prescribed by JSCC as set forth in Article 65-2 of the Business
Rules and any notification of a revision to the notified contents shall be given by asubmission of the written form prescribed by JSCC to JSCC. In this case, the Clearing
Participant intending to give such notification shall have agreed with its Customer subject
to such notification on the contents of such notification in advance.

2

When lifting the increase of the Required Initial Margin under Article 65-2 of the Business
Rules, the notification shall be given by a submission of the written form prescribed by
JSCC to JSCC. In this case, the Clearing Participant intending to give such notification
shall have agreed with its Customer subject to such notification on the contents of such
notification in advance.

3

The manner of an increase of the Required Initial Margin to be prescribed by JSCC as
set forth in Article 65-2 of the Business Rules shall be the manner of adding the amountobtained by multiplying the rate of increase notified by the Clearing Broker in the
notification of Paragraph 1 by the Required Initial Margin for the Customer subject tosuch notification to the Required Initial Margin.

4

The amount added to the Required Initial Margin pursuant to the provisions of Paragraph3 shall be aggregated with the Additional Required Initial Margin after the aggregation
pursuant to the provisions of Article 25.

Article 37. Return of Initial Margin at Termination of Clearing Brokerage Contract
1 Under Article 76.3 of the Business Rules, a Customer may claim the return of Initial Marginwhen all the Clearing Brokerage Contracts were terminated in accordance with the47

Clearing Brokerage Agreement, except for the case where JSCC declared the Default of
the Clearing Broker with whom such Customer has executed the Clearing Brokerage
Agreement.
2 In the case of Paragraph 1, JSCC shall deliver the entire amount of Initial Margindeposited by the Customer to its Clearing Broker.
3 A Clearing Broker shall apply Initial Margin in the form of Cash delivered by JSCC
pursuant to Paragraph 2 remaining after deduction of costs required for conversion toanother currency, and the amount of Cash equal to the market value used in thecalculation of the appraisal value of Initial Margin in the form of Eligible Securities
Collateral delivered by JSCC pursuant to Paragraph 2 or its liquidation proceeds
remaining after deduction of cost of the liquidation, to a performance of the outstanding
obligations of the Customer to that Clearing Broker in connection with the Clearing
Brokerage Contracts (including the outstanding obligations arising out of the terminationof the Clearing Brokerage Contracts) and obligations of the Customer owed to theClearing Broker in connection with the Cross Margined JGB Futures Cleared Contracts
and Cross Margined Interest Rate Futures Cleared Contracts recorded on the Customer
Account in accordance with the Clearing Brokerage Agreement, and return the remaining
amount to the Customer.
Article 38. Required Amount of Variation Margin
1 The required amount of Variation Margin under Article 78.1 of the Business Rules and therequired amount of Variation Margin for Customer’s Cleared Contracts of which are
Cleared Contracts (Collateral Type) under Article 78.2 shall be, according to below-listed
denomination currency of Cleared Contract (Collateral Type), determined in the following
method:(1) JPY Cleared Contracts:
a. Obtain the Net Present Value in respect of the JPY Cleared Contracts which are
Cleared Contracts (Collateral Type) as of 4:00 p.m. on the JSCC Business Day
immediately preceding the date of calculation. In this calculation, the Clearing Yield
Curve at 3:02 p.m. on the same JSCC Business Day shall be used;b. Obtain the Net Present Value in respect of the JPY Cleared Contracts which are
Cleared Contracts (Collateral Type) as of 4:00 p.m. on the date of calculation. In
this calculation, the Clearing Yield Curve at 3:02 p.m. on the date of calculation shallbe used.
c. Then, the difference between the value obtained in a. above and the value obtainedin b. above shall be the required amount of Variation Margin.
Any reference to “as of 4:00 p.m.” in this item and Article 38-2 shall be the reference to “as48

of the time of the confirmation,” when JSCC confirmed a satisfaction of VM-as-Settlement
Requirements pursuant to the provisions of Article 51-2.2 of the Business rules, “as thetime of the confirmation,” when JSCC confirmed a satisfaction of Per Trade Compression
Conditions pursuant to the provisions of Article 53.2 of the Business Rules, “as of the timeof the confirmation,” when JSCC confirmed a satisfaction of Blended Rates Compression
Conditions pursuant to the provisions of Article 53-2.2 of the Business Rules, “as of thetime of the confirmation,” when JSCC confirmed a satisfaction of Member-InitiatedCompression Conditions pursuant to the provisions of Article 53-2-3.2 of the Business
Rules, “as of the time of the confirmation,” when JSCC confirmed a satisfaction of JSCCInitiated Compression Conditions pursuant to the provisions of Article 53-2-4.4 of theBusiness Rules, and “as of the time of the acceptance,” when accepting an application for
Position Transfer or transfer from a Clearing Participant in accordance with the provisionsof Article 53-4.1, Article 58-3.1, Article 58-5.1 or Article 58-7.1 of the Business Rules.
(2) AUD Cleared Contracts:
The calculation method described in Item (1) above shall apply, except that “on the
JSCC Business Day immediately preceding the date of calculation” in a. above shallbe “the day which is JSCC Business Day and Sydney Business Day immediately
preceding the date of calculation,” and any reference to “JPY Cleared Contracts” shallbe “AUD Cleared Contracts”;(3) USD Cleared Contracts:
The calculation method described in Item (1) above shall apply, except that “on the
JSCC Business Day immediately preceding the date of calculation” in a. above shallbe “the day which is JSCC Business Day and New York Business Day immediately
preceding the date of calculation,” and any reference to “JPY Cleared Contracts” shallbe “USD Cleared Contracts”;(4) EUR Cleared Contracts:
The calculation method described in Item (1) above shall apply, except that “on the
JSCC Business Day immediately preceding the date of calculation” in a. above shallbe “the day which is JSCC Business Day and TARGET Settlement Day immediately
preceding the date of calculation,” any reference to “Clearing Yield Curve at 3:02 p.m.”shall be “Clearing Yield Curve as of 11:02 a.m.” and any reference to “JPY Cleared
Contracts” shall be “EUR Cleared Contracts”;
2 In the calculation of the Net Present Value of JPY Cleared Contract which are Cleared
Contracts (Collateral Type) under Paragraph 1.(1), if the calculation is made as of the
JSCC Business Day immediately preceding the date of settlement of the Fixed Amount or
the Floating Amount, the Fixed Amount or the Floating Amount to be received shall be
deducted, and the Fixed Amount or the Floating Amount to be paid shall be added, in thecalculation of the Net Present Value.

49

3 The provisions of Paragraph 2 shall apply to the calculation of the Net Present Value of
Foreign Currency Cleared Contracts (Collateral Type) set forth in Paragraph 1.(2) through1.(4), except that any reference to “JPY Cleared Contract” shall be “Foreign Currency
Cleared Contract” and “if the calculation is made as of the JSCC Business Day
immediately preceding the date of settlement of the Fixed Amount or the Floating Amount”
shall be “if the date of settlement of the Fixed Amount or Floating Amount is a Business
Holiday and Foreign Currency Home Business Day, and if the calculation is made as of
the JSCC Business Day immediately preceding the date of settlement of the Fixed Amountor the Floating Amount.”
Article 38-2. Required Amount of Mark-to-Market Difference
1 The required amount of Mark-to-Market Difference under Article 78-2 of the Business
Rules and the required amount of Mark-to-Market Difference for Customer’s Cleared
Contracts of which are Cleared Contracts (Settlement Type) shall be according to the
below-listed denomination currency of Cleared Contract (Settlement Type) determined in
the following method:(1) JPY Cleared Contracts:
Obtain the amount equivalent to the Net Present Value in respect of the JPY Cleared
Contracts which are Cleared contracts (Settlement Type) as of 4:00 p.m. on the dateof calculation. In this calculation, the Clearing Yield Curve at 3:02 p.m. on the date ofcalculation shall be used and the amount obtained shall be the required amount ofMark-to-Market Difference.
(2) AUD Cleared Contracts:
The calculation method described in Item (1) above shall apply, except that “JPY
Cleared Contracts” shall be replaced with “AUD Cleared Contracts”;(3) USD Cleared Contracts:
The calculation method prescribed in Item (1) above shall apply, except that “JPY
Cleared Contracts” shall be replaced with “USD Cleared Contracts”;(4) EUR Cleared Contracts:
The calculation method prescribed in Item (1) above shall apply, except that “Clearing
Yield Curve at 3:02 p.m.” shall be replaced with “Clearing Yield Curve at 11:02 a.m.”and “JPY Cleared Contracts” shall be replaced with “EUR Cleared Contracts”
respectively;
2 The provisions of Article 38.2 shall apply mutatis mutandis to the calculation of the Net
Present Value related to JPY Cleared Contracts which are Cleared Contracts (SettlementType) prescribed in Paragraph 1 (1) above. In this case, “Cleared Contracts (CollateralType)” shall be replaced with “Cleared Contracts (Settlement Type).”50

3 The provisions of Article 38.3 shall apply mutatis mutandis to the calculation of the Net
Present Value related to Foreign Currency Cleared Contracts which are Cleared
Contracts (Settlement Type) prescribed in Paragraph 1 (2) to (4) above. In this case,“Cleared Contracts (Collateral Type)” shall be replaced with “Cleared Contracts(Settlement Type).”
Article 39. Deleted
Article 40. Clearing Yield Curve Determination Method
1 The data prescribed under Article 79 of the Business Rules shall be the data as specifiedin each of below items:(1) Quotes related to IRS Transaction, provided by the information provider of IRS
Transaction quotes, specified by JSCC in a notification.
(2) Fixed Rate for Cleared Contract and other matters specified by JSCC in a notification.
2 The Clearing Yield Curve specified under Article 79 of the Business Rules shall be
determined by the method specified by JSCC in a notification based on the data set forthin the preceding paragraph.
Article 41. Deleted
Article 42. Calculation of Interest on Variation Margin etc.
1 The rate to be prescribed under Article 83.1 of the Business Rules (“Base Rate”) shallbe, according to the currency of denomination of the Cleared Contracts (Collateral Type),interest rate described below:(1) JPY Cleared Contracts:
The weighted average of the overnight unsecured call rate published by the Bankof Japan;(2) AUD Cleared Contracts:
Australian Overnight Index Average published by the Reserve Bank of Australia;(3) USD Cleared Contracts:
Federal Funds Rate published by the US Federal Reserve Bank; and(4) EUR Cleared Contracts:
Euro Overnight Index Average published by the European Central Bank.
2 Interest on Variation Margin under Article 83.1 of the Business Rules shall be the sum of
the amount obtained, according to the currency of denomination of Cleared Contracts(Collateral Type), using the following formula:51

(1) JPY Cleared Contracts
Variation Margin for JPY Cleared Contracts deposited with JSCC or each Clearing
Participant on the JSCC Business Day immediately preceding calculation date ×Base Rate × number of days from the JSCC Business Day immediately preceding
calculation date to calculation date/365(2) AUD Cleared Contracts:
Variation Margin for AUD Cleared Contracts deposited with JSCC or each Clearing
Participant on calculation date × Base Rate × number of days from the JSCC
Business Day and Sydney Business Day immediately preceding calculation date tocalculation date/365;(3) USD Cleared Contracts:
Variation Margin for USD Cleared Contracts deposited with JSCC or each Clearing
Participant on calculation date × Base Rate × number of days from the JSCC
Business Day and New York Business Day immediately preceding calculation dateto calculation date/360(4) EUR Cleared Contracts:
Variation Margin for EUR Cleared Contracts deposited with JSCC or each Clearing
Participant on calculation date × Base Rate × number of days from the JSCC
Business Day and TARGET Settlement Day immediately preceding calculation dateto calculation date/360
3 Adjustment Amount related to Mark-to-Market Difference under Article 83-2.1 of theBusiness Rules shall be the sum of the amount obtained, according to the currency ofdenomination of Cleared Contracts (Settlement Type), using the following formula:(1) JPY Cleared Contracts:
The provisions in Paragraph 2 (1) above shall apply mutatis mutandis. In this case,“Variation Margin for JPY Cleared Contracts deposited” shall be replaced with“Mark-to-Market Difference for JPY Cleared Contracts paid”(2) AUD Cleared Contracts:
The provisions in Paragraph 2 (2) above shall apply mutatis mutandis. In this case,“Variation Margin for AUD Cleared Contracts deposited” shall be replaced with“Mark-to-Market Difference for AUD Cleared Contracts paid”(3) USD Cleared Contracts:
The provisions in Paragraph 2 (3) above shall apply mutatis mutandis. In this case,“Variation Margin for USD Cleared Contracts deposited” shall be replaced with“Mark-to-Market Difference for USD Cleared Contracts paid”
52

(4) EUR Cleared Contracts:
The provisions in Paragraph 2 (4) above shall apply mutatis mutandis. In this case,“Variation Margin for EUR Cleared Contracts deposited” shall be replaced with“Mark-to-Market Difference for EUR Cleared Contracts paid”
Chapter 5-2 Cross Margining (Article 42-2 – 42-9)
Article 42-2. Notification of Using Cross Margining
1 A notification to JSCC under Article 84-2.1 of the Business Rules shall be given by asubmission to JSCC of a notification form prescribed by JSCC stating the below-listed
details of each person specified below. The Clearing Participant intends to submit the
notification must have agreed with the persons listed in Items (2), (3) and (4) to theutilization of Cross Margining by the person listed in Item (3):(1) Clearing Participant
a. Trading name or company name (including the trading name or company namein English);b. Address of its headquarters or principal office; andc. Name of the representative.
(2) JGB Futures Clearing Participant which will be Cross Margining Requestor:
Matters listed in Item (1).a. through c.;(3)

Person to be a Cross Margining User
Matters listed in Item (1).a. through c.; and(4)

JGB Futures Non-Clearing Participant to whom the person to become Cross
Margining User requests brokerage of JGB Futures Contracts or Interest Rate
Futures Contracts:
Matters listed in Item (1).a. through c.
However, matters listed under Item (4) need not be notified unless the person to become
Cross Margining User falls on the criteria set forth in Article 2.1.(13)-9.d. of the Business
Rules.
2 When a Clearing Participant is not affiliated to the JGB Futures Clearing Participant which
will become the Cross Margining Requestor and the Customer is not the JGB Futures
Clearing Participant, the Clearing Participant may not submit a notification under this
Article 42-2 in respect of such Customer ,as a person to be a Cross Margining User
described in Paragraph 1.(3).
3 A Clearing Participant may not submit a notification under this Article 42-2 in respect ofany person who has already been a Cross Margining User, as a person to be a Cross
53

Margining User described in Paragraph 1.(3).
4 The documents considered necessary by JSCC shall be attached to the notification set
forth in Paragraph 1.
Article 42-3. Change in Notified Matters for Use of Cross Margining
A notification to be given to JSCC under Article 84-2.2 of the Business Rules shall begiven by a submission of the notification form prescribed by JSCC together with the
documents considered necessary by JSCC. When changing any of the persons listed
in below items related to a Cross Margining User through such notification, the Clearing
Participant submitting the notification form must have agreed with the person who will fallon below-listed items after change and the relevant Cross Margining User to the use of
the Cross Margining by such Cross Margining User.
(1) Cross Margining Requestor; or(2) JGB Futures Non-Clearing Participant to which the Cross Margining User
requests brokerage of JGB Futures Contracts or Interest Rate Futures Contracts.
Article 42-4. Notification of Discontinuance of Using Cross Margining
A notification to be given to JSCC under Article 84-3 of the Business Rules shall be given
by a submission of the notification form prescribed by JSCC stating below-listed mattersconcerning the Cross Margining User intending to discontinue use of Cross Margining andpersons listed in Article 42-3 for such Cross Margining User, together with the documents
considered necessary by JSCC.
(1) Trading name or company name (including the trading name or company namein English);(2) Address of its headquarters or principal office; and(3) Name of the representative.
Article 42-5. Notification Method for Cross Margining Acceptance
A notification of the details of Cross Margining Request under Article 84-4.1 of theBusiness Rules and a notification of an acceptance or rejection of such request from a
Clearing Participant to JSCC under Article 84-4.2 of the Business Rules shall be given via
IRS Clearing System.
Article 42-6. Conditions of Accepting Cross Margining
1 The conditions to be prescribed by JSCC under Article 84-4.1 of the Business Rules shallbe JSCC’s confirmation in respect of the Clearing Participant which is the Cross Margining
User for the relevant Cross Margining Request to the effect that the amount equivalent toRequired Initial Margin for Proprietary Cleared Contracts as of the time of the request
calculated in the same manner set forth in Appendix 2.1.(1) on an assumption of covering
Positions in JGB Futures Contracts and Positions in Interest Rate Futures Contracts
subject to the relevant Cross Margining Request under Cross Margining is less than theamount equivalent to the Required Initial Margin for the Proprietary Cleared Contracts as54

of the time of the request calculated in the same manner set forth in Appendix 2.1.(1)without regard to the said Positions. For the calculation of the amount equivalent to Initial
Margin above, if sudden change in market environment occurs or otherwise JSCC deems
necessary from viewpoint of ensuring proper execution of its IRS Clearing Business, suchamount may be changed temporarily.
2 The provisions of Paragraph 1 shall apply to the case where a Customer is a Cross
Margining User, except that any reference to “Clearing Participant” shall be “Customer,”any reference to “Appendix 2.1.(1)” shall be “Appendix 2.1.(2)” and any reference to“Proprietary Cleared Contract(s)” shall be “Customer’s Cleared Contract(s).”Article 42-7. Recording Positions in JGB Futures Contracts and Interest Rate Futures
Contracts on Clearing Participant Account
1 The conditions to be prescribed by JSCC under Article 84-4.3 of the Business Rules
shall be JSCC’s confirmation in respect of the Clearing Participant which is the Cross
Margining User for the relevant Cross Margining Request of either of the following:(1)

On the date of acceptance of the cross margining (referred to as “Cross Margining
Acceptance Date” in this Article and Article 42-8), the Clearing Participant has
deposited with JSCC Cash or Eligible Securities Collateral in the amount at least
equal to the Required Initial Margin calculated for the Proprietary Account of therelevant Clearing Participant plus or minus, as applicable, the required amount of
Variation Margin, (or, for Variation Margin for Foreign Currency Cleared Contracts,
JPY amount obtained by conversion of such required amount of Variation Margin
into Japanese yen by using foreign exchange rate prescribed by JSCC through apublic notice) and the required amount of Mark-to-Market Difference (or, for Markto-Market Difference for Foreign Currency Cleared Contracts, JPY amountobtained by conversion of such required amount of Mark-to-Market Difference into
Japanese yen by using foreign exchange rate prescribed by JSCC through apublic notice), plus the sum of the amount calculated by converting the Unpaid
Amount for the relevant Clearing Participant into Japanese yen pursuant to theprovisions of Article 43-3.1 and the amount calculated by converting the
Settlement Amount related to the Foreign Currency Cleared Contracts recordedon the Proprietary Account for which the Payment Date is the relevant Cross
Margining Acceptance Date into Japanese yen using foreign exchange rateprescribed by JSCC through a public notice; or(2)

On the next JSCC Business Day following the Cross Margining Acceptance Date,
the Clearing Participant has satisfied the Clearing Requirements set forth in Article
49 of the Business Rules applicable had it applied for Clearing to JSCC pursuant
to the provisions of Article 48 of the Business Rules.

2 The provisions of Paragraph 1 shall apply when the Cross Margining User is a Customer,55

except that “the Proprietary Account established for the relevant Clearing Participant” in
Item (1) shall be “the Customer Account established for the Customer who is a Cross
Margining User for which the Clearing Participant acts as Clearing Broker,” any reference
to “deposit” in Item (1) shall be “deposit or delivery,” and “had it applied for Clearing to
JSCC” in Item (2) shall be “had it applied for Clearing to JSCC at a request of the
Customer.”
Article 42-8. Deletion of Positions of Cross Margined JGB Futures Cleared Contracts andPositions of Cross Margined Interest Rate Futures Cleared Contracts from Clearing
Participant Account
1 The deletion of record on a Clearing Participant Account under Article 84-4.4 of theBusiness Rules shall be made if and when JSCC confirms satisfaction of any one of thefollowing conditions:(1) Conditions set forth in Article 42-7.1.(1) (including such provision as being applied
pursuant to the provisions of Article 48-7.2) on the next JSCC Business Day
following the Cross Margining Acceptance Date;(2)

Conditions set forth in Article 42-7.1.(1) (including such provision as being applied
pursuant to the provisions of Article 48-7.2) on the second JSCC Business Day
following the Cross Margining Acceptance Date; or(3)Conditions set forth in Article 42-7.1.(2) (including such provision as being applied
pursuant to the provisions of Article 48-7.2) on the second JSCC Business Day
following the Cross Margining Acceptance Date.

2. Notwithstanding the provisions of Paragraph 1, when a new Cross Margining Request has
been submitted and accepted on the next JSCC Business Day following the Cross
Margining Acceptance Date, the record shall be deleted upon confirmation by JSCC ofthe conditions set forth in Article 42-7.
Article 42-9. Details of Claims and Obligations to Come into EffectDetails of the claims and obligations which come into effect pursuant to the provisions ofArticle 84-5.1 of the Business Rules shall be, according to the type of the claims andobligations, as set forth below:(1)

Claims and obligations owed by Clearing Participant to JSCC:
The claims with the identical terms and conditions as the claims that cease to exist
pursuant to the provisions of Article 73-15-4 of the Securities and Similar
Contracts Business Rules which the Cross Margining Requestor had against
JSCC, and the obligations with the identical terms and conditions as theobligations that cease to exist pursuant to the provisions of Article 78-18.1 of the
Securities and Similar Contracts Business Rules which the Cross Margining
Requestor owed to JSCC;
56

(2)

Claims and obligations owed by JSCC to Clearing Participant:
The claims with the identical terms and conditions as the claims that cease to exist
pursuant to the provisions of Article 73-15-4 of the Securities and Similar
Contracts Business Rules which JSCC had against the Cross Margining
Requestor, and the obligations with the identical terms and conditions as theobligations that cease to exist pursuant to the provisions of Article 78-18.1 of the
Securities and Similar Contracts Business Rules which JSCC owed to the Cross
Margining Requestor.
Chapter 5-3 Customer Buffer Framework(Article 42-10 – 42-11)

Article 42-10. Notification of Customer Buffer Utilization
The manner to be prescribed by JSCC as set forth in Articles 84-6.1 thru 84-6.4 of theBusiness Rules shall be the utilization of the IRS clearing system.
Article 42-11. Utilization of Customer Buffer
1 An allocation of the Customer Buffer to a Customer Account as set forth in Article 84-7.1of the Business Rules shall be made in the order of JSCC’s receipt of the notification ofrequest for brokerage of clearing as set forth in Article 54.1 of the Business Rules,
including the case where such provisions apply mutatis mutandis under Article 54-2.1 of
the Business Rules.
2

The order of an allocation of the Customer Buffer to Customer Accounts set forth in
Article 84-7.2 of the Business Rules shall be from the Customer Account with the smallest
Intraday Margin Shortfall under Article 84-7.2.

3 The timing to be prescribed under Article 84-7.3 of the Business Rules shall be at thetime of calculation of Intraday Margin and just before 5:30 p.m.
4 The amount to be prescribed as the amount equivalent to Margin Required to Clear
under Article 84-7.3 of the Business Rules shall be the amount equivalent to Margin
Required to Clear as of 5:30 p.m. with respect to Cleared Contracts on each Customer
Account just before 5:30 p.m. on the date of calculation.
5 The timing to be prescribed by JSCC as set forth in Article 84-7.4 of the Business Rules
shall be just before 7:00 p.m.

57

Chapter 6 Cash Settlement (Article 43 – 43-2)
Article 43. Method of Settlement of Moneys in Japanese Yen
1 The payments and receipts of Cash amounts specified under Article 85.1 of the Business
Rules shall be the payments and receipts of the following:(1) Variation Margin for JPY Cleared Contracts which are Cleared Contracts(Collateral Type);(1)-2 Mark-to-Market Difference for JPY Cleared Contracts which are Cleared Contracts(Settlement Type);(2) Interests on Variation Margin for JPY Cleared Contracts which are Cleared
Contracts (Collateral Type);(2)-2 Adjustment Amount related to Mark-to-Market Difference for JPY Cleared
Contracts which are Cleared Contracts (Settlement Type);(3) Upfront Fee for JPY Cleared Contracts;(4) The Fourth Tier Special Clearing Charge Collateral deposited in Japanese yen
pursuant to Article 24.(1) of the Rules on Default Settlement Regarding Clearing
Participants in relation to IRS Clearing Business;(5) The Fixed Amount for JPY Cleared Contracts;(6) The Floating Amount for JPY Cleared Contracts;(7) The amount to be paid upon Position Transfer set forth in Article 8.5.(1) of the Rules
on Default Settlement Regarding Clearing Participants in relation to IRS Clearing
Business and the accrued liabilities set forth in Article 8.5.(2) of the Rules on
Default Settlement Regarding Clearing Participants in relation to IRS Clearing
Business payable in Japanese yen and the amount equivalent to the Cross
Margining MtM Difference set forth in Aritcle 94-3.5.(4) of the Business Rules;(8) The Successful Bid Amount set forth in Article 14 of the Rules on Default
Settlement Regarding Clearing Participants in relation to IRS Clearing Businesspayable in Japanese yen;(9) The Early Termination Charge which becomes payable in connection with thetermination of JPY Cleared Contracts set forth in Article 97.2 of the Business Rules;(10) Unwind Fee to be settled in Japanese yen;58

(11) Cross Margining MtM Difference to be settled between JSCC and a Clearing
Participant under Article 77-2 of the Business Rules;(12) The Early Termination Charge and the amount to be paid upon Transfer in respectof JPY Cleared Contracts set forth in Articles 53-4.1, 58-3.1, 58-5.5, 58-5.7 and 587.6 of the Business Rules.
2 The manner prescribed under Article 85.1 of the Business Rules shall be account transfer
between the current account in the name of JSCC and that in the name of a Clearing
Participant each opened and maintained with the Bank of Japan using BOJ-NET.
3 A Clearing Participant may settle Cash amounts as set forth in Paragraph 1 through its
agent by submitting to JSCC the document stating the matters required by JSCC and with
JSCC’s approval, provided that such settlement shall be performed through the current
account in the name of such agent opened and maintained with the Bank of Japan.
4 The netting as set forth in Article 85.2 of the Business Rules shall be the netting between
the gross receipts and the gross payments of the Cash amounts listed in Paragraph 1 ofthis Article.
Article 43-2. Settlement of Moneys in Foreign Currency
1 The settlement of Cash set forth in Article 85-4.1 of the Business Rules shall be performed
for each classification of Cash listed in below items, by the currency of denomination of
Foreign Currency Cleared Contracts, through the bank(s) designated by JSCC in a notice(referred to as “Designated Bank(s)” in this Article and Article 43-3), in the method
described below:(1) Below Cash shall be settled within Japan through an account in the name of JSCC
established at the Designated Bank:a. Variation Margin for Foreign Currency Cleared Contracts which are Cleared
Contracts (Collateral Type);
a-2. Mark-to-Market Difference for Foreign Currency Cleared Contracts which are
Cleared Contracts (Settlement Type);b. Interests on Variation Margin for Foreign Currency Cleared Contracts which
are Cleared Contracts (Collateral Type);b-2. Adjustment Amount related to Mark-to-Market Difference for Foreign Clearedc.

d.

Contracts which are Cleared Contracts (Settlement Type);
The Fourth Tier Special Clearing Charge Collateral deposited in currency
other than Japanese yen Cash pursuant to Article 24.(1) of the Rules on
Default Settlement Regarding Clearing Participants in relation to IRS Clearing
Business;
The amount to be paid upon Position Transfer set forth in Article 8.4.(1) of theRules on Default Settlement Regarding Clearing Participants in relation to
59

e.
f.
g.
h.

(2)

IRS Clearing Business and the accrued liabilities set forth in Article 8.4.(2) of
the Rules on Default Settlement Regarding Clearing Participants in relationto IRS Clearing Business payable in currency other than Japanese yen;
The Successful Bid Amount set forth in Article 14 of the Rules on Default
Settlement Regarding Clearing Participants in relation to IRS Clearing
Business payable in currency other than Japanese yen;
The Early Termination Charge which becomes payable in connection with thetermination of Foreign Currency Cleared Contracts set forth in Article 97.2 of
the Business Rules;
Unwind Fee to be settled in currency other than Japanese yen; andThe Early Termination Charge and the amount to be paid upon Transfer set
forth in Articles 53-4.1, 58-3.1, 58-5.5, 58-5.7 and 58-7.6 of the Business
Rules, other than those related to JPY Cleared Contracts.

Below Cash shall be settled in the city of settlement for Foreign Currency Cleared
Contracts through the account in the name of JSCC established at the DesignatedBank:a. Upfront Fee for Foreign Currency Cleared Contracts;
b. The Fixed Amount for Foreign Currency Cleared Contracts; andc. The Floating Amount for Foreign Currency Cleared Contracts;

2 The city of settlement for Foreign Currency Cleared Contracts set forth in Paragraph 1.(2)shall be, according to the below-listed type of the Foreign Currency Cleared Contracts,
the following city:(1)
AUD Cleared Contracts: Sydney(2)
USD Cleared Contracts: New York(3)
EUR Cleared Contracts: London
3 A Clearing Participant shall notify JSCC the Designated Bank for the settlement of Cashset forth in Paragraph 1 by a submission, in advance, of the notification form prescribedby JSCC.
4 When a Clearing Participant intends to change matters notified pursuant to the provisionsof Paragraph 2, it shall notify JSCC of such change by a submission, in advance, of thenotification form prescribed by JSCC.
5 The netting as set forth in Article 85-4.2 of the Business Rules shall be the netting between
the gross receipts and the gross payments of the Cash amounts listed in Paragraph 1 ofthis Article.
Article 43-3. Handling of Fund Settlement Failure for Foreign Currency Cleared Contracts
1 Additional charge of Required Initial Margin under Article 85-5.2 of the Business Rules
shall be charged by adding, by each of the Proprietary Account and each Customer60

Account on which Foreign Currency Cleared Contracts causing settlement failure arerecorded, the Japanese yen equivalent of the Unpaid Amount converted into Japanese
yen by using the foreign exchange rate prescribed by JSCC through public notice toRequired Initial Margin for the relevant Proprietary Account or Customer Account.
2 After charging additions to Required Initial Margin pursuant to Paragraph 1, if JSCC
confirms a completion of a deposit or payment of the Unpaid Amount by the Clearing
Participant Failing Settlement to JSCC, JSCC will deduct the amount equal to theadditional amount so charged in respect of the Required Initial Margin for the Proprietary
Account or Customer Account pursuant to the provisions of Paragraph 1 from theRequired Initial Margin for the relevant Proprietary Account or Customer Account.
3 Provisions of Paragraphs 1 and 2 shall apply mutatis mutandis to the required amount ofIntraday Margin.
4 The Clearing Participant Failing Settlement shall pay delay penalty to JSCC calculated in
the manner prescribed by JSCC in a public notice according to the Unpaid Amount;provided that the payment of delay penalty may not be required at JSCC’s discretion due
to an unavoidable cause, such as system failure of the Designated Bank.
Chapter 7 Clearing Deposit (Article 44 - 44-3)
Article 44. Management of Clearing Deposit
1 The manner to be prescribed under Article 87.1 of the Business Rules shall be, depending
upon the asset class of the Clearing Deposit (excluding Initial Margin deposited by
Customers), as follows:(1) Cash
To keep it by separating from JSCC’s proprietary assets, assets undermanagement of JSCC for other clearing business and Initial Margin of Customers
in either of the following forms of custody:a.
Deposit in bank settlement accounts opened in the name of JSCC by typeof the Clearing Deposit; orb.

In money trust to a bank which engages in trust business,and to manage it on the accounting book by Clearing Participant and by type of the
Clearing Deposit. As used herein, the types of Clearing Deposit are IRS Clearing
Fund, Initial Margin, the Third Tier Special Clearing Charge Collateral and Default
Contingent Margin.
(2) Japanese Government Bonds
61

To keep it by separating from JSCC’s proprietary assets in either of the following
forms of custody:a.
Record in a segregated account opened and maintained in the name of
JSCC with the Bank of Japan under the JGB book-entry system operated by the
Bank of Japan; orb.

In trust to a bank which engages in trust business,and to manage it on the accounting book by Clearing Participant and by type of the
Clearing Deposit.
(3) US Treasuries
To keep it by separating from JSCC’s proprietary assets, assets undermanagement of JSCC for other clearing business and Initial Margin of Customers
in either of the following forms of custody:a.
Record in an account opened in the name of JSCC with a bank located in
the City of New York, the State of New York, the United States of America; orb.

In trust to a bank which engages in trust business,and to manage it on the accounting book by Clearing Participant and by type of the
Clearing Deposit.
2 The manner of segregation of Initial Margin of Customers other than those set forth inParagraph 6 below to be prescribed under Article 87.1 of the Business Rules shall be,depending upon the asset class of Initial Margin of Customers, as follows:(1) Cash
To keep it by separating from JSCC’s proprietary assets, assets undermanagement of JSCC for other clearing business and Clearing Deposits depositedby Clearing Participants in either of the following forms of custody:a.

Deposit in a bank settlement account opened in the name of JSCC; orb.

In money trust to a bank which engages in trust business,and to manage it on the accounting book by Customer.
(2) Japanese Government Bonds
To keep it by separating from JSCC’s proprietary assets in either of the following
forms of custody:
62

a.
Record in a segregated account opened and maintained in the name of
JSCC with the Bank of Japan under the JGB book-entry system operated by the
Bank of Japan; orb.

In trust to a bank which operates trust business,and to manage it on the accounting book by Customer.
(3) US Treasuries
To keep it by separating from JSCC’s proprietary assets, assets undermanagement of JSCC for other clearing business and Clearing Deposits depositedby Clearing Participants in either of the following forms of custody:a.
Record in an account opened in the name of JSCC with a bank located in
the City of New York, the State of New York, the United States of America; orb.

In trust to a bank which engages in trust business,and to manage it on the accounting book by Customer.
3 Notwithstanding the provisions of Paragraphs 1 and 2 above, if a notification of such
effect is received from a Clearing Participant or a Customer, the manner to beprescribed by JSCC under Article 87.1 of the Business Rules related to Cash depositedby the Clearing Participant or the Customer as IRS Clearing Fund, Initial Margin and
Default Contingent Margin shall be the manner to keep it by separating from JSCC’s
proprietary assets and assets under management of JSCC for other clearing
businesses in the form of custody of a deposit in the current account opened in thename of JSCC at the Bank of Japan, which is designated by JSCC, and to manage it on
the accounting book for each Clearing Participant or Customer and by the type ofClearing Deposit; provided, however, that the amount of Cash to be held in the manner
set forth in this Paragraph shall not be more than the cap prescribed by JSCC in a
notification or a public notice, and the portion of such Cash exceeding the cap, if any,
shall be held in the manner set forth in Paragraph 1.(1).b or Paragraph 2.(1).b. by
separating it according to the classification set forth in Paragraphs 1 and 2, and to
manage it on the accounting book kept separately for each Clearing Participant or
Customer and by the type of Clearing Deposit.
4 The provisions of Paragraph 3 above shall not apply in the case where the current
account JSCC may designate does not exist.
5 The notification to be submitted by a Clearing Participant or a Customer as set forth inParagraph 3 and any withdrawal thereof shall be made in advance in a manner63

prescribed by JSCC in a notification or a public notice.
6 The manner of segregation of Initial Margin of a Customer who has concluded theClearing Brokerage Agreement with a Clearing Participant who is the Futures
Commission Merchant (“FCM”) as set forth in U.S. Commodity Exchange Act (“FCM
Clearing Participant”) to be prescribed under Article 87.1 of the Business Rules shall beto keep it, by separating from JSCC’s proprietary assets, assets under management of
JSCC for other clearing business, Clearing Deposits deposited by Clearing Participantsand Initial Margin deposited by Customers referred to in Paragraph 2 above, under
CFTC Regulation 1.49, in trust to a bank engaging in trust business, and to manage it
maintaining records by each Customer.
Article 44-2. Clearing Deposit Management
1 The management carried out by JSCC as set forth in Article 87.2 of the Business Rulesin respect of IRS Clearing Fund, Initial Margin and Default Contingent Margin depositedin Cash by Clearing Participants and Customers with JSCC which is undermanagement pursuant to Article 44.1.(1).b. and Article 44.2.(1).b. will be carried out via
any of the following mechanisms:(1) Secured call loan to financial institutions;(2) Loan to the bank engaging in trust business which has accepted trust of IRS
Clearing Fund, Initial Margin and Default Contingent Margin;(3) Ordinary deposit with the bank engaging in trust business which has accepted
trust of IRS Clearing Fund, Initial Margin and Default Contingent Margin;(4) Time deposit with the bank engaging in trust business which has accepted trust of
IRS Clearing Fund, Initial Margin and Default Contingent Margin;(5) Reverse repo transactions with financial institutions; or(6) Investment in JGBs.
2 The management carried out by JSCC as set forth in Article 87.2 of the Business Rulesin respect of Initial Margin deposited in Cash by a Customer having the Clearing
Brokerage Agreement with a FCM Clearing Participant shall be carried out through an
ordinary deposit to the bank engaging in trust business which has accepted trust of
Initial Margin of said Customer.
Article 44-3. Treatment of Profit or Loss from Management of Clearing Deposit
1 The amount of interest set forth in Article 87.4 of the Business Rules shall be
determined by prorating the remaining profit earned from the management after64

payment of the amount specified by JSCC in a public notice according to the average,over the period designated by JSCC in a public notice, of the sum of IRS Clearing
Fund, Initial Margin and Default Contingent Margin deposited in Cash by the Clearing
Participant or the Customer (other than those held in the form of a custody of a depositin the current account opened in the name of JSCC at the Bank of Japan pursuant to
the provisions of Article 44.3).
2 JSCC shall pay interest calculated according to the provisions of Paragraph 1 to
Clearing Participants and Customers. Interest payable to a Customer shall be paid to
the Clearing Broker for such Customer, which shall then pay the entire amount ofinterest received from JSCC as interest payable to the Customer to the relevant
Customer as interest calculated pursuant to the provisions of Paragraph 1.
3 A Clearing Participant’s or Customer’s share of loss set forth in Article 87.5 of theBusiness Rules shall be determined by prorating such loss according to the sum of IRS
Clearing Fund, Initial Margin and Default Contingent Margin deposited in Cash by the
Clearing Participant or the Customer (other than those held in the form of custody of adeposit in the current account opened in the name of JSCC at the Bank of Japanpursuant to the provisions of Article 44.3) as of the date and time specified by JSCC ina public notice.
4 Under Article 87.6 of the Business Rules JSCC shall prorate the Clearing Participant’sor Customer’s share of loss obtained pursuant to the provisions of Paragraph 3
according to IRS Clearing Fund, Initial Margin and Default Contingent Margin depositedin Cash by the Clearing Participant or the Customer as of the date and time set forth inParagraph 3, and apply IRS Clearing Fund, Initial Margin and Default Contingent
Margin deposited in Cash with JSCC to the payment of such loss.
Chapter 8 Miscellaneous Provisions (Article 45 - 48)
Article 45. Deleted
Article 46. Method of Notification
1 The method of notification to be prescribed under Article 125 of the Business Rules shallbe as follows:(1) Notification to all Clearing Participants when Target-JSCC Site is available:
The notification shall be given via Target-JSCC Site;(2) Notification to all Clearing Participants when Target-JSCC Site is not available:
The notification shall be given by way of sending written document or facsimiletransmission;65

(3) Notification to limited Clearing Participants:
The notification shall be given by way of sending written document or facsimiletransmission or e-mail transmission.
2 Notwithstanding the provisions of Paragraph 1, if the method of notification to Clearing
Participants is otherwise specified in a Rule, the provision of such Rule shall prevail unlesssuch method is unavailable, in which case JSCC shall make notification to the Clearing
Participants by the method set forth in Paragraph 1.(3).
3 The method of a public notice and a public announcement under Article 125 of theBusiness Rules shall be the posting on JSCC website.
Article 47. Retention of Clearing Participant Agreement
1 JSCC shall keep an copy of the signed Clearing Participant Agreement and the letter ofundertaking referred to in Article 43.2 of the Business Rules for the benefit of the Clearing
Broker which is a Financial Instruments Business Operator engaging in securities services
that are Type I financial instruments business or the Customer (referred to as the“Information Discloser/Recipient” in this Article 47) as a document evidencing that other
Clearing Participant or other Customer, which is a party to a Clearing Brokerage Original
Transaction, agreed that the Information Discloser/Recipient receive information related
to Clearing Brokerage Original Transaction from the Customer or the Clearing Broker thatis the party to the Clearing Brokerage Agreement or the provision by the Information
Discloser/Recipient of such information to the Customer or the Clearing Broker.
2 The method of retention of the above mentioned Clearing Participant Agreement and theletter of undertaking, how to deal with any inquiry from the Information Discloser/Recipient
in relation to the Clearing Participant Agreement and the letter of undertaking and othernecessary matters shall be prescribed by JSCC in a notification or a public notice.
Article 47-2. Representation regarding Registration as an FCM or Other Status
When a Clearing Participant falls under any of the following statuses, it shall submit
representation to JSCC in advance as prescribed in a public notice;(1)

where such Clearing Participant intends to be registered as an FCM orderegistered as an FCM;

(2)

where an Affiliated Customer or Unaffiliated Customer which has entered into a
Clearing Brokerage Agreement with such Clearing Participant intends to beregistered as FCM or be deregistered as an FCM, or where such Clearing
Participant intends to enter into a Clearing Brokerage Agreement with an FCM;

(3)

where such Clearing Participant will become itself a U.S. Person as set forth in theInterpretive Guidance and Policy Statement regarding Compliance with Certain66

Swap Regulations, 78 Fed. Reg. 45292 (July 26, 2013) , IV.A.4, as amended or
supplemented by the CFTC from time to time (“CFTC Interpretive Guidance”) (“U.S.
Person”), or ceases to be a U.S. Person; or(4)where an Affiliated Customer or Unaffiliated Customer which has entered into a
Clearing Brokerage Agreement with such Clearing Participant will become a U.S.
Person or ceases to be a U.S. Person, or where such Clearing Participant intends
to enter into a Clearing Brokerage Agreement with a U.S. Person.

Article 47-3. Matters to be Reported by FCM Clearing Participant
1 A FCM Clearing Participant shall provide JSCC with the report in accordance with
CFTC Regulation 22.14 (c)(2).
2 When FCM Clearing Participant submitted a report to CFTC in accordance with CFTC
Regulations Part 17 and Part 20, it shall submit a copy of the same to JSCC.
Article 47-4. Reporting Terms and Conditions of Cleared Contracts
1 JSCC shall report the terms, conditions and other data required for its compliance withthe laws, regulations of the relevant foreign countries and orders, notifications of, or othermeans of exercise of the administrative authorities by, the relevant Foreign Government
and the like, or agreements with the relevant Foreign Government and the like, which
JSCC prescribes in the public notice, to the Foreign Government and the like designatedby JSCC in the public notice or entities engaging in a type of business operations similar
to the trade data depository business designated by the relevant Foreign Government
and the like. For the purpose of this paragraph, “Foreign Government and the like”
means governments, government agencies, local governments and central banks fromwhich JSCC received registration, authorization, designation or other license, or
exemption therefrom for its performance of the IRS Clearing service.
2 Clearing Participants shall not file reports related to Cleared Contracts under CFTC
Regulation Part45 to Swap Data Repository (as such term defined in Commodity
Exchange Act Section 1a (48)) (hereinafter referred to as “SDR”).
3 Clearing Brokers shall make efforts to prevent its Customers from filing reports set forthin Paragraph 4 above related to Cleared Contracts subject to Brokerage (as such term
defined in Article 2.(1) of Exhibit Form 3 “Interest Rate Swap Clearing Brokerage
Agreement” or Article 2. (1) of Exhibit Form 3-2 “Interest Rate Swap Clearing Brokerage
Agreement”) to SDR.
Article 47-5. Submission of Documents to the U.S. Commodity Futures Trading
Commission
When JSCC is required by the U.S. Commodity Futures Trading Commission (“CFTC”) to
submit documents concerning financial calculations and documents concerning risk
67management in respect of any particular Clearing Participant, JSCC shall submit to CFTC
the documents submitted by the Clearing Participant to JSCC in accordance with Article
14 and under reporting requirement in accordance with Article 20 that are relevant.
Article 48. Determination of Necessary Matters concerning IRS Clearing Business
JSCC may specify administrative procedures and other details in relation to the mattersset forth in the Rules from time to time by way of issuance of a notification or a public
notice.
Supplementary Provisions
1 These IRS Procedures shall come into force as of October 9, 2012 (hereinafter referred
to as “Date of Enforcement”). Provided, however, that the provisions of Article 3, Article
6, Article 14 and Article 15 hereof shall come into force as of August 20, 2012.
2 JSCC may take the actions listed in each item of Paragraph 3 of the supplementaryprovisions of the Business Rules which shall be done in accordance with the provisionsof the same paragraph and may take necessary procedures and perform any other acts
and things in relation to those actions even before the respective dates of enforcement
set forth in the preceding paragraph pursuant to the applicable provisions of these IRS
Procedures.
3 Notwithstanding the provisions of Article 15 of these IRS Procedures, the amount of fee
for IRS Clearing Qualification shall be JPY 0 in respect of any Applicant to which JSCC
has approved acquisition of such IRS Clearing Qualification within six (6) months of theDate of Enforcement.
4 Article 41 of these IRS Procedures shall not apply until lapse of nine (9) months from theDate of Enforcement
Supplementary Provisions
These amendments shall come into force as of December 25, 2012.
Supplementary Provisions
These amendments shall come into force as of February 25, 2013.
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 24,
Paragraph 3, Item 1, Article 24, Paragraph 6, Item 1 and Article 24, Paragraph 8, Item 2,
68all as amended, the references to “5.625%” in Article 24, Paragraph 3, Item 1, a., Article
24, Paragraph 6, Item 1, a. and Article 24, Paragraph 8, Item 2, a. shall be read as“4.375%,” and the references to “7.5%” in Article 24, Paragraph 3, Item 1, b., Article 24,
Paragraph 6, Item 1, b. and Article 24, Paragraph 8, Item 2, b. shall be read as “5.625%.”
3. During the period from March 31, 2014 to March 30, 2015, in applying Article 24,
Paragraph 3, Item 1, Article 24, Paragraph 6, Item 1 and Article 24, Paragraph 8, Item 2,
all as amended, the references to “5.625%” in Article 24, Paragraph 3, Item 1, a., Article
24, Paragraph 6, Item 1, a. and Article 24, Paragraph 8, Item 2, a. shall be read as “5%,”and the references to “7.5%” in Article 24, Paragraph 3, Item 1, b., Article 24, Paragraph
6, Item 1, b. and Article 24, Paragraph 8, Item 2, b. shall be read as “6.875%.”
Supplementary Provisions
These amendments shall come into force as of August 19, 2013.
Supplementary Provisions
These amendments shall come into force as of November 25, 2013.
Supplementary Provisions
These amendments shall come into force as of February 24, 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 July 15, 2014.
Supplementary Provisions
These amendments shall come into force as of August 25, 2014.
Supplementary Provisions
1

These amendments shall come into force as of November 4, 2014.

69

2

Notwithstanding the provisions of Paragraph 1, the provisions of Article 9.(5).c andArticle 9.(9).a., as amended, shall come into force on the date designated by JSCC.
Note: The date designated by JSCC is December 15, 2014.
Supplementary Provisions

These amendments shall come into force as of November 25, 2014.
Supplementary Provisions
These amendments shall come into force as of the date designated by JSCC.
Note: The date designated by JSCC is November 29, 2014.
Supplementary Provisions
These amendments shall come into force as of May 25, 2015.
Supplementary Provisions
These amendments shall come into force as of May 29, 2015.
Supplementary Provisions
These amendments shall come into force as of September 24, 2015.
Supplementary Provisions
1 These amendments shall come into force as of October 19, 2015 (hereinafter referred toas “Date of Enforcement”).
2 Notwithstanding the provisions of Paragraph 1, the provisions of Article 35-4-2 and Exhibit
Form 3, as amended, shall come into force as of the date prescribed by JSCC.
3 During the period from the Date of Enforcement up to the date prescribed in Paragraph
2, the main body of Article 35-4-2 shall be replaced with the following:“The claims and obligations to be designated by JSCC under Articles 53-4.3, 58-3.3 and58-5.4 of the Business Rules shall be, according to the classification specified in below
items, claims and obligations specified below which has already become due at the timeof confirmation of a deposit or delivery of Margin Required to Clear to JSCC as set forth70

in Articles 53-4.1, 58-3.1 and 58-5.1 of the Business Rules:”Supplementary Provisions
1. These amendments shall come into force as of October 26, 2015, until such time as JSCC
is registered as a Derivatives Clearing Organization under Section 5b(a) of the U.S.
Commodity Exchange Act (“DCO”).
2. Notwithstanding Paragraph 1 above, effective only on October 26, 2015, Article 47-2 as
amended shall be replaced with the following:
Article 47-2. Representation regarding Registration as an FCM or Other Status
When a Clearing Participant falls under any of the following statuses, it shall submit
representation to JSCC promptly as prescribed in a public notice;(1)

where such Clearing Participant intends to be registered as an FCM orderegistered as FCM, or is registered as an FCM;

(2)

where an Affiliated Customer or Unaffiliated Customer which has entered into a
Clearing Brokerage Agreement with such Clearing Participant intends to beregistered as an FCM or be deregistered as an FCM, or is registered as an FCM,
or where such Clearing Participant intends to enter into a Clearing Brokerage
Agreement with an FCM;

(3)

where such Clearing Participant will become itself a U.S. Person as set forth in
IV.A.1. of the Interpretive Guidance and Policy Statement regarding Compliancewith Certain Swap Regulations, 78 Fed. Reg. 45292 (July 26, 2013)1 as
amended or supplemented by the CFTC from time to time (“CFTC Interpretive
Guidance”) (“U.S. Person”), or ceases to be a U.S. Person; or(4)where an Affiliated Customer or Unaffiliated Customer which has entered into a
Clearing Brokerage Agreement with such Clearing Participant will become a U.S.
Person, is a U.S. Person, or ceases to be a U.S. Person, or where such Clearing
Participant intends to enter into a Clearing Brokerage Agreement with a U.S.
Person.

3. Notwithstanding the provisions of Paragraph 1 and other Supplemental Provisions, theprovisions of Article 44.6, Article 44-2.2 and Article 47-3 of these IRS Procedures shallnot apply until such time as JSCC is registered as a DCO.
Supplementary Provisions
These amendments shall come into force as of November 24, 2015.

71

Supplementary Provisions
1. These amendments shall come into force as of March 1, 2016.
2. Notwithstanding Paragraph 1 above, the provisions of Article 47-4.5 and Article 47-4.6 ofthese Rules, as amended, shall not apply if the Clearing Participants or Customers are
required to file reports set forth in Article 47-4.5 or Article 47-4.6, as amended, pursuant
to the provisions of U.S. Commodity Exchange Act, CFTC Regulations or other laws andordinances, or orders, publications, issued documents or other similar documents of
CFTC, or if JSCC considers that non-filing of the report pursuant to the amended
provisions is inappropriate due to circumstances beyond its control.
Supplementary Provisions
1. These amendments shall come into force as of April 11, 2016.
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 and Clearing Participants inrelation to Cleared Contracts, these amendments shall come into force as of the datedesignated by JSCC which is on or after April 11, 2016.
Supplementary Provisions
These amendments shall come into force as of May 23, 2016.
Supplementary Provisions
These amendments shall come into force as of September 30, 2016.
Supplementary Provisions
These amendments shall come into force as of October 11, 2016.
Supplementary Provisions
These amendments shall come into force as of November 28, 2016.

72

Supplementary Provisions
These amendments shall come into force as of December, 19, 2016.
Supplementary Provisions
These amendments shall come into force as of January 30, 2017.
Supplementary Provisions
These amendments shall come into force as of February 27, 2017.
Supplementary Provisions
These amendments shall come into force as of May 29, 2017.
Supplementary Provisions
These amendments shall come into force as of August 28, 2017.
Supplementary Provisions
These amendments shall come into force as of November 1, 2017.
Supplementary Provisions
These amendments shall come into force as of November 27, 2017.
Supplementary Provisions
These amendments shall come into force as of December 1, 2017.
Supplementary Provisions
These amendments shall come into force as of February 26, 2018.

73

Supplementary Provisions
These amendments shall come into force as of April 6, 2018.
Supplementary Provisions
These amendments shall come into force as of May 28, 2018.
Supplementary Provisions
These amendments shall come into force as of August 27, 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 and Clearing Participants inrelation to Cleared Contracts, these amendments shall come into force as of the datedesignated by JSCC which is on or after September 25, 2018.
Supplementary Provisions
These amendments shall come into force as of November 26, 2018.
Supplementary Provisions
These amendments shall come into force as of December 3, 2018.
Supplementary Provisions
These amendments shall come into force as of February 25, 2019.
Supplementary Provisions74

1. These amendments shall come into force as of April 1, 2019.
2. The notification from a Clearing Participant or a Customer set forth in Article 44.5 may besubmitted as prescribed in the amended rules before the effective date of theseamendments.
3. 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 and Clearing Participants inrelation to Cleared Contracts, these amendments shall come into force as of the datedesignated by JSCC which is on or after April 1, 2019.
Supplementary Provisions
These amendments shall come into force as of April 15, 2019
Supplementary Provisions
These amendments shall come into force as of May 27, 2019
Supplementary Provisions
These amendments shall come into force as of September 1, 2019.
Supplementary Provisions
These amendments shall come into force as of November 25, 2019.
Supplementary Provisions
These amendments shall come into force as of April 1, 2020.
Supplementary Provisions

75

These amendments shall come into force as of June 1, 2020.
Supplementary Provisions
These amendments shall come into force as of August 24, 2020.
Supplementary Provisions
These amendments shall come into force as of November 24, 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 and Clearing Participants inrelation to Cleared Contracts, the amendments related to Article 8, Articles 30-3 through 304-2, Article 35-4-4, Article 36-2, Article 42-10 and Article 42-11, and Article 11-2, Article 2812 and Article 28-13 of the Exhibit Form 3 and Exhibit Form 3-2 shall come into force as ofthe date designated by JSCC which is on or after May 17, 2018.
3. If, in the Clearing Brokerage Agreement between Party A and Party B that have alreadybeen concluded in the form of Exhibit Form 3 or Exhibit Form 3-2 before this amendment,
Article 54 of Exhibit Form 3 or Exhibit Form 3-2 before amendment has been deleted, Party
A and Party B shall be deemed to have agreed, as of the effective date of this amendment,that Party B will not use Application for Exchanging Market-to-Market Difference And
Adjustment Amount.
4. If, in the Clearing Brokerage Agreement between Party A and Party B that have alreadybeen concluded in the form of Exhibit Form 3 or Exhibit Form 3-2 before amendment, Article
55 of Exhibit Form 3 or Exhibit Form 3-2 before amendment has been deleted, Party A’s
consent set forth in Article 28-7.1 of such Exhibit Form shall not be deemed to have been
given as of the effective date of this amendment.

76

5. If, in the Clearing Brokerage Agreement between Party A and Party B that have alreadybeen concluded in the form of Exhibit Form 3 or Exhibit Form 3-2 before amendment, Article
57 of Exhibit Form 3 or Exhibit Form 3-2 before amendment has been deleted, Party A andParty B shall be deemed to have agreed as of the effective date of this amendment, that
Party B does not use JSCC-Initiated Compression.
Supplementary Provisions
These amendments shall come into force as of May 24, 2021.
Supplementary Provisions
These amendments shall come into force as of August 30, 2021.
Supplementary Provisions
1. These amendments shall come into force as of December 6, 2021 (hereinafter referred
to as the “Effective Date”).
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 and Clearing Participants inrelation to Cleared Contracts, these amendments shall come into force as of the datedesignated by JSCC which is on or after the Effective Date.
3. The Floating Rate Option of the Cleared Contracts existing as of the close of the businesson the JSCC Business Day immediately preceding the Effective Date that designate JPYLIBOR-BBA as their Floating Rate Option will be replaced by JPY-TONA-OIS Compound onthe

Effective Date in a manner prescribed by JSCC (hereinafter referred to as the“OneTime OIS Conversion”).
4. Notwithstanding the provisions of the preceding 3 paragraphs, if the Floating Rateapplicable to the final Calculation Period of the Cleared Contracts is fixed on or before
December 31, 2021, those Cleared Contracts that would have otherwise been subject to the
One Time OIS Conversion shall not be subject to the One Time OIS Conversion. If this is77the case, those Cleared Contracts shall be treated as if there is no amendment to Article 9.
5. Notwithstanding the provisions of Paragraphs 1 and 2 of these Supplementary Provisions,for the period up to December 30, 2021, when a clearing of an IRS Transaction that hascome into effect as a result of an exercise of a Swaption and designates JPY-LIBOR or JPYLIBOR-BBA as its Floating Rate Option is applied for, it shall be handled as if there is noamendment to Article 9. For the purpose of this paragraph and Paragraph 7 below,“Swaption” means the right to have an IRS Transaction come into existence between theparties by the right holder (referring to a party to whom the Swaption is granted) expressing
its intention to exercise such right. In this case, in applying the provisions of Article 9, thereference to “JPY-LIBOR-BBA” shall be deemed to have been replaced by “JPY-LIBOR.”
6. The Floating Rate Option of the Cleared Contracts designating JPY-LIBOR as their
Floating Rate Option that are cleared pursuant to the provisions of the preceding paragraphand existing as of the close of the business on December 30, 2021 will be replaced by JPYTONA-OIS Compound on January 4, 2022 in a manner prescribed by JSCC (hereinafterreferred to as the “One Time OIS Conversion of Swaption Resultant Transactions”).
7. For the time being after the implementation of the One Time OIS Conversion of Swaption
Resultant Transactions, when a clearing of an IRS Transaction designating JPY-LIBOR or
JPY-LIBOR-BBA as its Floating Rate Option that comes into existence as a result of an
exercise of a Swaption is applied for, JSCC deems such application as an application forclearing of an IRS Transaction after replacement of its Floating Rate Option by JPY-TONAOIS Compound in a manner prescribed by JSCC, and implement such replacement andclearing.
Supplementary Provisions
These amendments shall come into force as of February 21, 2022.
Supplementary Provisions
These amendments shall come into force as of May 23, 2022.
Supplementary Provisions
78

These amendments shall come into force as of August 22, 2022
Supplementary Provisions
These amendments shall come into force as of November 21, 2022
Supplementary Provisions
These amendments shall come into force as of February 13, 2023
Supplementary Provisions
These amendments shall come into force as of August 21, 2023
Supplementary Provision
1. These amendments shall come into force as of September 19, 2023.
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 and Clearing Participants inrelation to Cleared Contracts, these amendments shall come into force as of the datedesignated by JSCC which is on or after September 19, 2023.
Supplementary Provision
1. These amendments shall come into force as of November 20, 2023.
Supplementary Provision
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 and Clearing Participants inrelation to Cleared Contracts, these amendments shall come into force as of the datedesignated by JSCC which is on or after March 4, 2024.
79

Supplementary Provision
These amendments shall come into force as of April 1, 2024.

80

<Appendix 1> Schedule of Prices Used to Determine Value of Eligible Securities
CollateralType of Eligible Securities
CollateralJapanese
Whose over-theGovernment countertradingreference
pricesBonds
are published by
the
Japan
Securities Dealers
Association
Which are listed onadomestic
financial
instruments
exchange,but
whose
over-thecountertradingreference
pricesare not publishedMarket Price (*1)
Average of the overthe-countertradingreference prices

The closing price (*4)
onthefinancial
instruments exchange
(*3)

81

Market Price Multiplier(*2)(1) Interest-bearing
Japanese government
bond and discountgovernment bond(excluding government
bond with floating rateand STRIPs)
a. Years to maturity ofless than 1 year: 99%
b. Years to maturity
over 1 year and lessthan 5 years: 98%
c. Years to maturity
over 5 year and lessthan 10 years: 98%
d. Years to maturity
over 10 year and lessthan 20 years: 96%
e. Years to maturity
over 20 year and lessthan 30 years: 93%
f. Years to maturity
over 30 years: 92%(2) Government bondwith floating rate
a. Years to maturity ofless than 1 year: 99%
b. Years to maturity
over 1 year and lessthan 5 years: 99%
c. Years to maturity
over 5 year and lessthan 10 years: 99%
d. Years to maturity
over 10 year and lessthan 20 years: 99%(3) STRIPs

a. Years to maturity ofless than 1 year: 99%
b. Years to maturity
over 1 year and lessthan 5 years: 98%
c. Years to maturity
over 5 year and lessthan 10 years: 98%
d. Years to maturity
over 10 year and lessthan 20 years: 96%
e. Years to maturity
over 20 year and lessthan 30 years: 93%
f. Years to maturity
over 30 years: 91%
US Treasuries

The final indicative
market price on the
New York market onthepreviousday
converted
intoJapanese Yen by the
TTB rate vis-à-vis
customers
on
the
Tokyo
Foreign
Exchange Market oftwo days before(1) Years to maturity ofless than 1 year: 94%(2) Years to maturity
over 1 year and lessthan 5 years: 92%(3) Years to maturity
over 5 year and lessthan 10 years: 91%(4) Years to maturity
over 10 year and lessthan 20 years: 89%(5) Years to maturity
over 20 year and lessthan 30 years: 88%(6) Years to maturity
over 30 years: 88%(*1) The market price on two days before delivery or deposit of the Eligible Securities
Collateral (or the day immediately preceding such day if such day is a Business
Holiday; such business day convention shall apply in respect of each such day).
(*2) In the case where JSCC has reduced the multiplier in order to change to substituteprice pursuant to the provisions of Article 7 of the Business Rules, such reduced
multiplier shall apply.
(*3) In respect of an issue that is listed on multiple financial instruments exchanges, thefinancial instruments exchange shall be selected in accordance with the order of82

priority prescribed by JSCC.
(*4) In the case where a final quote is posted on the applicable financial instruments
exchange, “closing price” means such final quote.

83

<Appendix 2> Required Initial Margin Calculation Method

1. Required Initial Margin(1) Required Initial Margin arising from Proprietary Cleared Contract (other than the casespecified in Item (1)-2 below)
a. The Required Initial Margin arising from a Proprietary Cleared Contract shall beobtained in respect of the Net Present Values, respectively, of the JPY Cleared
Contracts, AUD Cleared Contracts, USD Cleared Contracts and EUR Cleared
Contracts of the Proprietary Account as of 4:00 p.m. (or, when JSCC confirmed thesatisfaction of Per Trade Compression Conditions pursuant to the provisions ofArticle 53.2 of the Business Rules, as of the time of such confirmation, or, when
JSCC confirmed the satisfaction of Blended Rates Compression Conditions pursuant
to the provisions of Article 53-2.2 of the Business Rules, as of the time of suchconfirmation, or, when JSCC confirmed the satisfaction of Member-InitiatedCompression Conditions pursuant to the provisions of Article 53-2-3.2 of theBusiness Rules, as of the time of such confirmation, or, when JSCC confirmed thesatisfaction of JSCC-Initiated Compression Conditions pursuant to the provisions ofArticle 53-2-4.4 of the Business Rules, as of the time of such confirmation, or, when
accepting an application for Position Transfer or transfer from a Clearing Participant
in accordance with the provisions of Article 53-4.1, Article 58-3.1, Article 58-5.1 or
Article 58-7.1of the Business Rules, as of the time of such acceptance; the same
applies in this Appendix 2) on the date of the calculation calculated by using theClearing Yield Curve as of 3:02 p.m. (or as of 11:02 a.m. for EUR Cleared Contracts)on the same date and the present value obtained based on the Settlement Price of
the Position of the JGB Futures Contract and the Position of the Interest Rate Futures
Contracts with respect of which Cross Margining Acceptance has been given by the
Clearing Participant with respect to the relevant Proprietary Account by 6:30 on thedate of calculation calculated using the Clearing Price on the same date (hereinafterreferred to as “Futures Clearing Price Value”), and shall be the average of top 12
values of negative fluctuations set forth in (a) and (b) below whose absolute value isthe largest. However, the Required Initial Margin arising from a Proprietary Cleared
Contract may be changed at any time temporarily, when JSCC determines thatdrastic market change has occurred or otherwise determines it necessary to do soin order to ensure the continued protection of the JSCC’s IRS Clearing Business.
(a) Fluctuation of Net Present Value calculated based on the Estimated Fluctuation
Yield Curve or fluctuation of the Futures Clearing Price Value calculated basedon the Estimated Fluctuation Price; and(b) Amount prescribed by JSCC in a public notice among the fluctuation of Net
Present Value calculated based on Stress Event Scenario Estimated Fluctuation

84

Yield Curve or the fluctuation of the Futures Clearing Price Value calculated bsed
on Stress Event Scenario Estimated Fluctuation Price.
For the purpose of above (a) and (b), the fluctuation of Net Present Value for Foreign
Currency Cleared Contracts shall be obtained by reflecting fluctuation of historicalforeign exchange rates on the fluctuation of the Net Present Value so calculated.
b. The “Estimated Fluctuation Yield Curve” set forth in 1.(1)a.(a) above shall beobtained in respect of the quote of the IRS Transaction, etc. used for obtaining theClearing Yield Curve on the date of the calculation, if such quote fluctuates with thesame range as the fluctuation range over five (5) days of the quote of IRS
Transaction, etc. used for obtaining the daily Clearing Yield Curve over the last 1,250
JSCC Business Days counted from the date of the calculation. Past fluctuation
ranges shall be adjusted by the method prescribed by JSCC through the public notice.
c. The “Estimated Fluctuation Price” set forth in 1.(1)a.(a) above shall be obtained
assuming if the Clearing Price on the date of calculation fluctuates with the samerange as the fluctuation range over five (5) days of daily Settlement Price over thelast 1,250 JSCC Business Days counted from the date of the calculation. Past
fluctuation ranges shall be adjusted by the method prescribed by JSCC through the
public notice.
d. The “Stress Event Scenario Estimated Fluctuation Yield Curve” set forth in 1.(1)a.(b)above shall be obtained in respect of the quote of the IRS Transaction, etc. used for
obtaining the Clearing Yield Curve on the date of the calculation, if such quote
fluctuates with the same range as the fluctuation range over five (5) days of the quoteof IRS Transaction, etc. used for obtaining the daily Clearing Yield Curve over theperiod of time prescribed by JSCC in a public notice.
e. The “Stress Event Scenario Estimated Fluctuation Price” set forth in 1.(1)a.(b) above
shall be obtained assuming if the Clearing Price on the date of calculation fluctuateswith the same range as the fluctuation range over five (5) days of the daily Clearing
Price over the period of time prescribed by JSCC in a public notice.
f. The fluctuation of foreign exchange rate set forth in 1.(1)a. shall be obtained
assuming if, in respect of daily quote obtained at 3:00 p.m. in the manner prescribedby JSCC in a public notice, the quote of foreign exchange rate on the date ofcalculation fluctuates with the same range as the fluctuation range over five (5) days
over the last 1,250 JSCC Business Days counted from the date of the calculation.
Past fluctuation ranges shall be adjusted by the method prescribed by JSCC throughthe public notice.
g. When a Foreign Currency Cleared Contract is recorded on the Proprietary Account,on the second JSCC Business Day preceding the day which is a Foreign Currency
Home Business Day related to the relevant Foreign Currency Cleared Contract but
is a Business Holiday, the amount calculated based on the provisions of 1.(1)a. to f.
above by replacing the references to “the fluctuation range over five (5) days” in
1.(1)a. to f. with “the fluctuation range over the period during which Foreign Currency
85

Home Business Day related to the Foreign Currency Cleared Contract recorded on
the Proprietary Account falls on Business Holiday” shall be added to the Required
Initial Margin Amount obtained based on 1.(1)a. to f.
h. When a Foreign Currency Cleared Contract is recorded on the Proprietary Account,on the JSCC Business Day immediately preceding the date which is the Foreign
Currency Home Holiday related to the relevant Foreign Currency Cleared Contract,
but is the JSCC Business Day, the amount equivalent to the required amount of
Variation Margin or the required amount of Mark-to-Market Difference in respect of
the Proprietary Account calculated as if such Foreign Currency Home Holiday is the
JSCC Business Day converted into Japanese yen using the foreign exchange rateprescribed by JSCC in a public notice shall be added to or deducted from theRequired Initial Margin obtained pursuant to the provisions of 1.(1)a. to f.
(1)-2 Required Initial Margin arising from Proprietary Cleared Contract (when new
Proprietary Cleared Contract is executed during the period from 5:30 p.m. to 7:00 p.m.)a.
The Required Intraday Margin of a Proprietary Cleared Contract shall be theamount equivalent to the Initial Margin calculated for the Proprietary Cleared Contracts on
the Proprietary Account as at 7:00 p.m. on the date of the calculation adjusted by the amountequivalent to the Variation Margin/Mark-to-Market Difference. However, the Required
Initial Margin arising from a Proprietary Cleared Contract may be changed at any time
temporarily, when JSCC determines that drastic market change has occurred or otherwise
determines it necessary to do so in order to ensure the continued protection of the JSCC’s
IRS Clearing Business.
b.
The “amount equivalent to the Intial Margin” set forth in a. above shall be theamount obtained in respect of the Net Present Values, respectively, of the JPY Cleared
Contracts, AUD Cleared Contracts, USD Cleared Contracts and EUR Cleared Contracts of
the Proprietary Account as of 7:00 p.m. on the date of the calculation referred to in a. above
calculated by using the Clearing Yield Curve as of 3:02 p.m. (or as of 11:02 a.m. for EUR
Cleared Contracts) on the same date and the Futures Clearing Price Value of the Cross
Margined JGB Futures Cleared Contracts and Cross Margined Interest Rate Futures
Cleared Contracts recorded on that Proprietary Account, and shall be the average of top 12
values of negative fluctuations set forth in (a) and (b) below whose absolute value is thelargest.
(a) Fluctuation of the Net Present Value calculated based on the EstimatedFluctuation Yield Curve set forth in (1).a.(a) (reflecting historical fluctuation offoreign exchange rate set forth in (1).f for Foreign Currency Cleared Contracts)or fluctuation of Futures Settlement Price Value calculated based on the
Estimated Fluctuation Price set forth in (1).c.; and(b) Amount prescribed by JSCC in a public notice among the fluctuation of Net
Present Value calculated based on Stress Event Scenario Estimated Fluctuation
86

Yield Curve set forth in (1).a.(b) (reflecting historical fluctuation of foreignexchange rate set forth in (1).f. for Foreign Currency Cleared Contracts) or thefluctuation of Futures Settlement Price Value calculated based on Stress Event
Scenario Estimated Fluctuation Price set forth in (1).e.
c. The “amount equivalent to the Variation Margin/Mark-to-Market Difference” set forthin (1)-2.a. above shall be the sum total of the difference, calculated by each currency of
the Cleared Contract, between the Net Present Value in respect of the Cleared Contracts
as at 4:00 p.m. on the date of calculation calculated based on the Clearing Yield Curveas at 3:02 p.m. (or, in respect of EUR Cleared Contracts, 5:30 p.m.) on the same day
and the Net Present Value in respect of the Cleared Contracts as at 7:00 p.m. on thedate of calculation calculated based on the Clearing Yield Curve as at 3:02 p.m. on thesam day, convereted into Japanese yen using the foreign exchange rate prescribed by
JSCC in a public notice if Cleared Contracts are Foregin Currency Cleared Contracts.
d. The provisions of (1).g shall apply mutatis mutandis to the calculation of theRequired Initial Margin under this Item (1)-2, whereby “the amount calculated based on
the provisions of 1.(1)a. to f. above” referred to in Section (1).g shall be replaced with“the amount calculated based on the provisions of 1.(1)-2 a to c” and “Required Initial
Margin obtained based on 1.(1)a. to f” referred to in Section (1).g shall be replaced with
“Required Initial Margin obtained based on 1.(1)-2 a. to c.”e. The provisions of (1).h shall apply mutatis mutandis to the calculation of theRequired Initial Margin under this Item (1)-2, whereby “Required Initial Margin obtained
based on 1.(1)a. to f” referred to in Section (1).h shall be replaced with “Required Initial
Margin obtained based on 1.(1)-2.a. to c.”(2) Required Initial Margin of Customer’s Cleared Contract (limited to those related to
Customers other than Customers set forth in Article 94.1 and 94-2.1 of the Business Rules)
The provisions of Section 1.(1) and Section 1.(1)-2 above shall apply mutatis mutandis
to the calculation of Required Initial Margin of the Customer’s Cleared Contract, whereby“the Proprietary Cleared Contracts” referred in Section 1.(1) and Section 1.(1)-2 above
shall be replaced with “the Customer Cleared Contracts” and “the Proprietary Account”
referred in Section 1.(1) and Section 1.(1)-2 above shall be replaced with “eachCustomer Account”.
(3) Required Initial Margin of ’Customer's Cleared Contract (limited to those related to
Customers set forth in Article 94.1 and 94-2.1 of the Business Rules ) (excluding such
Required Initial Margin related to Non-hedge Account)87

The provisions of Section1.(1) and Section 1.(1)-2 shall apply mutatis mutandis to thecalculation of Required Initial Margin set forth in this item, whereby “the Proprietary
Cleared Contract” referred in Section 1.(1) and Section 1.(1)-2 above shall be replacedwith “the Customer Cleared Contract,” “the Proprietary Account” referred in Section 1.(1)and Section 1.(1)-2 above shall be replaced with “each Customer Account,” and “thefluctuation range over five (5) days” in the said items shall be replaced with “thefluctuation range over seven (7) days” (the Estimated Fluctuation Yield Curve in thisitem shall be hereinafter referred to as the “Special Estimated Fluctuation Yield Curve,”
the Stress Event Scenario Yield Curve in this item shall be hereainfter referred to as the“Stress Event Scenario Special Estimated Fluctuation Yield Curve,” the EstimatedFluctuation Price in this item shall be hereinafter referred to as the “Special EstimatedFluctuation Price” and the Stress Event Scenario Estimated Fluctuation Price in thisitem shall be hereinafter refererred to as the “Stress Event Scenario Special EstimatedFluctuation Price”).
(4) Required Initial Margin related to Non-hedge Account
It shall be the Required Initial Margin obtained pursuant to the provisions of the main
body of the immediately preceding item multiplied by 1.1(one point one).
2. Required Intraday Margin(1) Required Intraday Margin of Proprietary Cleared Contracta. The Required Intraday Margin of a Proprietary Cleared Contract shall be the amountequivalent to the Initial Margin calculated for the Proprietary Cleared Contracts of theProprietary Account as at the noon on the date of the calculation adjusted by the amountequivalent to the Variation Margin/Mark-to-Market Difference. However, the Required
Intraday Margin of a Proprietary Cleared Contract may be changed at any time
temporarily, when JSCC determines that a significant market move has occurred orotherwise determines it necessary to do so in order to ensure the continued protectionof the JSCC’s IRS Clearing Business.
b. The “amount equivalent to the Initial Margin” set forth in 2.(1)a. above shall beobtained in respect of the Net Present Values of JPY Cleared Contracts, AUD Cleared
Contracts, USD Cleared Contracts and EUR Cleared Contracts on the Proprietary
Account calculated by using the Clearing Yield Curve based on the quote as at 11:02
a.m. on the date of calculation set forth in 2.(1).a. above and the present value calculated
based on the contract price of the Cross Margined JGB Futures Cleared Contracts andthe Cross Margined Interest Rate Futures Cleared Contracts recorded on the Proprietary
Account on the date of calculation (hereinafter referred to as the “Futures Settlement
Price Value”), and shall be the average of top 12 values of negative fluctuations set forthin (a) and (b) below whose absolute value is the largest. For the purpose of this88

paragraph and Paragraph 3, the contract price shall be the price obtained as “Intraday
Settlement Price” set forth in Article 20-4 of the Rules on Margins, etc. for Futures andOption Contracts for the Securities and Similar Contracts Clearing Business which JSCC
engages in.
(a) Fluctuation of the Net Present Value calculated based on the EstimatedFluctuation Yield Curve set forth in 1.(1).b. (reflecting historical fluctuation offoreign exchange rate set forth in 1.(1).f for Foreign Currency Cleared Contracts),
fluctuation of Futures Settlement Price Value calculated based on the JGB
Futures Estimated Fluctuation Price set forth in 1.(1).c. or fluctuation of Futures
Settlement Price Value calculated based on the Interest Rate Futures EstimatedFluctuation Price set forth in 1.(1).c.; and(b) Amount prescribed by JSCC in a public notice among the fluctuation of Net
Present Value calculated based on Stress Event Scenario Estimated Fluctuation
Yield Curve set forth in 1.(1).d. (reflecting historical fluctuation of foreignexchange rate set forth in 1.(1).f for Foreign Currency Cleared Contracts) or thefluctuation of Futures Settlement Price Value calculated based on Stress Event
Scenario Estimated Fluctuation Price set forth in 1.(1).e.
c. The “amount equivalent to the Variation Margin/Mark-to-Market Difference” set forthin 2.(1)a. above shall be obtained in respect of the Cleared Contracts as at 4:00 p.m. on
the JSCC Business Day immediately preceding the date of calculation, and shall be thesum total of the difference, calculated by each currency of the Cleared Contract, between
the Net Present Value calculated based on the Clearing Yield Curve as at 3:02 p.m. (or,in respect of EUR Cleared Contracts, 5:30 p.m. (or 4:30 p.m. when day light saving timeis in effect in London)) on the same day and the Net Present Value calculated based on
the Clearing Yield Curve as at 11:02 a.m. on the date of calculation of the Cleared
Contract set forth in 2.(1)a. above, convereted into Japanese yen using the foreignexchange rate prescribed by JSCC in a public notice if Cleared Contracts are Foregin
Currency Cleared Contracts.
d. The provisions of 1.(1).g shall apply mutuatis mutandis to the calculatin of of theRequired Intraday Margin, whereby “on the second JSCC Business Day preceding the
day which is a Foreign Currency Home Business Day” referred to in Section 1.(1).g shallbe replaced with “on the JSCC Business day immediately preceding the day which is a
Foreign Currency Home Business Day,” “the amount calculated based on the provisionsof 1.(1).a. to f. above” referred to in Section (1).g shall be replaced with “the amountcalculated based on the provisions of 2.(1).a. to c.” and “Required Initial Margin obtained
based on 1.(1)a. to f” referred to in Section (1).g shall be replaced with “Required
Intraday Margin obtained based on 2.(1).a. to c.”e. The provisions of 1.(1).h shall apply mutuatis mutandis to the calculatin of of theRequired Intraday Margin, whereby “on the JSCC Business Day immediately preceding
the datewhich is the Foreign Currency Home Holiday” referred to in Section 1.(1).h shall89be replaced with “on the JSCC Business day which is a Foreign Currency Home Holiday”
and “Required Initial Margin obtained based on 1.(1).a. to f.” referred to in Section (1).hshall be replaced with “Required Intraday Margin obtained based on 2.(1).a. to c.”(2) Required Intraday Margin of Customer’s Cleared Contract (limited to those related to
Customers other than Customers set forth in Article 94.1 of the Business Rules)
The provisions of Section 2.(1) above shall apply mutatis mutandis to the calculation of
Required Intraday Margin of the Customer’s Cleared Contract, whereby “the Proprietary
Account” referred in Section 2.(1) above shall be replaced with “each Customer Account”.
(3) Required Intraday Margin of Customer’s Cleared Contract (limited to those related toClearing Customoers set forth in Article 94.1 of the Business Rules ) (excluding such
Required Intraday Margin related to Non-hedge Account)
The provisions of Section 2.(1) shall apply mutatis mutandis to the calculation of
Required Intraday Margin set forth in this item, whereby “the Proprietary Account”
referred in Section 2.(1) above shall be replaced with “each Customer Account,”“Estimated Fluctuation Yield Curve set forth in Section 1.(1)b. above” in the said item
shall be replaced with “Special Estimated Fluctuation Yield Curve set forth in Section
1.(3) above,” “Stress Event Scenario Estimated Fluctuation Yield Curve” shall be
replaced with “Stress Event Scenario Special Estimated Fluctuation Yield Curve set
forth in Section 1.(3) above,” “Estimated Fluctuation Price” in the said item shall be
replaced with “Special Estimated Fluctuation Price set forth in Section 1.(3) above” and“Stress Event Estimated Fluctuation Price” in the said item shall be replaced with “Stress
Event Special Estimated Fluctuation Price set forth in Section 1.(3).”(4) Required Intraday Margin related to Non-hedge Account
It shall be the Required Intraday Margin obtained pursuant to the provisions of the theimmediately preceding item multiplied by 1.1(one point one).
3 Margins Required to Clear(1) Margins Required to Clear of Proprietary Cleared Contracta. The Margins Required to Clear of a Proprietary Cleared Contract shall be the amountequivalent to the Initial Margin calculated for the Cleared Contracts of the Proprietary
Account as at the time of receipt by JSCC of the notification of application for Clearings
set forth in Article 48.1 of the Business Rules (referred to as “Application Receipt Timing”
in this Paragraph 3) and adding the Eligible IRS Transaction subject to the relevant
application (or in case of an application for Clearing related to a Package Trade, all
Eligible IRS Transactions comprising the Package Trade) and for the Position of JGB
90

Futures Contracts and Interest Rate Futures Contracts for which Cross Margining
Acceptance has been given by the Clearing Participant in respect of the Proprietary
Account by 6:30 p.m. on the JSCC Busines Day immediately preceding the date ofcalculation, adjusted by the amount equivalent to the Variation Margin/Mark-to-Marked
Difference, and further adding the Unsettled Amount (meaning the absolute value of the
net amount obtained pursuant to the provisions of Article 85-2.1.(1) of the Busines Rules
if such amount is negative), and the Japanese yen equivalent of Variation Margin,excluding Unpaid Amount, related to the Foreign Currency Cleared Contracts of which
deposit or payment has not been completed as of the Application Receipit Timing
calculated by using foreign exchange rage presecribed by JSCC in a public notice.
However, the Required Margin at Clearing may be changed at any time temporarily,
when JSCC determines that drastic market change has occurred or otherwise
determines it necessary to do so in order to ensure the continued protection of the
JSCC’s IRS Clearing Business.
b. The “amount equivalent to the Initial Margin” set forth in 3.(1)a. above shall beobtained in respect of the Net Present Values of the JPY Cleared Contracts, AUD
Cleared Contracts, USD Cleared Contracts and EUR Cleared Contracts on the
Proprietary Account calculated by using the Clearing Yield Curve based on the quote as
at 11:02 a.m. of the date of receipt of the application for Clearings referred to in 3.(1)a.
above (referred to as the “Application Receipt Date” in the Paragraph 3) (or, if theapplication for Clearings is received during the period from 9:00 a.m. to noon or theapplication set forth in Article 27.3 is received, as at 3:02 p.m. on the JSCC Business
Day immediately preceding such Application Receipt Date, or, if the application for
Clearings is received during the period from 5:30 p.m. to 7:00 p.m., as at 3:02 p.m. (or11:02 a.m. for EUR Cleared Contracts) on such Application Receipt Date) and thepresent value (hereinafter referred to as the “Futures Intraday Value”) calculated basedon the contract price on the date of calculation of the Position of JGB Futures Contracts
and Interest Rate Futures Contracts for which Cross Margining Acceptance has been
given in respect of the Clearing Participant’s Proprietary Account by 6:30 p.m. on the
JSCC Business Day immediately preceding the date of calculation (or, if the application
for Clearing is received during the period from 9:00 a.m. to noon or the application set
forth in Article 27.3 is received, the settlement price on the JSCC Business Day
immediately preceding the Application Receipt Date), and shall be the average of top 12
values of negative fluctuations set forth in (a) and (b) below whose absolute value is thelargest:(a) Fluctuation of the Net Present Value calculated based on the EstimatedFluctuation Yield Curve set forth in Section 1.(1).b, reflecting the fluctuatin of thehistorical foreign exchange rate for Foreign Currency Cleared Contracts, orfluctuation of the Futures Intraday Value calculated based on the EstimatedFluctuation Price set forth in Section 1.(1).c; and(b) Amount prescribed by JSCC in a public notice among the fluctuation of the Net
Present Value calculated based on Stress Event Scenario Estimated Fluctuation
91

Yield Curve set forth in Section 1.(1)d, reflecting the fluctuatin of the historicalforeign exchange rate for Foreign Currency Cleared Contracts, or the fluctuationof the Futures Intraday Value calculated based on the Stress Event Scenario
Estimated Fluctuation Price set forth in Section 1.(1).e.
c. The “amount equivalent to the Variation Margin/Mark-to-Market Difference” set forthin 3.(1)a. above shall be obtained in respect of the Cleared Contracts as at 4:00 p.m. on
the day immedidately preceding the Application Receipt Date, and shall be the difference
between the Net Present Value calculated by each currency of the Cleared Contracts
based on the Clearing Yield Curve as at 3:02 p.m. on the the JSCC Business Day
immediately preceding the Application Receipt Date and the Net Present Value
calculated by each currency of the Cleared Contracts based on the Clearing Yield Curveas at 11:02 a.m. on the same day (or, if the application for Clearings is received during
the period from 9:00 a.m. to noon or the application set forth in Article 27.3 is received,
the Clearing Yield Curve as at 3:02 p.m. on the JSCC Business Day immediately
preceding such Application Receipt Date, or, if the application for Clearings is received
during the period from 5:30 p.m. to 7:00 p.m., as at 3:02 p.m. (or 11:02 a.m. for EUR
Cleared Contracts) on such Application Receipt Date), converted into Japanese yen
using the foreign exchange rate prescribed by JSCC in a public notice for Foreign
Currency Cleared Contracts.
d. The provisions of 1.(1).g shall apply mutuatis mutandis to the calculatin of of the
Margins Required to Clear, whereby “on the second JSCC Business Day preceding the
day which is a Foreign Currency Home Business Day” referred to in Section 1.(1).g shallbe replaced with “on the JSCC Business day immediately preceding the day which is a
Foreign Currency Home Business Day,” “the amount calculated based on the provisionsof 1.(1).a. to f. above” referred to in Section (1).g shall be replaced with “the amountcalculated based on the provisions of 3.(1).a. to c.” and “Required Initial Margin obtained
based on 1.(1).a. to f.” referred to in Section (1).g shall be replaced with “Margins
Required to Clear obtained based on 3.(1).a. to c.”d. The provisions of 1.(1).h shall apply mutuatis mutandis to the calculatin of of the
Margins Required to Clear, whereby “on the JSCC Business Day immediately preceding
the date which is the Foreign Currency Home Holiday” referred to in Section 1.(1).h shallbe replaced with “on the JSCC Business day which is a Foreign Currency Home
Holiday” and “Required Initial Margin obtained based on 1.(1).a. to f” referred to in
Section (1).h shall be replaced with “Margin Required to Clear obtained based on 3.(1).a.
to c.”(2) Required Margin at Clearing of Customer’s Cleared Contract (limited to those related to
Customers other than Customers set forth in Article 94.1 of the Business Rules)

92

The provisions of Section 3.(1) above shall apply mutatis mutandis to the calculation of
Required Margin at Clearing of the Customer’s Cleared Contract, whereby “theProprietary Account” referred in Section 3.(1) above shall be replaced with “eachCustomer Account”.
(3) Required Margin at Clearing of Customer’s Cleared Contract (limited to those related to
Customers set forth in Article 94.1 of the Business Rules ) (excluding such Required Margin
at Clearing related to Non-hedge Account)
The provisions of Section 3.(1) shall apply mutatis mutandis to the calculation of
Required Margin at Clearing set forth in this item, whereby “the Proprietary Account”
referred in Section 3.(1) above shall be replaced with “each Customer Account,”“Estimated Fluctuation Yield Curve set forth in Section 1.(1)b. above” in the said item
shall be replaced with “Special Estimated Fluctuation Yield Curve set forth in Section
1.(3) above,” “Stress Event Scenario Estimated Fluctuation Yield Curve” shall be
replaced with “Stress Event Scenario Special Estimated Fluctuation Yield Curve set
forth in Section 1(3) above,” “Estimated Fluctuation Price” in the said item shall be
replaced with “Special Estimated Fluctuation Price set forth in Section 1.(3) above,” and“Stress Event Scenario Estimated Fluctuation Price” shall be replaced with “Stress
Event Scenario Special Estimated Fluctuation Price.”(4) Required Margin at Clearing related to Non-hedge Account
It shall be the Required Margin at Clearing obtained pursuant to the provisions of he
immediately preceding item multiplied by 1.1.

93

<Appendix 3> Notional Amount related to Criteria for Clearing
Number of Days to Maturity
More than

Up to

Notional(in JPY 0.1bil.)-~

46 days

6,400

46 days~

107 days (3 months)

2,100

107 days (3 months)~

198 days (6 months)

1,200

198 days (6 months)~

381 days (1 year)

1,100

381 days (1 year)~

746 days (2 years)

460

746 days (2 years)~

1,842 days (5 years)

240

1,842 days (5 years)~

3,668 days (10 years)

170

3,668 days (10 years)~

10,973 days (30 years)

120

10,973 days (30 years)

~

-

67

94

<Exhibit Form 1> Form of Guarantee
Guarantee

To [

Date:
], President & CEO of Japan Securities Clearing Corporation

Address
Trade Name or Company Name
Name of Representative(Seal)[] (hereinafter referred to as the “Company”) confirms and accepts the details of theInterest Rate Swap Clearing Business Rules prescribed by JSCC (hereinafter referred to as
the “Business Rules”), etc. in advance and submits this Guarantee (hereinafter referred toas this “Guarantee”) to JSCC through [] (hereinafter referred to as the “Clearing
Participant”) in accordance with the provisions of Paragraph 5 of Article 8 of the Business
Rules. The terms used in this Guarantee shall have the meanings prescribed in theBusiness Rules unless otherwise provided in this Guarantee.
1 The Company is a Parent Company, etc. of the Clearing Participant.
2 The Company shall guarantee jointly and severally with the Clearing Participant to JSCC
all current and future obligations borne by the Clearing Participant against JSCC inconnection with the IRS Clearing Business of JSCC (including but not limited to the
obligations relating to the Cleared Contracts to which the Clearing Participant is a Clearing
Participant and the indemnity obligation in the case of the determination of the Default. of
the Clearing Participant by JSCC).
3 The Company shall cooperate with the report or submission of documents by the Clearing
Participant or the inspection by JSCC when JSCC requests the Clearing Participant toreport or submit documents to JSCC or conducts inspection in respect of the mattersconcerning the Company pursuant to the provisions of Article 21 of the Business Rules(in the case the said Article is amended in accordance with the Business Rules, theprovisions as amended).
4 This Guarantee shall be governed by and construed in accordance with the laws of Japan.
5 The Company agrees to the exclusive jurisdiction of the Tokyo District Court of Japan for
the first instance if any lawsuit arises between JSCC and the Company in relation to this
Guarantee.

95

<Exhibit Form 2> Clearing Participant Agreement
Interest Rate Swap Clearing Participant Agreement
Date:
To [

], President & CEO of Japan Securities Clearing Corporation
Address
Trade Name or Company Name
Name of the Representative(Seal)[] (hereinafter referred to as the “Company”) confirms and accepts the details of theInterest Rate Swap Clearing Business Rules prescribed by JSCC (hereinafter referred to as
the “Business Rules”), etc. in advance and submits this IRS Participant Agreement(hereinafter referred to as this “Agreement”) to JSCC in accordance with the provisions ofArticle 11 of the Business Rules. The terms used in this Agreement shall have themeanings prescribed in the Business Rules unless otherwise provided in this Agreement.
1 The Company shall abide by and comply with the Rules (in the case the Rules areamended in accordance with the Rules, the Rules as amended) in respect of IRS Clearing
Business conducted by JSCC, Cleared Contracts to be executed in accordance with theRules and other matters prescribed by the Rules.
2 The Company agrees that:(1) The provisions of the Rules shall apply to the current and future claims andobligations concerning Cleared Contracts and the matters listed in each item of
Paragraph 1 of Article 1 of the Business Rules.
(2) The provisions of the Rules shall constitute a part of this Agreement.
(3) In the case the provisions of the Rules are amended in accordance with the Rules,
this Agreement shall be automatically amended according to such amendments on
the day of such amendments.
(4) It shall comply with revocation of IRS Clearing Qualification, suspension of new
Clearing and any other measures taken by JSCC in accordance with the Rules.
(5) When the IRS Clearing Qualification of the Company is renounced (including
renunciation due to revocation of IRS Clearing Qualification by JSCC), it shall bear
any and all responsibilities concerning such renunciation, and shall not cause any
inconvenience to JSCC, other Clearing Participants, Customers who designatedthe Company as their Clearing Broker.
(6) Customer may make available any information related to Clearing Brokerage
Original Transaction to a Clearing Broker and such Clearing Broker may receive
such information in an Clearing Brokerage whose Clearing Brokerage Original
Transaction is entered into between a Customer acting through a Clearing Broker
96which is not the Company on one hand and the Company on the other.
(7) JSCC will keep an executed copy of this Agreement for the benefit of the Clearing
Participant or the Customer referred to in Item (6) above as a document certifyingthat the Company has agreed to the matters set forth in Item (6) above, and will
disclose such executed copy of this Agreement or any substance thereof to such
Clearing Participant or the Customer to an extent required by law.
(8) Unless otherwise set forth in the Rules, this Agreement shall be governed by andconstrued in accordance with the laws of Japan.
3 This Agreement shall automatically terminate without indication of intention by the parties
when the IRS Clearing Qualification of the Company has been renounced; provided,
however, if there remain any Contact for Clearing or other rights and obligations between
JSCC and the Company or any other rights and obligations under the provisions of theRules at the termination hereof, the Company shall abide by and comply with the Rules.
to the extent pertaining to such rights and obligations.

97

<Exhibit Form 3> Clearing Brokerage Agreement (Japanese language original format)( omitted )98

<Exhibit Form 3-2> Clearing Brokerage Agreement (English language original format)
Interest Rate Swap Clearing Brokerage Agreement
With an agreement to be bound by the Rules (as defined below), ○○○○ (“Party A”) and ○○○○(“Party B”) hereby make and enter into this Interest Rate Swap Clearing Brokerage
Agreement (this “Agreement”) concerning the Clearing Brokerage (yuuka shouken tou
seisan toritsugi) in respect of the IRS Transactions to be conducted by Party A for theaccount of Party B, as follows:
Chapter 1 General Provisions
Article 1. Purpose
Party A and Party B hereby acknowledge and agree that Party A provides Clearing
Brokerage services for IRS Transactions to Party B in accordance with the provisions of
this Agreement.
Article 2. Definitions
The terms used herein shall have definitions from the Financial Instruments and Exchange
Act (Act No.25 of 1948) (kin’yuu shouhin torihiki hou) or the Rules (as defined below) andthe following items shall be defined as follows:(1) “Cleared Contract subject to Brokerage” means a Cleared Contract (seisan
yakujou) that comes into effect between JSCC and Party A acting as broker for
Party B under Clearing Brokerage pursuant to this Agreement;(1)-2 “JPY Cleared Contract subject to Brokerage” means a Cleared Contract subject toBrokerage whose Notional Amount and settlement currency are denominated inJapanese yen;(1)-3 “Foreign Currency Cleared Contract subject to Brokerage” means a Cleared
Contract subject to Brokerage whose Notional Amount and settlement currency aredenominated in a currency other than Japanese yen;
(2) “Event of Default” means the events specified in Article 29.1 of this Agreement;(3) “Early Termination Amount” means the amount of money to be paid or received
between Party A and Party B upon termination of all Subject Clearing BrokerageContracts in accordance with the provision of Article 30 or Article 35.1 of thisAgreement;(4) “Business Rules” means the business rules concerning the Clearing Service for
IRS Transactions established by JSCC, as amended;99

(5) “Rules” shall collectively refer to the Business Rules and other rules set by JSCC
that are subordinated to the Business Rules, in whatever name and including theamendments thereto if any;(6) “JSCC” means Japan Securities Clearing Corporation;(6)-2 “AUD Cleared Contract subject to Brokerage” means a Cleared Contract subject
to Brokerage whose Notional Amount and settlement currency are denominated inAustralian dollars;(7) “JSCC Business Day” means any day other than a Business Holiday;(8)“Position Transfer” means a process to have new claims and obligations related
to Clearing Brokerage Contracts (seisan itaku torihiki) to which Party B is a party
and the Customer’s Cleared Contracts (seisan yakujou (itaku bun)) corresponding
to such Clearing Brokerage Contracts accrue among JSCC, a Successor Clearing
Broker and Party B, and to pay or receive money and settle claims and obligationsin association therewith, in accordance with the provisions of the Rules;(9)“Successor Clearing Broker” means a Clearing Participant who has entered intoa Clearing Brokerage Agreement with Party B (“Clearing Broker (jutaku seisansankasha)”) that assumes the claims and obligations arising as a result of the
Position Transfer.;(9)-2 “Profit and Loss before Default” means the amount of Cash calculated pursuant
to the provision of Article 35.2 as the amount to be paid and received between
Party A and Party B upon termination of all Subject Clearing Brokerage Contracts
pursuant to the provision of Article 35.1.
(9)-3 “Post-Default Allocated Profit and Loss” means the amount of Cash calculated
pursuant to the provision of Article 35.1 as the amount to be paid and received
between Party A and Party B upon termination of all Subject Clearing BrokerageContracts pursuant to the provision of Article 35.1.
(9)-4 “USD Cleared Contract subject to Brokerage” means a Cleared Contract subject
to Brokerage whose Notional Amount and settlement currency are denominated in
United States dollars;(10) “Subject Clearing Brokerage Contract” means a legal relationship between Party
A and Party B coming into effect as a result of each Clearing Brokerage hereunder,
which has the same economic effect as the Cleared Contract subject to Brokeragecoming into effect as a result of the said brokerage.
100(10)-2 “Subject Clearing Brokerage Contract (Settlement Type)” (seisan itaku torihiki(kessai gata)) means a Subject Clearing Brokerage Contract having the same
economic effect as Cleared Contracts subject to Brokerage that is a Cleared
Contract (Settlement Type) (seisan yakujou (kessai gata));(10)-3 “Subject Clearing Brokerage Contract (Collateral Type)” (seisan itaku torihiki(tampo gata)) means a Subject Clearing Brokerage Contract having the same
economic effect as Cleared Contracts subject to Brokerage that is a Cleared
Contract (Collateral Type) (seisan yakujou (tampo gata));(11) “EUR Cleared Contract subject to Brokerage” means a Cleared Contract subject
to Brokerage whose Notional Amount and settlement currency are denominated inEuro;
Article 3. Submission of Letter of Undertaking
1 Immediately after the execution of this Agreement, Party B shall submit to JSCC via Party
A a letter of undertaking in the form prescribed by JSCC stating that Party B will comply
with this Agreement and the Rules.
2 Immediately upon receipt of the letter of undertaking from Party B pursuant to Paragraph
1, Party A shall submit it to JSCC.
Article 3-2. Notification of Clearing Brokerage of IRS Transactions in Currencies other thanJapanese Yen
When Party B intends to apply for Clearing Brokerage to Party A in respect of an IRS
Transaction whose Notional Amount and settlement currency are denominated in acurrency other than Japanese yen for the first time, it shall obtain Party A’s prior consent.
Article 3-3. Amendment to this Agreement
1 If JSCC makes an amendment to the Exhibit Form 3-2 to the Handling Procedures ofInterest Rate Swap Business Rules (hereinafter referred to as “Form 3-2”) after the
execution of this Agreement, this Agreement shall be amended as a matter of course to
the terms and conditions of the Form 3-2 as amended as of the effective date of such
amendment.
2 Upon receipt of JSCC’s notification as to an amendment to Form 3-2 pursuant to theprovisions of Article 7.2 of the Handling Procedures of Interest Rate Swap Business
Rules, Party A shall promptly notify such amended terms and conditions to Party B.
Chapter 2 Clearing Brokerage
Article 4. Clearing Brokerage
1 When Party B intends to apply for Clearing Brokerage to Party A, Party B shall notify JSCC,
101

in the manner set forth in the Rules, of (i) the name of the Clearing Participant who will
become the counterparty (“Designated Counterparty”) to the IRS Transaction which will
come into effect between Party A and the said Designated Counterparty through theClearing Brokerage and (ii) other matters set forth in the Rules.
2 Party A and Party B hereby agree in advance that, when the notification given underParagraph 1 arrives at JSCC, Party B shall be deemed to have applied for Party A’s
Clearing Brokerage in respect of the IRS Transaction set forth in Paragraph 1 and Party
A shall be deemed to have accepted such application at the time of JSCC’s receipt.
3 Notwithstanding the provision of Paragraph 2, if Party B does not belong to the same
Corporate Group (kigyou shuudan) as Party A, then the phrase “and Party A shall bedeemed to have accepted such application” in Paragraph 2 shall be deleted.
4 Paragraphs 2 and 3 above shall not apply if:(1) the notification given under Paragraph 1 fails to meet conditions prescribed in theRules; or(2) the contents of the notification set forth in Paragraph 1 are inconsistent with aseparate agreement concerning limits on Clearing Brokerage made between Party
A and Party B to the extent permitted by the Rules, if any, provided that the termsof such agreement is notified to JSCC in the manner prescribed by JSCC.
5 When Party B is deemed to have applied for Clearing Brokerage to Party A pursuant to
the provision of Paragraph 2 as amended by the provision of Paragraph 3, and JSCC
gives notice concerning such application to Party A in accordance with the provisions of
the Rules, Party A shall notify JSCC of its decision as to whether or not it accepts Party
B’s application for Clearing Brokerage for the IRS Transaction; provided, however, that
Party A and Party B hereby agree in advance that if Party A has given, pursuant to theprovisions of the Rules, a notification of its desire to skip JSCC's notification to Party A
related to the request for Clearing Brokerage and Party A’s notification to JSCC of its
acceptance or denial of the request for Clearing Brokerage of the IRS Transaction related
to such notification, JSCC’s notification to Party A related to the request for Clearing
Brokerage and Party A’s notification to JSCC of its acceptance of the request for Clearing
Brokerage shall be deemed to have been given upon arrival of the notification set forth inParagraph 1 at JSCC.
Article 5. Execution of Cleared Contract Subject to Brokerage
1 When the notification specified in Article 4.1 of this Agreement arrives at JSCC andClearing Brokerage is deemed to have been applied for and accepted pursuant to theprovision of Article 4.2 of this Agreement, an IRS Transaction of which the terms andconditions in the Rules are identical to the Clearing Brokerage Original Transaction102

(seisan toritsugi gen torihiki) shall come into effect between Party A for the account ofParty B and the Designated Counterparty in the manner as set forth in the Rules.
2 Notwithstanding the provision of Paragraph 1, if Party B does not belong to the same
Corporate Group as Party A, the phrase “Clearing Brokerage is deemed to have been
applied for and accepted pursuant to the provision of Article 4.2 of this Agreement” inParagraph 1 shall be replaced with the phrase “Party A notifies JSCC of its decision toaccept Party B’s application for Clearing Brokerage pursuant to the provision of Article 4.5of this Agreement or JSCC’s notification to Party A related to the request for Clearing
Brokerage and Party A’s notification to JSCC of its acceptance of the request for Clearing
Brokerage shall be deemed to have been given pursuant to the proviso of Article 4.5 ofthis Agreement.”
3 When an IRS Transaction comes into effect between Party A and the DesignatedCounterparty pursuant to the provisions of Paragraph 1 or 2, Party A and the DesignatedCounterparty shall be deemed to have made notification to JSCC requesting Clearing(saimu futan) for such IRS Transaction in accordance with the provisions of the Rules.
4 When the Cleared Contract subject to Brokerage comes into effect, Party A shall notify
Party B of that effect and the details thereof without delay.
Article 6. Attribution of Profits and Losses from Cleared Contracts Subject to Brokerage
1 All profits and losses resulting from the Cleared Contracts subject to Brokerage shall be
attributed to Party B.
2 When Party A receives Funds (kinsen tou) other than Margin (shoukokin) from JSCC in
respect of Cleared Contracts subject to Brokerage, it shall deliver such Funds to Party B.
3 When Party A owes obligations to pay Funds other than Margin, Special Clearing Charge
Collateral (tokubetsu seisanryou tampokin), clearing fees and Special Clearing Charges(tokubetsu seisanryou) to JSCC in respect of Cleared Contracts subject to Brokerage,
Party B shall pay such Funds to Party A.
4 Unless otherwise set forth herein, Party A and Party B shall determine by mutual
agreement the timing and the manner of the payments and receipts of Funds under theprovisions of Paragraphs 2 and 3.
Article 7. Application for Exchanging Mark-to-Market Difference And Adjustment Amount1 When Party B intends to instruct Party A to apply for, or to give instruction to withdraw,
Application for Exchanging Mark-to-Market Difference And Adjustment Amount inrelation to the Cleared Contracts subject to Brokerage which are Cleared Contracts(Collateral Type), it shall notify such effect to Party A by the time agreed between Party
A and Party B in the manner agreed between Party A and Party B.
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2

Upon receipt of the above-mentioned notice, Party A shall apply for or withdraw
Application for Exchanging Mark-to-Market Difference And Adjustment Amount as
instructed by Party B to JSCC in accordance with the provisions of the Rules.

Article 8. Payments and Receipts of Settlement Amount1 When Party A is due to pay the Settlement Amount (kessai kingaku) to JSCC in connection
with a Cleared Contract subject to Brokerage, Party B shall pay to Party A Cash (kinsen)
in an amount equivalent to the Settlement Amount by the time agreed between Party A
and Party B that is at or before the cut-off time of its payment to JSCC, or, in the case of
the Settlement Amount for a Foreign Currency Cleared Contract (gaika date seisan
yakujou), such cut-off time on the next Foreign Currency Home Business Day (gaika
hongoku eigyou bi) following the date on which the payment by Party A to JSCC becomesdue, and in the manner agreed between Party A and Party B. If Party A and Party B haveagreed in advance that it is practically difficult for Party B to put in place operational
procedures for its punctual payment in accordance with the first sentence of thisparagraph, the payment shall be made by the above-mentioned cut-off time on the JSCC
Business Day following the date on which the payment to JSCC becomes due, or, in thecase of the Settlement Amount for a Foreign Currency Cleared Contract, the first day
which is both the JSCC Business Day and the Foreign Currency Home Business Day
following the date on which the payment to JSCC becomes due.
2 When Party A receives Settlement Amount from JSCC in connection with Cleared
Contracts subject to Brokerage, Party A shall pay to Party B Cash in the amount equivalent
to the Settlement Amount by the time agreed between by Party A and Party B, or, promptly,
absent such agreement, and in the manner agreed between Party A and Party B.
Article 9. Clearing Brokerage Account (seisan toritsugi kouza)
1 Party A shall set up an account (“Party B Clearing Brokerage Account”) to manage thedetails of the Subject Clearing Brokerage Contracts, Initial Margin (tousho shoukokin),
Customer Initial Margin (itaku tousho shoukokin) and Variation Margin (hendou
shoukokin) related to such Subject Clearing Brokerage Contracts, Positions (tategyoku)
of the JGB Futures Contracts (kokusai shouken sakimono torihiki) and Interest Rate
Futures Contracts (kinri sakimono torihiki) covered under Cross Margining (kurosumajin
seido) on Party B’s book, Mark-to-Market Difference (soneki sakin) and other Funds to be
paid or received between Party A and Party B in accordance with this Agreement and theRules.
2 Upon request of Party B, Party A may set up multiple accounts dividing the Party B
Clearing Brokerage Account.
Article 9-2. Notification of Hedge Account and Non-Hedge AccountParty B shall notify Party A of whether the Customer Account (itaku torihiki kouza)104corresponding to Party B Clearing Brokerage Account is Hedge Account (hejji kouza) or
Non-hedge Account (non hejji kouza), in accordance with the provisions of the Rules.
Party B shall also give notice to Party A when it changes the types of the Customer
Account.
Article 10. Fees
Party A may, based on an agreement between Party A and Party B, charge Party B
consideration, fees and other money thus agreed for its Clearing Brokerage service andits performance of other obligations under this Agreement, including an amount equal to
the Special Clearing Charge paid by Party A, if any.
Article 10-2. When Action is Taken against Party A
When an action under Article 29-2.2 of the Business Rules is taken against Party A withrespect to Subject Transaction for Clearing (seisan taishou torihiki) under Clearing
Brokerage for Party B or an action under Article 29-3.1 of the Business Rules is taken
against Party A, and if Party A requests that Party B take necessary actions to manage
risk of Party B’s positions, including actions related to Cross Margined JGB Futures
Cleared Contracts (kurosumajin taishou kokusai sakimono seisan yakujou) or Cross
Margined Interest Rate Futures Cleared Contracts (kurosumajin taishou kinri sakimono
seisan yakujou), Party B shall take necessary action in response to such request.
Chapter 3 Margin
Section 1 Initial Margin
Article 11. Obligation to Deposit Initial Margin
1 Party B shall deposit with JSCC Initial Margin other than Intraday Margin (nitchuu
shoukokin) in an amount not less than the Required Initial Margin (tousho shoukokinshoyougaku) in relation to the Cleared Contract subject to Brokerage. If Party A andParty B separately agree otherwise regarding Initial Margin other than Intraday Margin,
Party B shall deposit with JSCC the amount calculated under such agreement or theRequired Initial Margin, whichever is larger (“Initial Margin Deposit Requirement”).
2 The Required Initial Margin in respect of Cleared Contracts subject to Brokerage shall becalculated by JSCC in accordance with the Rules and Party A shall notify such Required
Initial Margin to Party B, except where the amount of Margin Required to Clear (saimu
futan zi shoyou shoukokin) for such Cleared Contracts subject to Brokerage is deemed tobe equal to the amount of the Required Initial Margin in accordance with the provision of
Article 66.3 of the Business Rules.
3 JSCC may pay interest on Initial Margin in the manner as set forth in the Rules.
Article 11-2. Increase of Required Initial Margin105

1With an agreement between Party A and Party B, Party A may give a notification of anincrease of the Required Initial Margin related to the Cleared Contracts subject toBrokerage related to Party B and a notification related to change of the notified matteras set forth in Article 65-2 of the Business Rules to JSCC in a manner prescribed in theRules.

2

When lifting the increase of the Required Initial Margin subject to the notification of
Paragraph 1 with an agreement between Party A and Party B, Party A shall notify such
effect to JSCC in a manner prescribed in the Rules.

Article 12. Deposit Method of Initial Margin
1 Party B shall deposit Initial Margin with JSCC via Party A acting as its agent in accordancewith the provisions of the Rules.
2 Party B hereby offers Party A, and Party A hereby accepts, to act on Party B’s behalf inrespect of a deposit of Initial Margin with JSCC and requesting the return thereof.
3 Party A shall deposit with JSCC, as an agent of Party B, all Cash and Eligible Securities
Collateral (daiyou yuuka shouken) delivered by Party B as Initial Margin in accordancewith the provisions of the Rules.
Article 13. Cut-Off Time for Deposit of Initial Margin
1 When the sum of Cash and the value of Eligible Securities Collateral deposited with JSCC
as Initial Margin in respect of Cleared Contracts subject to Brokerage (referred to as“Initial Margin” ) and Cash and the value of Eligible Securities Collateral deposited with
Party A as Customer Initial Margin in respect of Subject Clearing Brokerage Contracts(referred to as “Customer Initial Margin”) (such sum shall be hereinafter referred to as“Initial Margin and Customer Initial Margin Deposited Amount”) falls short of the Initial
Margin Deposit Requirement on a JSCC Business Day, Party B shall deposit with Party
A the amount equal to such shortfall by the date and time agreed between Party A andParty B that is at or before the cut-off time for deposit to JSCC on the JSCC Business
Day following the date of occurrence of such shortfall. If Party A and Party B agreed
in advance that it is practically difficult for Party B to put in place operational proceduresfor depositing such shortfall, Party B shall deposit with Party A such amount by the
aforementioned cut-off time on the second JSCC Business Day following the date ofoccurrence of such shortfall.
2 Notwithstanding the provision of Paragraph 1, if the Initial Margin and Customer Initial
Margin Deposited Amount is equal to or more than the amount of the Margin Required toClear calculated by JSCC upon receipt of the application for Clearing, unless otherwise
agreed regarding the Initial Margin between Party A and Party B, the Initial Margin Deposit
Requirement shall be deemed to be equal to the amount of the Margin Required to Clear.

106Article 14. Obligation to Deposit Intraday Margin
1 Party B shall deposit with JSCC Cash or Eligible Securities Collateral in the amount notless than the Required Intraday Margin (nitchuu shoukokin shoyougaku) in relation to
Cleared Contracts subject to Brokerage as Initial Margin. If Party A and Party B
separately agree otherwise in respect of Intraday Margin, the amount to be deposited shallbe the amount calculated based on such agreement or the Required Intraday Margin,
whichever is larger (“Intraday Margin Deposit Requirement”).
2 The Required Intraday Margin in relation to Cleared Contracts subject to Brokerage shallbe calculated by JSCC in accordance with the Rules and Party A shall notify Party B ofsuch requirement, except where the amount of Margin Required to Clear for such Cleared
Contracts subject to Brokerage is deemed to be equal to the amount of the Required
Intraday Margin in accordance with the provision of Article 70.3 of the Business Rules.
Article 15. Cut-Off Time for Deposit of Intraday Margin
1 When the Initial Margin and Customer Initial Margin Deposited Amount falls short of theIntraday Margin Deposit Requirement to be deposited with JSCC, Party B shall deliver toParty A an amount equal to such shortfall by the date and time agreed between Party A
and party B that is at or before the cut-off time for deposit with JSCC on the date ofoccurrence of such shortfall. If Party A and Party B have agreed in advance that it ispractically difficult for Party B to put in place procedures for depositing such shortfall,
Party B shall deliver such shortfall to Party A by the aforementioned cut-off time on thesecond JSCC Business Day following the date of occurrence of such shortfall.
2 If the Initial Margin and Customer Initial Margin Deposited Amount is equal to or morethan the Margin Required to Clear calculated by JSCC upon receipt of the application for
Clearing, Intraday Margin Deposit Requirement shall be deemed to be equal to theamount of Margin Required to Clear, unless otherwise agreed regarding Intraday Margin
between Party A and Party B.
Article 16. Substituted Deposit
1 Notwithstanding the provision of Article 12 of this Agreement, Party A may retain Japanese
yen Cash or Eligible Securities Collateral delivered from Party B as Customer Initial
Margin with the prior written consent of Party B.
2 In the case of Paragraph 1, Party A shall deposit with JSCC Substituted Initial Margin(sashikae tousho shoukokin) in the amount not less than the amount of the Customer
Initial Margin delivered from Party B.
3 Party A shall pay interest on the Customer Initial Margin accrued at the same interest rate
as that applied for the calculation of interest on Initial Margin.
Article 17. Right to Claim Return of Initial Margin107

1 Party A and Party B shall respectively have the right to claim the return of Initial Margin
from JSCC in the amount as set forth below:(1) Party B:
The amount equivalent to the sum of Initial Margin deposited with JSCC by Party
B and Substituted Initial Margin deposited with JSCC by Party A in relation to
Cleared Contracts subject to Brokerage; less (i) the outstanding obligation of Party
B owed to Party A in respect of the Subject Clearing Brokerage Contracts (including
any outstanding obligation arising as a result of the termination of the Subject
Clearing Brokerage Contract) or outstanding Early Termination Amount and (ii) the
outstanding obligation of Party B owed to Party A in respect of the Cross Margined
JGB Futures Cleared Contracts and Cross Margined Interest Rate Futures Cleared
Contracts recorded on Party B Clearing Brokerage Account.
Notwithstanding the foregoing, in case the amount calculated above as Party B’s
claim exceeds the sum of Initial Margin deposited with JSCC by Party B and
Substituted Initial Margin deposited with JSCC by Party A in relation to Cleared
Contracts subject to Brokerage less the outstanding obligation of Party A owed to
JSCC in respect of Cleared Contracts subject to Brokerage (including any
outstanding obligation arising as a result of the termination of Cleared Contracts
subject to Brokerage due to Party A’s Default (hatan tou) or other reason, but
excluding obligation owed pursuant to the provision of Article 99-2.2 of theBusiness Rules) and the outstanding obligation of Party A owed to JSCC in respectof the Cross Margined JGB Futures Cleared Contracts and Cross MarginedInterest Rate Futures Cleared Contracts recorded on Party B Clearing Brokerage
Account, Party B’s claim shall not cover such excess amount;(2) Party A:
The amount equivalent to the sum of Initial Margin deposited with JSCC by Party
B and Substituted Initial Margin deposited with JSCC by Party A in relation to
Cleared Contracts subject to Brokerage less the sum of the outstanding obligationsof Party A owed to JSCC in connection with the Cleared Contracts subject toBrokerage (including any outstanding obligation arising as a result of thetermination of Cleared Contracts subject to Brokerage due to Party A’s Default orother reason), the outstanding obligations of Party A owed to JSCC in respect of
the Cross Margined JGB Futures Cleared Contracts and Cross Margined Interest
Rate Futures Cleared Contracts recorded on Party B Clearing Brokerage Accountand the amount of Party B’s claim under Item (1).
2 If the amount of Initial Margin for which there is a right to claim return exceeds the Initial
Margin Deposit Requirement or Intraday Margin Deposit Requirement, whichever is mostrecently calculated, (“Deposit Requirement”), Party B may request that JSCC return Initial
Margin up to the excess amount in accordance with the provisions of the Rules.
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3 Party B shall exercise its right to request the return of Initial Margin via Party A acting as
its agent in accordance with the provisions of the Rules, provided however, in the eventthat JSCC has declared the Default of Party A, Party B shall request the return of Initial
Margin directly from JSCC in accordance with the provisions of the Rules.
4 Party A shall deliver to Party B all Cash and Eligible Securities Collateral delivered from
JSCC as Initial Margin, of which Party B has the right to claim the return, by the timeagreed between Party A and Party B, or, promptly, absent such agreement, and in themanner agreed between Party A and Party B.
5 Notwithstanding the provision of Paragraph 2, where Party B may request the return ofCustomer Initial Margin from Party A, Party B shall not request the return of Initial Marginwhich corresponds to the same Customer Initial Margin from JSCC, except where JSCC
has declared the Default of Party A.
6 If the Rules set forth otherwise concerning the manner of requesting return of Initial Marginunder Paragraphs 1 through 5 above, the manner of request for Initial Margin to thesatisfaction of Obligation to be Collateralized and other related matters, the provisions of
the Rules shall prevail.
Article 18. Right to Claim Return of Customer Initial Margin
If the amount in which Party B has the right to claim return of Initial Margin exceeds the
Deposit Requirement, Party B may request the return of Customer Initial Margin from
Party A up to the lesser of (i) such excess amount and (ii) the amount of Customer Initial
Margin deposited with Party A, or, if the amount of Initial Margin returned by JSCC to Party
B as a result of Party B’s request for return of Initial Margin made pursuant to theprovisions of the Rules exceeds the amount of Initial Margin deposited with JSCC, theamount of the Customer Initial Margin deposited with Party A less such excess amount.
Article 19. Eligible Securities Collateral
1 The prices used to determine the value of the Eligible Securities Collateral shall becalculated by the method set forth in the Rules.
2 The manner of depositing the Eligible Securities Collateral and other necessary mattersin respect of Eligible Securities Collateral shall be set forth in the Rules.
3 Where Party B deposits Eligible Securities Collateral with JSCC or Party A as Initial Margin
or Customer Initial Margin, JSCC and Party A shall, when returning Initial Margin or
Customer Initial Margin, as the case may be, return to Party B the securities of the samekind, grade and amount as those of the Eligible Securities Collateral deposited, unlessotherwise set forth in this Agreement or the Rules.

109

4 JSCC and Party A may consume the Eligible Securities Collateral deposited by Party B.
Section 2 Cash Settlement Amount
Article 20. Variation Margin
1 Party A and Party B shall pay or receive Variation Margin in respect of the relevant
currency of the Cleared Contract subject to Brokerage which are Cleared Contracts(Collateral Type) on the day specified below according to the currency of Cleared Contract
subject to Brokerage which are Cleared Contracts (Collateral Type):(1) JPY Cleared Contract subject to Brokerage: JSCC Business Day(2) Foreign Currency Cleared Contract subject to Brokerage: On the day that is both
JSCC Business Day and Foreign Currency Home Business Day
2 The required amount of Variation Margin for Cleared Contracts subject to Brokerage which
are Cleared Contracts (Collateral Type) shall be calculated by JSCC in accordance with
the Rules and Party A shall notify Party B of such required amount.
Article 20-2. Mark-to-Market Difference
1 Party A and Party B shall pay or receive Cash in an amount equivalent to the Mark-toMarket Difference in the relevant currency of the Cleared Contract subject to Brokerage
which is a Cleared Contract (Settlement Type) on the day specified below according to
the Cleared Contract subject to Brokerage which is a Cleared Contract (Settlement Type)in the below-listed currency:(1) JPY Cleared Contract subject to Brokerage: JSCC Business Day(2) Foreign Currency Cleared Contract subject to Brokerage: On the day that is both
JSCC Business Day and Foreign Currency Home Business Day
2 The required amount of Mark-to-Market Difference for Cleared Contracts subject toBrokerage that is Cleared Contract (Settlement Type) shall be calculated by JSCC in
accordance with the Rules, and Party A shall notify Party B of such amount.
Article 21. Payment or Receipt of Variation Margin
1 When Party A is due to pay to JSCC Variation Margin in relation to Cleared Contracts
subject to Brokerage which are Cleared Contracts (Collateral Type), Party B shall pay to
Party A Cash in an amount equivalent to the Variation Margin by the time agreed between
Party A and Party B that is at or before the cut-off time for its payment to JSCC on the
JSCC Business Day following the date of calculation of Variation Margin, or, for Variation
Margin related to Foreign Currency Cleared Contracts, on the first day that is both JSCC
Business Day and Foreign Currency Home Business Day following the date of calculationof such Variation Margin, in the manner agreed between Party A and Party B. If Party A
and Party B have agreed in advance that it is practically difficult for Party B to put in place
operational procedures for such payment, the payment of Variation Margin shall be madeby the above-mentioned cut-off time on the second JSCC Business Day following the date110

of calculation of Variation Margin, or, in the case of Variation Margin related to Foreign
Currency Cleared Contracts, on the first day that is both JSCC Business Day and Foreign
Currency Home Business Day following the date such payment to JSCC becomes due.
2 When Party A receives from JSCC Variation Margin in respect of Cleared Contracts
subject to Brokerage, Party A shall pay Cash in the amount equivalent to said Variation
Margin to Party B by the time agreed between Party A and Party B, or promptly, absent
such agreement, and in the manner agreed between Party A and Party B.
Article 21-2. Payment or Receipt of Mark-to-Market Difference
1 When Party A is due to pay to JSCC Mark-to-Market Difference in relation to Cleared
Contracts subject to Brokerage that is Cleared Contracts (Settlement Type), Party B shall
pay to Party A Cash in an amount equivalent to the Mark-to-Market Difference by the timeagreed between Party A and Party B that is at or before the cut-off time for its payment to
JSCC on the JSCC Business Day following the date of calculation of the Mark-to-Market
Difference, or, for Mark-to-Market Difference related to Foreign Currency Cleared
Contracts on the first JSCC Business Day and Foreign Currency Home Business Day
following the date of calculation of such Mark-to-Market Difference, in the manner agreed
between Party A and Party B. If Party A and Party B have agreed in advance that it ispractically difficult for Party B to put in place operational procedures for such payment, thepayment of the Mark-to-Market Difference to Party A shall be made by the abovementioned cut-off time on the second JSCC Business Day following the date of calculationof Mark-to-Market Difference, or, in the case of Mark-to-Market Difference related toForeign Currency Cleared Contracts, the first day that is both JSCC Business Day andForeign Currency Home Business Day following the date such payment to JSCC becomesdue.
2 When Party A receives from JSCC Mark-to-Market Difference in respect of Cleared
Contracts subject to Brokerage of Cleared Contract (Settlement Type), Party A shall pay to
Party B Cash in an amount equivalent to such Mark-to-Market Difference by the timeagreed between Party A and Party B, or promptly, absent such agreement, and in themanner agreed between Party A and Party B.
Article 22. Payment or Receipt of Interest on Variation Margin
1 Party A and Party B shall pay or receive Cash equivalent to interest on Variation Margin
in respect of the relevant currency of the Cleared Contract subject to Brokerage which are
Cleared Contracts (Collateral Type) in accordance with this Agreement and the Rules on
the JSCC Business Day specified below according to the currency of Cleared Contract
subject to Brokerage which are Cleared Contracts (Collateral Type):(1) JPY Cleared Contract subject to Brokerage: JSCC Business Day(2) Foreign Currency Cleared Contract subject to Brokerage: On the day that is both
JSCC Business Day and Foreign Currency Home Business Day

111

2 The amount of interest on Variation Margin for Cleared Contracts subject to Brokerage
which are Cleared Contracts (Collateral Type) shall be calculated by JSCC pursuant to
the provisions of the Rules, and Party A shall notify Party B of such amount.
3 When Party A is due to pay to JSCC interest on Variation Margin, Party B shall pay to
Party A Cash in the amount equivalent to said interest by the time agreed between Party
A and Party B that is at or before the cut-off time for its payment to JSCC on the JSCC
Business Day following the date of calculation of the interest on Variation Margin, or, forinterest on Variation Margin related to Foreign Currency Cleared Contracts, on the firstday that is both JSCC Business Day and Foreign Currency Home Business Day following
the date of calculation of such interest on Variation Margin, and in the manner agreed
between Party A and Party B. If Party A and Party B have agreed in advance that it ispractically difficult for Party B to put in place operational procedures for its punctual
payment in accordance with the first sentence of this paragraph, the payment of interest
on Variation Margin shall be made by the above-mentioned cut-off time on the second
JSCC Business Day following the date of calculation of interest on Variation Margin, or, inthe case of interest on Variation Margin related to Foreign Currency Cleared Contracts,
the first JSCC Business Day and Foreign Currency Home Business Day following the datesuch payment to JSCC becomes due.
4 When Party A receives from JSCC interest on Variation Margin, Party A shall pay to Party
B Cash in the amount equivalent to said interest by the time agreed between Party A andParty B, or promptly, absent such agreement, and in the manner agreed between Party A
and Party B.
Article 22-2. Payment or Receipt of Adjustment Amount related to Mark-to-Market Difference
1 Party A and Party B shall pay or receive Cash equivalent to Adjustment Amount related toMark-to-Market Difference (soneki sakin ni kakaru chouseikin) in respect of the relevant
currency of the Cleared Contract subject to Brokerage which is a Cleared Contract(Settlement Type) in accordance with this Agreement and the Rules on the JSCC
Business Day specified below according to Cleared Contract subject to Brokerage which
is a Cleared Contract (Settlement Type) in the below-listed currency:(1) JPY Cleared Contract subject to Brokerage: JSCC Business Day(2) Foreign Currency Cleared Contract subject to Brokerage: On the day that is both
JSCC Business Day and Foreign Currency Home Business Day
2 The amount of Adjustment Amount related to Mark-to-Market Difference for Cleared
Contracts subject to Brokerage which are Cleared Contracts (Settlement Type) shall becalculated by JSCC pursuant to the provisions of the Rules, and Party A shall notify Party
B of such amount.
3 When Party A is due to pay Adjustment Amount related to Mark-to-Market Difference to
JSCC, Party B shall pay to Party A Cash in an amount equivalent to said amount by the112

time agreed between Party A and Party B that is at or before the cut-off time for its
payment to JSCC on the JSCC Business Day following the date of calculation of the
Adjustment Amount related to Mark-to-Market Difference, or, in the case of the
Adjustment Amount related to Mark-to-Market Difference for Foreign Currency Cleared
Contracts, such cut-off time on the first JSCC Business Day and Foreign Currency Home
Business Day following the date of calculation of such Adjustment Amount related toMark-to-Market Difference, in the manner agreed between Party A and Party B. If Party
A and Party B have agreed in advance that it is practically difficult for Party B to put inplace operational procedures for such payment, the payment of the Adjustment Amountrelated to Mark-to-Market Difference shall be made by the above-mentioned cut-off timeon the second JSCC Business Day following the date of calculation of the Adjustment
Amount related to Mark-to-Market Difference, or, in the case of Adjustment Amountrelated to Mark-to-Market Difference for Foreign Currency Cleared Contracts, the first day
that is both JSCC Business Day and Foreign Currency Home Business Day following thedate such payment to JSCC becomes due.
4 When Party A receives from JSCC Adjustment Amount related to Mark-to-Market
Difference, Party A shall pay to Party B Cash in an amount equivalent to said Adjustment
Amount related to Mark-to-Market Difference by the time agreed between Party A andParty B, or promptly, absent such agreement, and in the manner agreed between Party
A and Party B.
Article 23. Right to Claim Return of Variation Margin
Party A and Party B may not claim the other party to return Variation Margin in relation to
Subject Clearing Brokerage Contracts (Collateral Type) except for payment and return inaccordance with the provisions of this Agreement and the Rules.
Article 23-2. Cash Equivalent to Cross Margining MtM Difference
Where a legal relationship between Party A and Party B comes into effect pursuant to theprovision of Article 28-9 of this Agreement, Party B shall pay to Party A Cash equivalent
to the Cross Margining MtM Difference (kurosumajin koushin sakin) in respect of the Cross
Margined JGB Futures Cleared Contract and Cross Margined Interest Rate Futures
Cleared Contracts recorded on Party B Clearing Brokerage Account when Party A is apayer of such Cross Margining MtM Difference to JSCC, and Party A shall pay Cashequivalent to such Cross Margining MtM Difference to Party B when Party A is to receive
such Cross Margining MtM Difference from JSCC.
Article 23-3. Payment or Receipt of Cash Equivalent to Cross Margining MtM Difference
1 When Party A is due to pay to JSCC Cross Margining MtM Difference, Party B shall pay
to Party A Cash equivalent to such Cross Margining MtM Difference by the time agreed
between Party A and Party B that is at or before the cut-off time for its payment to JSCC
on the JSCC Business Day following the day on which the Cross Margining MtM
Difference accrued in the manner agreed between Party A and Party B. If Party A and
113

Party B have agreed in advance that it is practically difficult for Party B to put in place
operational procedures for such payment, such payment shall be made by the abovementioned cut-off time on the second JSCC Business Day following the day on which the
Cross Margining MtM Difference accrued.
2 When Party A receives Cross Margining MtM Difference from JSCC, Party A shall pay
Cash equivalent to such Cross Margining MtM Difference by the time agreed between
Party A and Party B, or promptly, in the absence of such agreement, in the manner agreed
between Party A and Party B.
Section 3 Others
Article 24. Nature of Deposit of Margin
Unless otherwise specified in the Business Rules, deposit of Margin shall constitutedeposit 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 25. Precedence of this Agreement 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), Party A and Party B may claim a return of Margin or assert anyother claim, only as prescribed in this Agreement or the Rules.
Article 26. Treatment of Right to Claim Return of Margin upon Occurrence of Event of
Default or Other Circumstances
1 Party B may not request the return of Margin deposited or paid in accordance with thisAgreement (simply referred to as “Margin”) from JSCC or Party A until the settlement of
all Subject Clearing Brokerage Contracts and Cross Margined JGB Futures Cleared
Contracts and Cross Margined Interest Rate Futures Cleared Contracts recorded on Party
B Clearing Brokerage Account is completed, if:(1) an Event of Default occurs and is continuing in respect of Party B; or(2) all Subject Clearing Brokerage Contracts are terminated pursuant to the provisionof Article 30 of this Agreement.
2 If JSCC declares the Default of Party A, Party B may not request the return of Margin from
JSCC or Party A until the completion of settlement of all Cleared Contracts subject toBrokerage and Cross Margined JGB Futures Cleared Contracts and Cross MarginedInterest Rate Futures Cleared Contracts recorded on Party B Clearing Brokerage Account.
3 If JSCC declares the Default of Party A, Party A may not request the return of Margin from
JSCC or Party B until the completion of settlement of all Cleared Contracts subject toBrokerage and Cross Margined JGB Futures Cleared Contracts and Cross MarginedInterest Rate Futures Cleared Contracts recorded on Party B Clearing Brokerage Account.
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Article 26-2. Method of Settlement of Cash Equivalent to Cash Settlement Amount related
to JPY Cleared Contracts subject to Brokerage
Party A and Party B may settle the receivables and payables in the Cash Settlement
Amount (hendou shoukokin tou) related to JPY Cleared Contracts subject to Brokerage
on a net basis.
Article 26-3. Netting of Initial Margin and Cash Settlement Amount
1 After netting pursuant to the provision of Article 26-2 of this Agreement, the net Cash
Settlement Amount related to JPY Cleared Contracts subject to Brokerage payable byParty B to Party A shall be netted with Initial Margin set forth in Article 11 of this Agreement
as specified in the formulae below. If the net amount is negative, then Party B shalldeposit the absolute value of such amount with Party A. The net amount calculated in
Item (1) shall be deposited in Cash:(1) Initial Margin and Customer Initial Margin Deposited Amount deposited in Cashminus the amount of Cash equivalent to Cash Settlement Amount related to JPY
Cleared Contracts subject to Brokerage payable by Party B to Party A(2) Initial Margin and Customer Initial Margin Deposited Amount minus Cash Allocatedto Settlement minus Initial Margin Deposit Requirement
For the purpose of this Article, “Cash Allocated to Settlement” means Initial Margin andCustomer Initial Margin Deposited Amount deposited in Cash which is applied to Cashequivalent to Cash Settlement Amount related to JPY Cleared Contracts subject toBrokerage payable by Party B to Party A pursuant to Article 26-3.1.(1) above.
2 After the netting pursuant to the provision of Article 26-2 of this Agreement, the net Cash
Settlement Amount related to JPY Cleared Contracts subject to Brokerage to be received
by Party B shall be netted with Initial Margin set forth in Article 11 of this Agreement as
specified in the formula below. If the net amount is negative, then Party B shall deposit
the absolute value of such amount with Party A.
Initial Margin and Customer Initial Margin Deposited Amount plus the amount of Cashequivalent to the net Cash Settlement Amount related to JPY Cleared Contracts subject
to Brokerage receivable by Party B from Party A minus Initial Margin Deposit
Requirement
Article 26-4. Request for Withdrawal and Deemed Deposit of Initial Margin
1 If Party B is due to receive Cash in the amount equivalent to the net Cash Settlement
Amount related to JPY Cleared Contracts subject to Brokerage, as a result of the netting
set forth in Article 26-2 of this Agreement, it shall only receive such amount upon request
by informing Party A of the amount it desires to receive.
2 If no request specified in Paragraph 1 above is received from Party B, Cash in the amount115

equivalent to the net Cash Settlement Amount related to JPY Cleared Contracts subject
to Brokerage receivable by Party B shall be deemed to have been deposited as Initial
Margin.
Article 26-5. Method of Settlement of Variation Margin and Settlement Amount related toForeign Currency Cleared Contracts subject to Brokerage
1 Upon settlement of Cash equivalent to Variation Margin related to Foreign Currency
Cleared Contracts subject to Brokerage, Party A and Party B may net, by each currencyof the Foreign Currency Cleared Contracts subject to Brokerage, the total amount to bereceived and the total amount to be paid.
2 Upon settlement of Cash equivalent to Settlement Amount related to Foreign Currency
Cleared Contracts subject to Brokerage, Party A and Party B may net, by each currencyof the Foreign Currency Cleared Contracts subject to Brokerage, the total amount to bereceived and the total amount to be paid.
Chapter 4 Per Trade Compression and other Compressions of Cleared Contract Subject toBrokerage
Article 26-6. Application for Per Trade Compression of Cleared Contract Subject toBrokerage
1 When Party B intends to instruct Party A to apply for, or to give instruction to withdraw its
application for, Per Trade Compression (torihiki goto kompuresshon) in relation to theCleared Contract subject to Brokerage, it shall notify such effect to Party A by the timeagreed between Party A and Party B in the manner agreed between Party A and Party B.
2 Upon receipt of the above-mentioned notice, Party A shall apply for or withdraw its
application for the Per Trade Compression as instructed by Party B to JSCC in accordancewith the provisions of the Rules.
Article 26-7. Application for Blended Rates Compression of Cleared Contract Subject toBrokerage
1 When Party B intends to instruct Party A to apply for, or to give instruction to withdraw its
application for, Blended Rates Compression (kupon burendeingu) in relation to theCleared Contract subject to Brokerage, it shall notify such effect to Party A by the timeagreed between Party A and Party B in the manner agreed between Party A and Party B.
2 Upon receipt of the above-mentioned notice, Party A shall apply for or withdraw its
application for the Blended Rates Compression as instructed by Party B to JSCC in
accordance with the provisions of the Rules.
Article 26-8.
Brokerage

Application for JSCC-Initiated Compression of Cleared Contract subject to116

1 When, in respect of Cleared Contract subject to Brokerage, Party B 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 Cleared Contract
subject to Brokerage, give instruction to withdraw its application or give instruction toagree to the JSCC-Initiated Compression, Party B shall notify Party A of such intention in
the manner and by the date and time separately agreed between Party A and Party B.
2 Upon receipt of the notice set forth in Paragraph 1, Party A shall express the intention ofutilization of the JSCC-Initiated Compression, apply for the JSCC-Initiated Compression
in respect of the Cleared Contract subject to Brokerage, withdraw the relevant applicationor agree to the JSCC-Initiated Compression to JSCC as stated in such notice, pursuant
to the provisions of the Rules.
Article 27. Application for Vendor-Initiated Compression of Cleared Contract Subject toBrokerage
1 When Party B intends to instruct Party A to apply for Vendor-Initiated Compression(ikkatsu kompuresshon), it shall notify such effect to JSCC in accordance with theprovisions of the Rules.
2 Party A and Party B hereby agree in advance that when the notification set forth inParagraph 1 arrives at JSCC, Party B shall be deemed to have given instruction to Party
A to apply for Vendor-Initiated Compression, and Party A shall be deemed to haveaccepted such instruction and made application as set forth in the Rules.
3 Notwithstanding the provision of Paragraph 2, if Party B does not belong to the same
Corporate Group as Party A, the phrase “, and Party A shall be deemed to have acceptedsuch instruction and made application” in Paragraph 2 shall be deleted.
4 When Party B has been deemed to have given instruction to Party A pursuant to theprovision of Paragraph 2 as amended by the provision of Paragraph 3 and JSCC gives
notice related to such instruction to Party A in accordance with the provisions of the Rules,
Party A shall notify JSCC of its decision as to whether or not it accepts the instruction to
apply for such Vendor-Initiated Compression.
Article 27-2. Application for Member-Initiated Compression of Cleared Contract Subject toBrokerage
1 When Party B intends to instruct Party A to apply for Member-Initiated Compression(sankasha teian gata kompuresshon), it shall notify such effect to JSCC in accordancewith the provisions of the Rules.
2 Party A and Party B hereby agree in advance that when the notification set forth inParagraph 1 arrives at JSCC, Party B shall be deemed to have given instruction to Party
A to apply for Member-Initiated Compression, and Party A shall be deemed to have117accepted such instruction and made application as set forth in the Rules.
3 Notwithstanding the provision of Paragraph 2, if Party B does not belong to the same
Corporate Group as Party A, the phrase “, and Party A shall be deemed to have acceptedsuch instruction and made application” in Paragraph 2 shall be deleted.
4 When Party B has been deemed to have given instruction to Party A pursuant to theprovision of Paragraph 2 as amended by the provision of Paragraph 3 and JSCC gives
notice related to such instruction to Party A in accordance with the provisions of the Rules,
Party A shall notify JSCC of its decision as to whether or not it accepts the instruction to
apply for such Member-Initiated Compression.
Article 28 Termination of Subject Clearing Brokerage Contract as a Result of Per Trade
Compression or other Compressions
When a Cleared Contract subject to Brokerage is terminated as a result of a Per Trade
Compression, a Blended Rates Compression, a Vendor-Initiated Compression, aMember-Initiated Compression or a JSCC-Initiated Compression, the relevant Subject
Clearing Brokerage Contract shall also terminate automatically, and the claims andobligations under the Subject Clearing Brokerage Contracts, other than those related toCash Settlement Amounts for which deposit or payment under the Subject Clearing
Brokerage Contracts related to Foreign Currency Cleared Contracts subject to Brokeragedue at the time of JSCC’s confirmation of the satisfaction of Per Trade Compression
Conditions, Blended Rates Compression Conditions, Vendor-Initiated Compression
Conditions, Member-Initiated Compression Conditions or JSCC-Initiated Compression
Conditions has not been completed, shall cease to exist and have no future effect inaccordance with the provisions of the Rules. In such case, Cash remain unsettled
between Party A and Party B with respect to such Subject Clearing Brokerage Contract,
if any, shall be promptly settled between Party A and Party B.
Article 28-2.
Conclusion of Subject Clearing Brokerage Contracts by Per Trade
Compression and other Compressions
When new Cleared Contracts subject to Brokerage which are Cleared Contracts(Collateral Type) come into effect between Party A and JSCC as a result of the Per Trade
Compression, the Blended Rates Compression, the Vendor-Initiated Compression, theMember-Initiated Compression or the JSCC-Initiated Compression, the Subject Clearing
Brokerage Contracts(Collateral Type) corresponding to such Cleared Contracts subject
to Brokerage which are Cleared Contracts (Collateral Type) shall come into effectbetween Party A and Party B at the same time.
Chapter 4-2 Position Transfer of Clearing Brokerage Contracts
Article 28-3.
Participant

Position Transfer of Subject Clearing Brokerage Contract to Other Clearing118

1 Subject to the provisions of the Rules, Party B may transfer the below listed claims andobligations under the Cleared Contracts subject to Brokerage with respect to which Party
B desires a Position Transfer to the Successor Clearing Broker (“Relevant Cleared
Contract subject to Brokerage”) entirely to the Successor Clearing Broker by delivering
Position Transfer Request in the form prescribed by JSCC to JSCC via Successor
Clearing Broker, and if JSCC accepts such request for Position Transfer:(1)

Claims and obligations of which the terms and conditions designated in theRules are identical to the claims and obligations under to the Relevant
Cleared Contract subject to Brokerage between Party A and JSCC existing
immediately before the termination of the Relevant Cleared Contract subject
to Brokerage pursuant to the provision of Paragraph 5 below; and(2)

Claims and obligations of which the terms and conditions designated in theRules are identical to the claims and obligations under the Subject Clearing
Brokerage Contract between Party A and Party B existing immediately before
the termination of the Subject Clearing Brokerage Contract corresponding to
the Relevant Cleared Contract subject to Brokerage pursuant to the provisionof Paragraph 5 below.

2 Party A and Party B hereby agree in advance that, when the claims and obligations listed
in Paragraph 1 related to all Cleared Contracts subject to Brokerage for Party B aretransferred to the Successor Clearing Broker pursuant to the provision of Paragraph 1,
Initial Margin in which Party B has the right to claim return pursuant to the provision of
Article 17 of this Agreement will be deemed as Initial Margin that has been deposited with
JSCC by Party B via the Successor Clearing Broker as agent at the time of such Position
Transfer, except for those for which notification to the effect of treating it as Initial Margindeposited with JSCC through Party A acting as agent has been given pursuant to theprovisions of the Rules.
3 When Party B makes request to JSCC of the Position Transfer pursuant to the provisionof Paragraph 1, Party B shall request the Successor Clearing Broker to accept such
Position Transfer and obtain its consent in advance. Then, Party B shall notify Party A
to the effect that it will request such Position Transfer. In this case, Party B shall deposit
and pay to Party A the Margin Required to Clear related to the Cleared Contract subject
to Brokerage to be paid or received in association with the Position Transfer and otheramount to be paid or received between Party A and Party B in relation to the Cleared
Contract subject to Brokerage pursuant to the provisions of the Rules, excluding Initial
Margin deemed to have been deposited with JSCC via the Successor Clearing Broker
acting as agent pursuant to the provision of Paragraph 2, by the date and time agreed
between Party A and Party B that is at or before the cut-off time for delivery to JSCC, inthe manner agreed between Party A and Party B.

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4 When JSCC has accepted the request for the Position Transfer made pursuant to theprovision of Paragraph 1, the claims and obligations specified in Paragraph 1 shall accrue
among JSCC, Successor Clearing Broker and Party B at the time of such acceptance. In
this case, claims and obligations between Successor Clearing Broker and JSCC shall betreated as those under the Cleared Contracts subject to Brokerage which are Cleared
Contracts (Collateral Type) while claims and obligations between Successor Clearing
Broker and Party B shall be treated as those under the Clearing Brokerage Contracts(Collateral Type).
5. When the Position Transfer is completed among JSCC, Successor Clearing Broker andParty B pursuant to the provisions of the Rules, the Relevant Cleared Contracts subject
to Brokerage between JSCC and Party A and the Subject Clearing Brokerage Contracts
corresponding thereto between Party A and Party B shall terminate as a matter of course
at the time when the Position Transfer becomes effective, and the claims and obligations
under the Relevant Cleared Contracts subject to Brokerage and the Subject Clearing
Brokerage Contracts corresponding thereto, other than those related to Settlement
Amounts for which deposit or payment under the Subject Clearing Brokerage Contracts
related to Foreign Currency Cleared Contracts subject to Brokerage due at the time of
the confirmation, pursuant to the provisions of the Rules, of the deposit with or payment
to JSCC of the Margin Required to Clear has not been completed, shall cease to exist
and have no future effect pursuant to the provisions of the Rules.
Article 28-4.
Participant

Position Transfer of Clearing Brokerage Contracts from other Clearing

1 When Party B requests the Position Transfer of the Customer's Cleared Contracts of Party
B’s another Clearing Broker coming into effect as a result of its Clearing Brokerage forParty B (referred to as “Carrying Clearing Broker” in this Article) and other claims andobligations set forth in the Rules (“Position Transfer Cleared Contracts” (shoukei taishou
seisan yakujou tou)) to Party A, and Party A accepts such request and submits such
request form to JSCC pursuant to the provisions of the Rules, the Position Transfer of the
Position Transfer Cleared Contracts to Party A shall come into effect pursuant to theprovisions of the Rules.
2 When Party A accepts the Position Transfer pursuant to the provision of Paragraph 1 andhas received the request form therefor from Party B in accordance with the Rules, it shallsubmit such request form to JSCC by 1:00 p.m. on the JSCC Business Day which is thedesired date of Position Transfer. Such request form shall state, among other things, theeffect that Party A has received the request to accept the Position Transfer, it hasconsented to accept such Position Transfer and it is submitting the request form for such
Position Transfer to JSCC; and that Party B notified the Carrying Clearing Broker of such
Position Transfer and Party B requests the Position Transfer to JSCC.

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3 If the Carrying Clearing Broker’s Position Transfer Cleared Contracts are transferred toParty A pursuant to the provision of Paragraph 1, the Carrying Clearing Broker’s Position
Transfer Cleared Contracts shall be deemed as the Cleared Contracts subject toBrokerage which are Cleared Contracts (Collateral Type) and the Subject Clearing
Brokerage Contracts (Collateral Type) for the purpose of this Agreement and theprovisions of this Agreement shall apply accordingly.
4 Party A and Party B hereby agree in advance that if the Carrying Clearing Broker’s
Position Transfer Cleared Contracts are transferred to Party A pursuant to the provisionof Paragraph 1 and the claims and obligations arising from all Customer’s Cleared
Contracts are transferred, the Initial Margin in which Party B has the right to claim return
pursuant to the provisions of the Clearing Brokerage Agreement between Party B and theCarrying Clearing Broker shall be deemed as Initial Margin deposited with JSCC by Party
B via Party A acting as its agent at the time of such Position Transfer, except for those forwhich notification to the effect of treating it as Initial Margin deposited with JSCC throughCarrying Clearing Broker acting as agent has been given pursuant to the provisions of theRules.
Article 28-5.

Transfer of Subject Clearing Brokerage Contracts to Party A, Other Clearing

Participant or Other Customer
1 Subject to the provisions of the Rules, Party B may Transfer the Subject Clearing
Brokerage Contracts to Party A, any other Clearing Participant (referred to as “Transferee
Clearing Participant” in this Article) or any other Customer (seisan itakusha) (referred toas “Transferee Customer in this Article”).
For the purpose of this Article, “Transfer” means (i) to have a Subject Clearing BrokerageContract and the claims and obligations under the Subject Clearing Brokerage Contract,other than those related to Settlement Amounts for which deposit or payment under the
Subject Clearing Brokerage Contracts related to Foreign Currency Cleared Contracts dueat the time of the confirmation of the deposit with or payment to JSCC of the Margin
Required to Clear pursuant to the provisions of the Rules has not been completed, cease
to exist pursuant to the provisions of the Rules, or (ii) to have a Subject Clearing BrokerageContract and the claims and obligations under the Subject Clearing Brokerage Contract,other than those related to Settlement Amounts for which deposit or payment under the
Subject Clearing Brokerage Contracts related to Foreign Currency Cleared Contracts
subject to Brokerage due at the time of the confirmation of the deposit with or payment to
JSCC of the Margin Required to Clear has not been completed, cease to exist pursuant to
the provisions of the Rules and simultaneously to have a new legal relationship with thesame terms and conditions come into effect between the Transferee Customer and the121Clearing Broker for the Transferee Customer.
2 Before requesting a Transfer of a Subject Clearing Brokerage Contract, Party B shallagree in advance with Party A, and the Transferee Clearing Participant, if the Subject
Clearing Brokerage Contract is transferred to a Transferee Clearing Participant, or theTransferee Customer and its Clearing Broker, if the Subject Clearing Brokerage Contract
is transferred to a Transferee Customer, on the settlement of claims and obligations
between them arising from the Transfer and other necessary matters.
Article 28-6. Transfer of Clearing Brokerage Contracts from Other Customer
1 Subject to the provisions of the Rules, Party B may accept a Transfer from another
Customer (referred to as “Transferor Customer” in this Article) of legal relationshipbetween the Transferor Customer and its Clearing Broker that are similar to Clearing
Brokerage Contracts (referred to as “Transferred Clearing Brokerage Contract”).
For the purpose of this Article, “Transfer” means to have Transferred Clearing BrokerageContract, other than the claims and obligations related to Settlement Amounts for which
deposit or payment under the Customer’s Cleared Contracts of the Clearing Broker for theTransferor Customer on the book of such Transferor Customer related to Foreign Currency
Cleared Contracts due at the time of the confirmation of the deposit with or payment to JSCC
of the Margin Required to Clear pursuant to the provisions of the Rules has not been
completed, cease to exist pursuant to the provisions of the Rules and simultaneously to havea new legal relationship as the Clearing Brokerage Contracts (Collateral Type) with the sameterms and conditions come into effect between Party A and Party B.
2 Before accepting Transfer of the Transferred Clearing Brokerage Contract from theTransferor Customer, Party B shall agree in advance with Party A and the Transferor
Customer (or, when accepting transfer from the Transferor Customer whose Clearing
Broker is a Clearing Participant other than Party A, the Transferor Customer and theClearing Broker for the Transferor Customer) on the settlement of claims and obligations
among them arising from the Transfer and other necessary matters.
Article 28-6-2. Transfer of Cleared Contracts from Party A
1 Subject to the provisions of the Rules, Party A may transfer to Party B the Cleared
Contracts between Party A and JSCC on Party A’s proprietary account.
For the purpose of this Article, “Transfer” means a process to have a new legal relationshipas a Clearing Brokerage Contract (Collateral Type) with the same economic effect as the
Cleared Contracts on Party A’s proprietary account, other than the claims and obligations
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related to Settlement Amounts for which deposit or payment under the Cleared Contracts
related to Foreign Currency Cleared Contracts due at the time of the confirmation of thedeposit with or payment to JSCC of the Margin Required to Clear pursuant to the provisionsof the Rules has not been completed, come into effect between Party A and Party B anddeem such Cleared Contracts as Cleared Contracts subject to Brokerage which are Cleared
Contracts (Collateral Type) between JSCC and Party A as a result of its Clearing Brokeragefor Party B under the Clearing Brokerage.
2 Before requesting a Transfer of the Cleared Contracts to Party B, Party A shall agree inadvance with Party B on the settlement of claims and obligations between Party A andParty B arising from the Transfer and other necessary matters.
Article 28-6-3. Transfer of Cleared Contracts from Other Clearing Participant
1 Subject to the provisions of the Rules, Party B may accept a transfer from a Clearing
Participant other than Party A (referred to as “Transferor Clearing Participant” in this
Article) the Cleared Contracts between the Transferor Clearing Participant and JSCC on
the Transferor Clearing Participant’s proprietary book.
For the purpose of this Article, “transfer” means to have a new legal relationship having
the same economic effect as the Cleared Contracts on the Transferor Clearing
Participant’s proprietary book, other than the claims and obligations related to settlement
amounts for which deposit or payment under the Cleared Contracts related to Foreign
Currency Cleared Contracts due at the time of the confirmation of the deposit with or
payment to JSCC of the Margin Required to Clear pursuant to the provisions of the Rules
has not been completed, come into effect between Party A and Party B and deem such
Cleared Contracts as Cleared Contracts subject to Brokerage between JSCC and Party
A acting as an agent for Party B under the Clearing Brokerage.
2 When intending to accept a transfer of Cleared Contracts from a Transferor Clearing
Participant, Party B shall agree in advance with Party A and the Transferor Clearing
Participant on the settlement of claims and obligations among them arising from thetransfer and other necessary matters.
Chapter 4-3 Cross Margining
Article 28-7. Utilization of Cross Margining
1 When Party B intends to use Cross Margining, it shall obtain consent of Party A byclarifying the below-listed persons to Party A:(1) Cross Margining Requestor (kurosumajin sinseisha); and(2) if relevant, JGB Futures Non-Clearing Participant (kokusai sakimono tou hi seisansankasha) acting as broker for Party B in respect of JGB Futures Contracts orInterest Rate Futures Contracts.

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2 Upon providing consent mentioned in Paragraph 1, Party A shall notify JSCC of such effectin the manner prescribed in the Rules.
3 When there is any change to the persons listed in Paragraph 1, Party B shall give an
advance notice of such change to Party A, which then notifies JSCC of such change
pursuant to the provisions of the Rules.
4 When intending to cease utilization of the Cross Margining, Party B shall give an advancenotice of such effect to Party A, which then notifies JSCC of such effect pursuant to theprovisions of the Rules.
Article 28-8. Recording on and Deletion from Clearing Brokerage Account of Position of
Cross Margined JGB Futures Cleared Contracts and Cross Margined Interest Rate Futures
Cleared Contracts
When JSCC recorded on or deleted from Party A’s Customer Account opened for Party
B which is a Cross Margining User (kurosumajin riyousha) Positions of JGB Futures
Contracts and Interest Rate Futures Contracts for the account of Party B pursuant to theprovisions of the Rules, Party A shall record on or delete from, as the case may be, Party
B Clearing Brokerage Account the Positions of the relevant JGB Futures Contract andInterest Rate Futures Contract.
Article 28-9. Legal Relationship related to Cross Margined JGB Futures Cleared Contracts
and Cross Margined Interest Rate Futures Cleared Contracts
1 When the claims and obligations with the same terms and conditions as those of Cross
Margined JGB Futures Cleared Contract or Cross Margined Interest Rate Futures Cleared
Contract that is recorded on Party B Clearing Brokerage Account between the Cross
Margining Requester and JSCC came into existence between Party A and JSCC pursuant
to the provisions of the Rules, simultaneously with the time when such claims andobligations come into effect, the legal relationship having the same economic effect as a
Subject Clearing Brokerage Contract which would come into effect if such claims andobligations come into effect as a result of Party A’s Clearing Brokerage for Party B under
this Agreement shall arise between Party A and Party B.
2 When JSCC conducts offsetting sale or offsetting purchase set forth in Article 28-10.1 ofthis Agreement, the legal relationship which has arisen in accordance with the provisionof Paragraph 1 shall cease to exist and have no future effect as of the time of suchoffsetting sale or offsetting purchase
Article 28-10. Liquidation of Cross Margined JGB Futures Cleared Contracts and Cross
Margined Interest Rate Futures Cleared Contracts
1 When the legal relationship as set forth in Article 28-9 comes into effect between Party A
and Party B, JSCC may cause the JGB Futures Clearing Participant (kokusai sakimono
tou seisan sankasha) of its selection to conduct offsetting sale or offsetting purchase or
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take other necessary liquidation process in respect of the Cross Margined JGB Futures
Cleared Contracts and Cross Margined Interest Rate Futures Cleared Contracts of which
Positions are recorded on Party B Clearing Brokerage Account pursuant to the provisionsof the Rules.
2 If a Cross Margining Liquidation Transaction (kurosumajin shobun torihiki) is executed in
respect of a Cross Margined JGB Futures Cleared Contract or Cross Margined Interest
Rate Futures Cleared Contract of which Position is recorded on Party B Clearing
Brokerage Account and the Subject Clearing Brokerage Contract has not been terminated,
the provisions of this Agreement shall apply by deeming the IRS Transaction which comes
into effect pursuant to the provision of Article 93-2.4 of the Business Rules as the Cleared
Contract subject to Brokerage which comes into effect as a result of Party A’s Clearing
Brokerage for Party B, and the legal relationship between Party A and Party B in respectof the IRS Transaction as the Subject Clearing Brokerage Contract related to the IRS
Transaction which is deemed to be the Cleared Contract subject to Brokerage pursuant
to the provision of this paragraph, respectively.
Article 28-11. Payment or Receipt of Cash Equivalent to Upfront Fee
1 When the IRS Transaction set forth in Article 28-10.2 comes into effect and Party A is due
to pay to JSCC upfront fee in respect of the IRS Transaction, Party B shall pay to Party A
the Cash equivalent to the upfront fee by the time agreed between Party A and Party B
that is at or before the cut-off time for its payment to JSCC on the JSCC Business Day
following the date of execution of the IRS Transaction in the manner agreed between Party
A and Party B. If Party A and Party B have agreed in advance that it is practically difficult
for Party B to put in place operational procedures for such payment, such payment shallbe made by the above-mentioned cut-off time on the JSCC Business Day following thedate on which the payment to JSCC becomes due.
2 When the IRS Transaction set forth in Article 28-10.2 comes into effect and Party A has
received upfront fee from JSCC in respect of the IRS Transaction, Party A shall pay Cashequivalent to the upfront fee by the time agreed between Party A and Party B, or promptly,
in the absence of such agreement, in the manner agreed between Party A and Party B.
Chapter 5 Party Default
Section1 Default of Party B
Article 29. Event of Default
1 An occurrence of any of the following events shall constitute an Event of Default in respectof Party B:(1) Failure to perform payment obligation or delivery obligation:
If Party B fails to perform any of its payment obligations or delivery obligations
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under this Agreement as it becomes due and fails to cure such failure within one
local business day from the date of the notice of failure from Party A to Party B. In
the above sentence, a “local business day” means a day on which commercial
banks located in the place designated by Party B as its address for receiving
notices are open for general business, including the dealings in foreign exchange
and foreign currency deposits;(2) Breach of agreement or repudiation of performance:
If Party B fails to perform any of its obligations under this Agreement (other thanthe payment obligations and delivery obligations set forth in Item (1)) and fails tocure such failure within 30 days from the date of the notice of failure from Party A
to Party B;(3) Bankruptcy and other similar events:a.
If Party B is dissolved (excluding the dissolution as a result of a merger);b.

If Party B (i) becomes insolvent, (ii) becomes unable to pay its debts, (iii)suspends payment of its obligations when due (other than the payment
obligations and delivery obligations set forth in Item (1)), or (iv) admits inwriting that it is generally unable to pay its debts when due.
For the purpose of this Sub-item b., if Party B is an entity established orformed under the Japanese law, the terms “insolvent,”(saimu chouka)“unable to pay its debts” (shiharai funou) and “suspend payment” (shiharai
teishi) shall have the same meaning as used in the Bankruptcy Act (ActNo.75 of 2004) (hasan hou);c.

If Party B carries out a general assignment, an arrangement (saimu seiri)
or a composition (wakai) with or for creditors;d.

If a petition is filed in respect of Party B for commencement of proceedings
seeking a insolvency or determination of bankruptcy or other relief under
the laws concerning bankruptcy or insolvency or other similar laws
affecting the rights of creditors, including a petition for commencement or
acknowledgment of the bankruptcy proceedings, rehabilitation
proceedings, reorganization proceedings, special liquidation (tokubetsu
seisan) or foreign bankruptcy proceedings or equivalent proceedings
under laws and regulations of a foreign country against Party B, or if apetition for dissolution or liquidation of Party B is filed;e.

If Party B adopts a resolution for its dissolution (kaisan), being under state
control or liquidation (seisan);

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f.

If Party B requests an appointment of a receiver (kanzainin), provisional
administrator or other similar official (“Receiver”) in respect of itself or amaterial part of its assets, or a Receiver is appointed for Party B or amaterial part of Party B’s assets;g.

If any secured creditor of Party B takes possession of, or files a petition forcompulsory execution, attachment, compulsory administration of or otherlegal proceedings in relation to, a material part of the assets of Party B andif such assets are not released, or the petition is neither dismissed nor
withdrawn, within 15 days from the date of commencement of such
possession or the date of filing of such petition, as the case may be;h.

If any event having similar effects to any of the events set forth in a. throughg. above occurs in respect of Party B; ori.

If Party B takes any action to facilitate, consents to, acknowledges or
implicitly admits any of the events set forth in a. through h. above.

(4) Acceleration of Obligations under Agreement for Setting up Futures/Options Trading
Account
When Cross Margined JGB Futures Cleared Contracts or Cross Margined Interest
Rate Futures Cleared Contracts are recorded on Party B Clearing Brokerage
Account, if obligations of Party B has been accelerated under an Agreement for
Setting up Futures/Options Trading Account (sakimono opushon torihiki kouza
settei yakudakusho) prescribed by the Designated Market Operator (shitei shijou
kaisetsusha) for brokerage of JGB Futures Contracts or Interest Rate Futures
Contracts or under a Contract for Commissioning Clearance Relating to JGB
Futures, Etc. (kokusai sakimono tou seisan jutaku keiyakusho) concluded pursuant
to the provision of Article 39 of the Securities and Similar Contracts Business Rules(shouken torihiki tou gyoumu houhousho).
2 If Party A and Party B separately agree that some of the Events of Default set forth inParagraph 1 shall not apply or that certain other events shall be added to the definition of
the Event of Default under this Agreement, such agreement shall prevail. In this case,the event agreed to be added shall constitute an Event of Default under this Agreement.
3 Notwithstanding the provisions of Paragraphs 1 and 2, Paragraph 1.(3).d. may bereplaced with the following, if Party A and Party B so agree:[(A) If Party B files a petition for commencement of proceedings seeking an
insolvency or determination of bankruptcy or other relief (hereinafter referred to as“Legal Bankruptcy Proceedings”) under laws concerning bankruptcy or insolvency
or other similar laws affecting the rights of creditors, or if a petition for127

commencement of the Legal Bankruptcy Proceedings is filed against Party B by aregulatory authority, supervisor or any similar government official that is located in
the place of establishment or formation of Party B or at the location of its head
office or principal place of business and has principal jurisdiction over bankruptcy,
corporate reorganization (kaisha kousei) of or regulations on Party B (“Regulatory
Authority”), or if a petition for dissolution or liquidation of Party B is filed by Party B
or by the Regulatory Authority; or(B) If a petition for commencement of the Legal Bankruptcy Proceedings or for
dissolution or liquidation is filed against Party B by any person other than Party B
or the Regulatory Authority and if the petition results in the insolvency,
determination of bankruptcy, the issuance of an order for relief or order for
dissolution or liquidation or if the petition is not dismissed, revoked, stayed orsuspended within 15 days from the date of filing thereof.]
Article 30. Termination of Subject Clearing Brokerage Contracts upon Occurrence of Eventof Default
1 If an Event of Default occurs and is continuing in respect of Party B, Party A may designate
the day on which all Subject Clearing Brokerage Contracts shall terminate before theTermination Date of Cleared Contracts subject to Brokerage pursuant to the provisions of
this Article (“Early Termination Date”). The designation of the Early Termination Date shalltake effect by giving Party B a not more than 20 days prior notice specifying the relevant
Event of Default, provided that if Party A and Party B separately agree that a certain dateshall be designated in advance as the Early Termination Date applicable to all or part of
the Events of Default, such agreement shall prevail.
2 All Subject Clearing Brokerage Contracts outstanding as of the Early Termination Dateshall be automatically terminated without further notice from Party A or Party B on the
Early Termination Date.
3 Notwithstanding the provisions of Paragraphs 1 and 2, upon occurrence of the Event of
Default set forth in Article 29.1.(3).d. or Article 29.1.(4) in respect of Party B, all Subject
Clearing Brokerage Contracts shall be automatically terminated immediately before theoccurrence of such Event of Default without further notice from Party A or Party B and thedate of termination of such Subject Clearing Brokerage Contracts shall be the Early
Termination Date.
4 If the Subject Clearing Brokerage Contracts are terminated pursuant to the provisions ofParagraphs 2 and 3, Party A or Party B shall notify JSCC to that effect in advance orwithout delay after the termination.
5 If all Subject Clearing Brokerage Contracts are terminated pursuant to the provision of
Paragraph 2 or 3, the Cleared Contracts subject to Brokerage corresponding to the
Subject Clearing Brokerage Contracts shall remain in force as the Cleared
128

Contracts(Collateral Type) between JSCC and Party A on its proprietary account.
6 On or after the Early Termination Date, Party A may execute one or more transactions tohedge, entirely or in part, loss which Party A may incur as a result of the Cleared Contracts
to survive on its proprietary account pursuant to the provision of Paragraph 5 (“Risk
Mitigating Transactions”). In such case, the Risk Mitigating Transactions shall be the IRS
Transactions that satisfy the criteria set forth in Article 9 of the Handling Procedures ofInterest Rate Swap Business Rules (kinri suwappu torihiki seisan gyoumu ni kansuru
gyoumu houhousho no toriatsukai), and shall cover loss which Party A may suffer from allor a part of such Cleared Contracts. Counterparty to Risk Mitigating Transactions shall be
another Clearing Participant of JSCC or a Customer of such other Clearing Participant.
7 If all Subject Clearing Brokerage Contracts are terminated pursuant to the provision of
Paragraph 2 or 3, Party A and Party B shall pay or receive the Early Termination Amountwith respect to each of such Subject Clearing Brokerage Contracts. In this case, the
Early Termination Amount shall be the sum of the amounts stated in Items (1) through (3)below less the amount stated in Item (4). If the amount so obtained is positive, the Early
Termination Amount shall be paid by Party A to Party B and if negative, it shall be paid byParty B to Party A:(1)

The total amount of the following:a.

The total amount of upfront fees that Party A received in respect of the
Risk Mitigating Transactions executed by Party A, less the total amount of
upfront fees that Party A paid in respect of such Risk Mitigating
Transactions;b.

The total amount of upfront fees that Party A received in respect of the IRS
Transactions set forth in Article 28-10.2, less the total amount of upfront
fees that Party A paid in respect of such IRS Transactions.

For the purpose of this item, in respect of the upfront fee to be paid or received inany currency other than Japanese yen, the above amounts shall be the Japanese
yen equivalent of such amount converted using the quotes of foreign exchange
rate on the date of execution of the Risk Mitigating Transactions or the IRS
Transactions set forth in Article 28-10.2.
(2)

The total amount of Net Present Values (shoumi genzai kachi) calculated withrespect to the transactions listed in a. and b. below as of the date specified in sucha. and b.:a.

Risk Mitigating Transactions and Cleared Contracts subject to Brokeragecovered by Risk Mitigating Transactions:
129

Date of execution of such Risk Mitigating Transactions;b.

Cleared Contracts subject to Brokerage other than those specified in a.
above:
JSCC Business Day immediately preceding the date of the notice set forthin Paragraph 8;

For the purpose of this item, in respect of the Net Present Value calculated in any
currency other than Japanese yen, the above amounts shall be the Japanese yen
equivalent of such amount converted using the quotes of foreign exchange rateon the date mentioned in such a. and b., as applicable.
(3)

The sum of the amounts specified in a. through c. below with respect to thetransactions specified in a. through c. below:a.

Subject Clearing Brokerage Contracts outstanding between Party A andParty B:The sum of Fixed Amounts Floating Amounts and other payment amounts
due from Party A to Party B on or before the Early Termination Date which
remain unpaid; less the sum of Fixed Amounts, Floating Amounts andother payment amounts, that are due from Party B to Party A on or before
the Early Termination Date which remain unpaid;b.

Cleared Contracts subject to Brokerage covered by Risk Mitigating
Transactions:
The sum of Party A’s receivable of Fixed Amounts, Floating Amounts andother payment amounts; less the sum of Party A’s payable of Fixed
Amounts, Floating Amounts and other payment amounts, that are dueduring the period from the Early Termination Date to the date of executionof such Risk Mitigating Transactions;c.

Cleared Contracts subject to Brokerage other than those specified in b.
above:The sum of Party A’s receivable of Fixed Amounts, Floating Amounts andother payment amounts; less the sum of Party A’s payable of Fixed
Amounts, Floating Amounts and other payment amounts, that are dueduring the period from the Early Termination Date to the date on which thenotice set forth in Paragraph 8 is given.

For the purpose of this item, in respect of the Fixed Amounts, Floating Amounts
and other payment amounts to be paid or received in any currency other thanJapanese yen, the above amounts shall be the Japanese yen equivalent of suchamount converted using the quotes of foreign exchange rate on the Early130

Termination Date.
(4)
In addition to those listed in Items (1) through (3), if Party A suffers loss, orincurs costs or liabilities in relation to the settlement of the Cleared Contracts
subject to Brokerage, the amount equivalent to such loss, costs or liabilities. For
the purpose of this item, in respect of the amount to be paid or received in any
currency other than Japanese yen, the above amount shall be the Japanese yen
equivalent of such amount converted using the quotes of foreign exchange rateon the Early Termination Date.
8 As soon as possible on or after the Early Termination Date, Party A shall execute the Risk
Mitigating Transactions set forth in Paragraph 6 and calculate the Early Termination
Amount set forth in Paragraph 7. After the calculation of such Early Termination Amount,Party A shall give notice of breakdown of such Early Termination Amount, including thedetails of the Risk Mitigating Transactions and profits and losses arising from such Risk
Mitigating Transactions, and information used for calculation of the Early Termination
Amount obtained pursuant to the provision of Paragraph 7, to Party B.
9 If Party A and Party B have agreed to adopt an alternative description of the event set
forth in Article 29.1.(3).d. of this Agreement pursuant to the provision of Article 29.3 of thisAgreement, the provision of Paragraph 3 shall be replaced with the following.
[Notwithstanding the provisions of Paragraphs 1 and 2, if the Event of Default set
forth in Article 29.1.(3).d. or Article 29.1.(4) of this Agreement occurs and iscontinuing in respect of Party B, Party A may designate the Early Termination Dateof the Subject Clearing Brokerage Contracts within 20 days after the occurrence ofsuch Event of Default (referred to as “Early Termination Date Designation Period”
in this paragraph). In this case, the Early Termination Date shall be designatedby such method and shall have such effect as set forth in the provisions ofParagraphs 1 and 2. If Party A does not designate the Early Termination Date
within the Early Termination Date Designation Period, all Subject Clearing
Brokerage Contracts shall be automatically terminated as of the expiry of the Early
Termination Date Designation Period without further notice from Party A or Party
B.]
Article 31. Return of Customer Initial Margin upon Termination of Subject Clearing
Brokerage Contracts
1 If all Subject Clearing Brokerage Contracts are terminated pursuant to the provision of
Article 30.2 or 30.3 of this Agreement, Party A shall immediately return to Party B
Customer Initial Margin deposited by Party B, provided that Party B may not request thereturn of Customer Initial Margin from Party A until the settlement of all Subject Clearing
Brokerage Contracts and Cross Margined JGB Futures Cleared Contracts and Cross
Margined Interest Rate Futures Cleared Contracts recorded on Party B Clearing
131

Brokerage Account is completed under the provision of Article 26.1 of this Agreement.
This proviso shall not affect the settlement of the claims and obligations in Customer Initial
Margin pursuant to the provision of Article 32 below.
2 For the purpose of Paragraph 1, if Customer Initial Margin is deposited in the form of
Eligible Securities Collateral, unless otherwise agreed between Party A and Party B, Party
A shall return Cash in the amount equivalent to the market value of the Eligible Securities
Collateral as of the Early Termination Date used to determine the appraisal value of the
Eligible Securities Collateral in lieu of returning Eligible Securities Collateral.
3 When all Subject Clearing Brokerage Contracts are terminated pursuant to the provisionof Article 30.2 or 30.3 of this Agreement, Party A and Party B shall immediately return tothe other party Variation Margin deposited by the other party in accordance with thisAgreement, provided that Party B may not request the return of Variation Margin from
Party A until the settlement of all Subject Clearing Brokerage Contracts is completed under
the provision of Article 26.1 of this Agreement, except for the case where the claims andobligations in Variation Margin are settled pursuant to the provision of Article 32 below.
Article 32. Close-Out Netting of Claims and Obligations upon Termination of Subject
Clearing Brokerage Contracts
If all Subject Clearing Brokerage Contracts are terminated pursuant to the provision of
Article 30.2 or 30.3 of this Agreement, all monetary obligations between Party A and Party
B under this Agreement outstanding as of the Early Termination Date, including theobligation to pay the Early Termination Amount upon the termination of the Subject
Clearing Brokerage Contracts pursuant to the provision of Article 30.7 of this Agreement,
the obligation to return Customer Initial Margin and Variation Margin pursuant to theprovision of Article 31 of this Agreement, the obligation to pay unpaid Fixed Amount,
Floating Amount and Mark-to-Market Difference and any and all other monetary
obligations outstanding between Party A and Party B, shall be settled as follows:(1) The total Early Termination Amounts payable by Party A to Party B in respect of all
Subject Clearing Brokerage Contracts terminated pursuant to the provision of
Article 30.2 or 30.3 of this Agreement, total Variation Margin to be returned from
Party A to Party B and other monetary obligations of Party A owed to Party B
outstanding as of the Early Termination Date, excluding the obligations to return
Customer Initial Margin under the provision of Article 31 of this Agreement, (“Party
A’s Obligations at Early Termination Date”) shall be netted with the total Early
Termination Amounts payable by Party B to Party A in respect of the Subject
Clearing Brokerage Contracts, total Variation Margin to be returned from Party B
to Party A and other monetary obligations of Party B owed to Party A outstanding
as of the Early Termination Date (“Party B’s Obligations at Early Termination Date”).
For the purpose of this item, in respect of the Variation Margin or monetary
obligations to be paid or received in any currency other than Japanese yen, the132

above amounts shall be the Japanese yen equivalent of such amounts converted
using the quotes of foreign exchange rate on the Early Termination Date;(2) As a result of netting pursuant to the provision of Item (1), if Party B’s Obligations
at Early Termination Date remain, the amount of Customer Initial Margin deposited
with Party A by Party B, or, if Customer Initial Margin consists of Eligible Securities
Collateral, but Party A will not return Cash equivalent to the market value of the
Eligible Securities Collateral as set forth in the provision of Article 31 of thisAgreement, the liquidation proceeds of Eligible Securities Collateral, shall be
deducted from the remaining amount of Party B’s Obligations at Early Termination
Date. As a result, if the amount of the Party B’s Obligations at Early Termination
Date becomes negative, Party A shall have an obligation to immediately return toParty B the amount equal to the absolute value of such negative value.
(3) As a result of netting pursuant to the provision of Item (2), if the Party B’s
Obligations at Early Termination Date still remain, the amount of Initial Margindeposited by Party B with JSCC, or, if Initial Margin consists of Eligible Securities
Collateral, the proceeds from liquidation of Eligible Securities Collateral by Party A,
shall be deducted from the remaining amount of Party B’s Obligations at Early
Termination Date. As a result, if the amount of the Party B’s Obligations at Early
Termination Date becomes negative, Party B may request the return from Party Aof Initial Margin delivered from JSCC up to the amount equal to the absolute valueof such negative value.
(4) As a result of netting pursuant to the provision of Item (3), if the Party B’s
Obligations at Early Termination Date still remain, that remaining amount shallconstitute the obligations of Party B owed to Party A arising from the termination of
all Subject Clearing Brokerage Contracts (referred to as “Party B’s Final
Obligations” in this Article) and the claims in the Party B’s Final Obligations shallconstitute the claims of Party A to Party B.
(5) As a result of netting pursuant to the provision of Item (1), if the Party A’s
Obligations at Early Termination Date remain, the sum of the absolute value of theParty A’s Obligations at Early Termination Date and the amount of the obligation to
return Customer Initial Margin pursuant to the provision of Article 31 of thisAgreement shall constitute the obligations of Party A owed to Party B arising fromthe termination of all Subject Clearing Brokerage Contracts (referred to as “Party
A’s Final Obligations” in this Article) and the claims in the Party A’s Final Obligations
shall constitute the claims of Party B to Party A.
Section 2 Default of Party A
Article 33. Termination of Cleared Contracts Subject to Brokerage due to Default of Party133

A

If JSCC declares the Default of Party A, Cleared Contracts subject to Brokerage shall be
automatically terminated on the date of such declaration (hereinafter referred to as “Party
A Default Determination Date”) without further notice from JSCC or Party A.

Article 34. Position Transfer of Outstanding Contracts
1 On the termination of the Cleared Contracts subject to Brokerage pursuant to the provisionof Article 33 of this Agreement, Party B may cause the claims and obligations listed below(collectively “Outstanding Contracts”) to be transferred through Position Transfer as awhole, to one or more Successor Clearing Brokers through the submission of a request
to JSCC in the form prescribed by JSCC via the Successor Clearing Broker(s), and if
JSCC accepts such request for the Position Transfer, in accordance with the Rules. Thismay only be done during the period specified in the Rules:(1) The claims and obligations of which the terms and conditions as prescribed in theRules are identical to the claims and obligations under the Cleared Contracts
subject to Brokerage between Party A and JSCC which are in effect immediately
before the termination of such Cleared Contracts subject to Brokerage pursuant to
the provision of Article 33 of this Agreement; and(2) The claims and obligations of which the terms and conditions as prescribed in theRules are identical to the claims and obligations under the Subject Clearing
Brokerage Contracts between Party A and Party B which are in effect immediately
before the termination of the Cleared Contracts subject to Brokerage pursuant to
the provision of Article 33 of this Agreement.
2 Party A and Party B hereby agree in advance that when the Outstanding Contracts aretransferred to the Successor Clearing Broker(s) pursuant to the provision of Paragraph 1,
Initial Margin in which Party B has the right to claim the return pursuant to the provision of
Article 17 of this Agreement shall be deemed as Initial Margin deposited with JSCC
through the Successor Clearing Broker(s) acting as agent for part B at the time of such
Position Transfer.
3 Where Party B requests to JSCC the Position Transfer of the Outstanding Contracts
pursuant to the provision of Paragraph 1, Party B shall request the Successor Clearing
Broker for the Position Transfer and shall obtain the acceptance of the Successor Clearing
Broker in advance.
4 When the Outstanding Contracts are transferred to the Successor Clearing Broker(s), theclaims and obligations arising as a result of the Subject Clearing Brokerage Contracts
between Party A and Party B as well as the claims and obligations resulting from Variation
Margin paid or received between them in relation to such Subject Clearing BrokerageContracts, excluding the obligations of Party A that is due at the time of the declaration of134

the Default in respect of Party A and the obligations of Party A related to Unpaid Amountset forth in Article 85-5.1 of the Business Rules, and the claims and obligations relating toCustomer Initial Margin in the amount equal to those deemed to have been deposited with
JSCC by Party B through the Successor Clearing Broker acting as agent for Party B
pursuant to the provision of Paragraph 2, shall cease to exist and have no future effect inaccordance with the Rules.
Article 34-2. Position Transfer of Outstanding Cross Margined Contracts
1 Notwithstanding the provision of Article 34, when the legal relationship with the same
economic effect as the Subject Clearing Brokerage Contracts set forth in Article 28-9.1
comes into existence as a result of a Default of Party A, Party B may cause the claims
and obligations listed below (collectively the “Outstanding Cross Margined Contracts”) tobe transferred through Position Transfer as a whole to one or more Successor Clearing
Brokers through the submission of a Position Transfer Request in the form prescribed by
JSCC to JSCC via the Successor Clearing Broker(s) and if JSCC accepts such request,
in accordance with the provisions of the Rules.

This may only be done during the period

specified in the Rules:(1) The claims and obligations of which the terms and conditions as prescribed in theRules are identical to the claims and obligations under the Cleared Contracts subject toBrokerage between Party A and JSCC which are in effect immediately before the legal
relationship having the same economic effect as the Subject Clearing Brokerage Contract
coming into existence pursuant to the provision of Article 28-9.1 of this Agreement;(2) The claims and obligations of which the terms and conditions as prescribed in theRules are identical to the claims and obligations under the Subject Clearing BrokerageContracts between Party A and Party B which are in effect immediately before the legal
relationship having the same economic effect as the Subject Clearing BrokerageContracts coming into existence pursuant to the provision of Article28-9.1 of thisAgreement.
2 Party A and Party B hereby agree in advance that when the Outstanding Cross MarginedContracts are transferred to the Successor Clearing Broker(s) pursuant to the provisionof Paragraph 1, Initial Margin in which Party B has the right to claim the return pursuant
to the provision of Article 17 of this Agreement shall be deemed as Initial Margin deposited
with JSCC through the Successor Clearing Broker(s) acting as agent of Party B at thetime of such Position Transfer.
3 Where Party B requests to JSCC the Position Transfer of the Outstanding Cross
135

Margined Contracts pursuant to the provision of Paragraph 1, Party B shall request to theSuccessor Clearing Broker the Position Transfer and shall obtain the consent of the
Successor Clearing Broker in advance.
4 When the Outstanding Cross Margined Contracts are transferred to the Successor
Clearing Broker(s), the claims and obligations arising as a result of the Subject Clearing
Brokerage Contracts between Party A and Party B as well as the claims and obligations
resulting from Variation Margin paid or received between them in relation to such Subject
Clearing Brokerage Contracts, excluding the obligations of Party A that is due at the timeof the declaration of the Default in respect of Party A and the obligations of Party A related
to Unpaid Amount set forth in Article 85-5.1 of the Business Rules, and the claims andobligations relating to Customer Initial Margin in the amount equal to those deemed tohave been deposited with JSCC by Party B through the Successor Clearing Broker(s)acting as agent pursuant to the provision of Paragraph 2, shall cease to exist and haveno future effect in accordance with the Rules.
5 The Position Transfer of Outstanding Cross Margined Contracts by Party B as set forth inParagraphs 1 through 4 above may only be allowed when Party B has agreed with the
Listed Futures Successor Clearing Broker (kokusai sakimonotou shoukei seisansankasha) on the Listed Futures Position Transfer (kokusai sakimonotou shoukei), andsubmitted a request for Listed Futures Position Transfer in the form prescribed by JSCC
to JSCC via the Listed Futures Successor Clearing Broker.
Article 34-3. Listed Futures Position Transfer of Claims and Obligations related to JGB
Futures Cleared Contracts (kokusai sakimono seisan yakujou) and Interest Rate Futures
Cleared Contracts (kinri sakimono seisan yakujou)
1 When the legal relationship having the same economic effect as the Subject Clearing
Brokerage Contract set forth in Article 28-9.1 of this Agreement comes into existence,
Party B may cause the claims and obligations listed in Items (1) and (2) below (hereinaftercollectively referred to as the “Claims and Obligations related to JGB Futures Cleared
Contracts”) and the claims and obligations listed in Items (3) and (4) below (referred toas the “Claims and Obligations related to Interest Rate Futures Cleared Contracts”) to betransferred through Position Transfer as a whole to a Listed Futures Successor Clearing
Broker through the submission of a Position Transfer Request in the form prescribed by
JSCC to JSCC via the Listed Futures Successor Clearing Broker and if JSCC accepts
such request, in accordance with the provisions of the Rules. This may only be done
during the period specified in the Rules:(1) The claims and obligations of which the terms and conditions as prescribed in the136Rules are identical to the claims and obligations with the same terms and conditions
as those related to Cross Margined JGB Futures Cleared Contracts set forth in Article
28-9.1 between Party A and JSCC which are in effect at the time when the legal
relationship having the same economic effect as the Subject Clearing BrokerageContracts comes into existence according to the provision of Article 28-9.1;(2) The claims and obligations listed in Item (1) of which the terms and conditions asprescribed in the Rules are identical to the legal relationship having the same
economic effect as the Subject Clearing Brokerage Contracts set forth in Article 289.1 between Party A and Party B which are in effect at the time when the legal
relationship having the same economic effect as the Subject Clearing BrokerageContract comes into existence according to the provision of Article 28-9.1.
(3) The claims and obligations of which the terms and conditions as prescribed in theRules are identical to the claims and obligations with the same terms and conditions
as those related to Cross Margined Interest Rate Futures Cleared Contracts set forthin Article 28-9.1 between Party A and JSCC which are in effect at the time when thelegal relationship having the same economic effect as the Subject Clearing BrokerageContracts comes into existence according to the provision of Article 28-9.1;(4) The claims and obligations listed in Item (3) of which the terms and conditions asprescribed in the Rules are identical to the legal relationship having the same
economic effect as the Subject Clearing Brokerage Contracts set forth in Article 289.1 between Party A and Party B which are in effect at the time when the legal
relationship having the same economic effect as the Subject Clearing BrokerageContract comes into existence according to the provision of Article 28-9.1.
2 Where Party B requests to JSCC a Listed Futures Position Transfer in respect of theclaims and obligations related to JGB Futures Cleared Contracts and the like and Interest
Rate Futures Cleared Contracts and the like pursuant to the provision of Paragraph 1,
Party B shall request to the Listed Futures Successor Clearing Broker the Listed Futures
Position Transfer and obtain the consent of the Listed Futures Successor Clearing Broker(and the JGB Futures Non-Clearing Participant, when the JGB Futures Contracts orInterest Rate Futures Contracts of Party B are traded through a JGB Futures NonClearing Participant) in advance.
3 When a Listed Futures Position Transfer to the Listed Futures Successor Clearing Broker137

is effected in respect of the claims and obligations related to JGB Futures Cleared
Contracts and the like and Interest Rate Futures Cleared Contracts and the like, theclaims and obligations identical to the claims and obligations related to the Cross
Margined JGB Futures Cleared Contracts and Cross Margined Interest Rate Futures
Cleared Contracts set forth in Article 28-9.1 and the legal relationship having the same
economic effect as the Subject Clearing Brokerage Contracts shall cease to exist andhave no future effect pursuant to the provisions of the Rules.
Article 35. Close-Out Netting of Subject Clearing Brokerage Contracts if Outstanding
Contracts are not Transferred
1 Upon termination of the Cleared Contracts subject to Brokerage pursuant to the provisionof Article 33 of this Agreement, if the Outstanding Contracts are not transferred pursuant
to the provision of Article 34 of this Agreement or the Outstanding Cross MarginedContracts are not transferred pursuant to the provision of Article 34-2, all Subject Clearing
Brokerage Contracts shall be automatically terminated without further notice from Party A
or Party B, and Party A and Party B shall pay or receive the Early Termination Amountwith respect to all of those Subject Clearing Brokerage Contracts. In this case, the Early
Termination Amount shall be the sum of the Profit and Loss before Default calculated
pursuant to the provision of Paragraph 2 and the Post-Default Allocated Profit and Losscalculated in the manner described below. For the purpose of this Paragraph, when the
Cash Settlement Amount is to be paid or received in any currency other than Japaneseyen, it shall be Japanese yen equivalent of such amount converted using the quotes offoreign exchange rate set forth in Article 6 of the Rules on Default Settlement Regarding
Clearing Participants in Relation to IRS Clearing Business (kinri suwappu torihiki seisan
gyoumu ni kansuru seisan sankasha no hatan shori ni kansuru kisoku):(1) The amount of the Post-Default Allocated Profit and Loss shall be the sum of theamounts obtained pursuant to a. through g. below, or, if Party B is not a Customer
set forth in Article 94.1 of the Business Rules, pursuant to b. through g. below:a.

The sum of the Cash Settlement Amount arising from the Cleared
Contracts subject to Brokerage to be paid or received on each JSCC
Business Day during the period from the Party A Default Determination
Date through the JSCC Business Day following the date on which it isdetermined that Party B is unable to transfer the Outstanding Contracts as
set forth in Article 34 of this Agreement;(For the purpose of this item, the “Last Day of Position Transfer Window”
means JSCC Business Day following the date on which it is determinedthat Customers (including Party B) is unable to transfer the Outstanding
Contracts as set forth in Article 34 of the Clearing Brokerage138

Agreement(s).)
b.

The total amount of the portion, allocated to the Cleared Contracts subject
to Brokerage, of the Cash Settlement Amount, to be paid or received on
the second JSCC Business Day following the Last Day of Position Transfer
Window applicable to Party B, arising from:(i)

Party A’s Cleared Contracts on its proprietary account;(ii)

Party A’s Customer’s Cleared Contracts that are confirmed not tobe transferred pursuant to Article 94 or Article 94-2 of the Business
Rules by the JSCC Business Day preceding the Last Day of
Position Transfer Window applicable to Party B;(in this b. through f. below, the Cleared Contracts that are
confirmed not to be transferred pursuant to Article 94 of theBusiness Rules by the JSCC Business Day preceding the Last Day
of Position Transfer Window shall be referred to as the “Subject
Cleared Contracts for Hedge”)(iii)

Cleared Contracts subject to Brokerage, as well as, the other
Customer’s Cleared Contracts as a result of Party A’s Clearing
Brokerage for such other Customers, with respect to whom theLast Day of Position Transfer Window is the same as thatapplicable to Party B, if any;(in this b. through f. below, the Cleared Contracts described in this(iii) shall be referred to as the “Cleared Contracts subject toBrokerage”)
and

(iv)

Hedge Transactions related to these Cleared Contracts.

The allocation shall be determined by prorating said amount according to
the risk (as such term set forth in Item(1)-3 below) respectively calculatedwith respect to the Subject Cleared Contracts for Hedge, the Cleared
Contracts subject to Brokerage as of the Last Day of Position Transfer
Window applicable to Party B;c.

If no other Customer’s Cleared Contract for which Party A is acting as
Clearing Broker is confirmed not to be transferred pursuant to Article 94 of
139

the Business Rules on or after the JSCC Business Day following the Last
Day of Position Transfer Window applicable to Party B, the total amount of
the portion, allocated to the Cleared Contracts subject to Brokerage, of the
Cash Settlement Amount to be paid or received on each JSCC Business
Day from the third JSCC Business Day following the Last Day of Position
Transfer Window applicable to Party B through the date of the Default
Auction (hatan shori nyuusatsu) with respect to the Default of Party A(referred to as the “Default Auction Date”) plus the Successful Bid Amount(rakusatsu zi shiharai kingaku) less the Net Present Value as of the JSCC
Business Day immediately preceding the Default Auction Date, eacharising from the Subject Cleared Contracts for Hedge, Cleared Contracts
subject to Brokerage and Hedge Transactions related to these Cleared
Contracts. The allocation shall be determined by prorating such amountin the same manner as the provision of b. above;d.

If one or more other Customer’s Cleared Contracts for which Party A isacting as Clearing Broker are confirmed not to be transferred pursuant to
Article 94 of the Business Rules on or after the JSCC Business Day
following the Last Day of Position Transfer Window applicable to Party B(such other Customer shall be referred to as “Customer Added to Hedge”),
the amount determined as follows:
For the purpose of d. through f., on the Last Day of Position Transfer
Window applicable to Customer Added to Hedge, the Cleared Contracts
subject to Brokerage shall be included in Subject Cleared Contracts for
Hedge.
(i)

The Cash Settlement Amount, arising from Subject Cleared
Contracts for Hedge, Cleared Contracts of such Customer Added
to Hedge and Hedge Transactions related to these Cleared
Contracts, to be paid or received on the second JSCC Business
Day following the Last Day of Position Transfer Window applicableto each Customer Added to Hedge shall be obtained;(ii)

The amount obtained in (i) above shall be allocated on a pro-ratabasis according to their risk respectively calculated on the Last Day
of Position Transfer Window applicable to the Customer Added toHedge with respect to the Subject Cleared Contracts for Hedge
and the Cleared Contracts of the Customer Added to Hedge; and(iii)

The amount allocated to Subject Cleared Contracts for Hedge
according to (ii) above shall be further allocated to (a) Cleared
Contracts on Party A’s proprietary account, (b) Party A’s
140

Customer’s Cleared Contracts which was confirmed not to betransferred pursuant to Article 94 of the Business Rules before theLast Day of Position Transfer Window applicable to Party B and (c)the Cleared Contracts subject to Brokerage on a pro-rata basis in
the same manner as the provision of b. above. The amount so
allocated to the Cleared Contracts subject to Brokerage shall be
the amount used for calculation of Cash equivalent to the Early
Termination Charge for the Cleared Contracts subject toBrokerage.
e.

When d. above applies, if no other Customer’s Cleared Contract for which
Party A is acting as Clearing Broker is confirmed not to be transferredpursuant to Article 94 of the Business Rules on or after the JSCC Business
Day following the Last Day of Position Transfer Window applicable to each
Customer Added to Hedge above, the sum of the amount of the potion,
allocated to Cleared Contracts subject to Brokerage, of the Cash
Settlement Amount to be paid or received on each JSCC Business Day
from the third JSCC Business Day following the Last Day of Position
Transfer Window applicable to the Customer Added to Hedge throughDefault Auction Date plus Successful Bid Amount less the Net Present
Value as of the JSCC Business Day immediately preceding the Default
Auction Date, each arising from the Subject Cleared Contracts for Hedge,
the Cleared Contracts of the Customer Added to Hedge and Hedge
Transactions related to these Cleared Contracts. The allocation shall be
determined by prorating such amount in the same manner as the provisionof d. above;f.

When d. above applies, if one or more further Customer’s Cleared
Contracts for which Party A is acting as Clearing Broker are confirmed not
to be transferred pursuant to Article 94 of the Business Rules on or after
the JSCC Business Day following the Last Day of Position Transfer
Window applicable to said Customer Added to Hedge, the sum of theamount obtained by the calculation made in the same manner as theprovisions of d. and e. above. If there is one or more additional
Customers for which Party A is acting as Clearing Broker is decided not
being able to transfer the Cleared Contracts executed for its accountpursuant to Article 94 of the Business Rules thereafter, the total amountcalculated in the same manner shall be added accordingly.

g.

When Party B is a Cross Margining User, if a Cross Margining Liquidation
Transaction is executed in respect of Party B’s Cross Margined JGB
Futures Cleared Contracts or Cross Margined Interest Rate Futures
Cleared Contracts, the amount equal to the Cash Settlement Amount141

related to the Cleared Contract which comes into existence as a result ofsuch Cross Margining Liquidation Transaction.
(1)-2 The “Cash Settlement Amount” and the “Net Present Value” referred to in Item (1)shall be calculated by JSCC pursuant to the provisions of the Rules on anassumption that Cleared Contracts to which Party A is a party, including Cleared
Contracts subject to Brokerage, validly exist on the Party A Default Determination
Date, and the “Cash Settlement Amount” and the “Net Present Value” to be paid or
received in any currency other than Japanese yen shall be Japanese yen
equivalent of such amount converted using the quotes of foreign exchange rate set
forth in Article 6 of the Rules on Default Settlement Regarding Clearing Participantsin Relation to IRS Clearing Business.
(1)-3 The “risk” referred to in Item (1) means the amount, with respect to the relevant
Cleared Contracts, calculated by JSCC according to the method set forth inParagraph 1.(1).a. of Appendix 2 to the Handling Procedures of Interest Rate Swap
Business Rules.
(2) When Party A is to pay to Party B the Post-Default Allocated Profit and Losscalculated pursuant to the provision of Item (1), Party A shall be deemed to owe a
payment obligation related to such Cash to Party B.
(3) When Party B is to pay to Party A the Post-Default Allocated Profit and Losscalculated pursuant to the provision of Item (1), Party B shall be deemed to owe a
payment obligation related to such Cash to Party A.
2 The amount of Profit and Loss before Default shall be, in respect of each Subject Clearing
Brokerage Contract, the sum total of the Net Present Value calculated on the Calculation
Date upon Party A Default, excluding those in respect of which the Cleared Contracts
subject to Brokerage related to the Subject Clearing Brokerage Contract is Cleared
Contracts (Settlement Type). For the purpose of this Paragraph, “Calculation Date upon
Party A Default” means the JSCC Business Day immediately preceding the Party A Default
Determination Date when Variation Margin is settled on the Party A Default Determination
Date, or the day that is 2 JSCC Business Days preceding the Party A Default
Determination Date when Variation Margin is not settled on the Party A Default
Determination Date.
3 When Party A owes to pay the Post-Default Allocated Profit and Loss to Party B pursuant
to the provision of Paragraph 1.(2), Party B may directly request JSCC to pay the sameamount as the relevant Post-Default Allocated Profit and Loss. When JSCC makes suchpayment, the payment obligation of Party A against Party B related to the Post-Default
Allocated Profit and Loss set forth in Paragraph 1.(2) shall cease to exist.

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4 If the Subject Clearing Brokerage Contracts are terminated pursuant to the provision of
Paragraph 1, Party A and Party B shall immediately return to the other party Variation
Margin deposited by the other party in accordance with this Agreement, provided thatneither Party A nor Party B may request the return of said Variation Margin from the otherparty until the settlement of all Cleared Contracts subject to Brokerage, Cross Margined
JGB Futures Cleared Contracts and Cross Margined Interest Rate Futures Cleared
Contracts recorded on Party B Clearing Brokerage Account is completed pursuant to theprovisions of Articles 26.2 and 26.3 of this Agreement, except for the case where theclaims and obligations arising from Variation Margin are settled pursuant to the provisionof Paragraph 7.
5 If the Subject Clearing Brokerage Contracts are terminated pursuant to the provision of
Paragraph 1, Party A shall immediately return to Party B Customer Initial Margin depositedby Party B, provided that Party B may not request the return of said Customer Initial
Margin from Party A until the settlement of all Cleared Contracts subject to Brokerage,
Cross Margined JGB Futures Cleared Contracts and Cross Margined Interest Rate
Futures Cleared Contracts recorded on Party B Clearing Brokerage Account is completed
pursuant to the provision of Article 26.1 of this Agreement, except for the case where theclaims and obligations arising from Customer Initial Margin are settled pursuant to theprovision of Paragraph 7.
6 For the purpose of Paragraph 3, where Customer Initial Margin is deposited in the form of
Eligible Securities Collateral, unless otherwise agreed between Party A and Party B, Party
A shall return Cash in the amount equivalent to the market value of Eligible Securities
Collateral used to determine the appraisal value of the Eligible Securities Collateral as of
the Initial Loss-Determination Date in relation to the Default of Party A (“Initial LossDetermination Date”) in lieu of returning the Eligible Securities Collateral.
7 If the Subject Clearing Brokerage Contracts are terminated pursuant to the provision of
Paragraph 1, all monetary obligations outstanding between Party A and Party B under thisAgreement as of the Initial Loss-Determination Date shall be settled as set forth below.
Such monetary obligations shall include the obligations to pay the Early Termination
Amount as a result of termination of the Subject Clearing Brokerage Contracts pursuant
to the provision of Paragraph 1, which include, if the Cross Margined JGB Futures Cleared
Contracts or Cross Margined Interest Rate Futures Cleared Contracts are recorded on
the Party B Clearing Brokerage Account, the payment obligation existing between Party
A and Party B in respect to the legal relationship having the same economic effect as the
Subject Clearing Brokerage Contracts that will come into existence pursuant to theprovision of Article 28-9.1 of this Agreement (where Paragraph 3 applies, other than thepayment obligations related to the Post-Default Allocated Profit and Loss set forth inParagraph 3; the same applies in this Paragraph), the obligations to return Variation
Margin pursuant to the provision of Paragraph 4, the obligations to return Customer Initial
Margin pursuant to the provisions of Paragraphs 5 and 6, the obligations to pay Fixed143

Amount and Floating Amount that remain unpaid, if any, and any and all other monetary
obligations outstanding between Party A and Party B:(1) The Early Termination Amount payable by Party A to Party B as a result oftermination of all Subject Clearing Brokerage Contracts pursuant to the provisionof Paragraph 1, Party A’s obligation to return Variation Margin to Party B and othermonetary obligations of Party A owed to Party B outstanding as of the Initial LossDetermination Date, excluding the obligations to return Customer Initial Marginunder the provisions of Paragraphs 5 and 6, (“Party A’s Obligations at Initial LossDetermination Date”) shall be netted with the Early Termination Amount payable
by Party B to Party A as a result of termination of the Subject Clearing BrokerageContracts, Party B’s obligation to return Variation Margin to Party A and othermonetary obligations of Party B to Party A outstanding as of the Initial LossDetermination Date (“Party B’s Obligations at Initial Loss-Determination Date”).
For the purpose of this paragraph, in respect of the Variation Margin or monetary
obligations to be paid or received in any currency other than Japanese yen, theabove amounts shall be the Japanese yen equivalent of such amount converted
using the quotes of foreign exchange rate set forth in the provision of Article 6 of
the Rules on Default Settlement Regarding Clearing Participants in Relation to IRS
Clearing Business;(2) As a result of netting pursuant to the provision of Item (1), if Party B’s Obligationsat Initial Loss-Determination Date remain, the amount of Customer Initial Margindeposited by Party B with Party A, or, if Customer Initial Margin consists of Eligible
Securities Collateral, but Party A will not return Cash equivalent to the market valueof the Eligible Securities Collateral as set forth in the provision of Paragraph 4, theliquidation proceeds of Eligible Securities Collateral shall be deducted from theremaining amount of Party B’s Obligations at Initial Loss-Determination Date. As
a result, if the amount of the Party B’s Obligations at Initial Loss-Determination
Date becomes negative, Party A shall have an obligation to immediately return toParty B the amount equal to the absolute value of such negative value.
(3) As a result of netting pursuant to the provision of Item (2), if the Party B’s
Obligations at Initial Loss-Determination Date still remain, the amount of Initial
Margin deposited by Party B with JSCC, or, if Initial Margin consists of the Eligible
Securities Collateral, the liquidation proceeds of Eligible Securities Collateral, shallbe deducted from the remaining amount of Party B’s Obligations at Initial LossDetermination Date. As a result, if the amount of Party B’s Obligations at Initial
Loss-Determination Date becomes negative, Party B may request return of Initial
Margin from JSCC up to the amount equal to the absolute value of such negativevalue.
(4) As a result of netting pursuant to the provision of Item (3), if the Party B’s
144

Obligations at Initial Loss-Determination Date still remain, that remaining amountshall constitute the obligations of Party B owed to Party A arising from thetermination of all Subject Clearing Brokerage Contracts (referred to as “Party B’s
Final Obligations” in this Article) and the claims in the Party B’s Final Obligations
shall constitute the claims of Party A to Party B.
(5) As a result of netting pursuant to the provision of Item (1), if the Party A’s
Obligations at Initial Loss-Determination Date remain, the sum of that remaining
amount and the amount of the obligation to return Customer Initial Margin pursuant
to the provisions of Paragraphs 3 and 4 shall constitute the obligations of Party A
owed to Party B arising from the termination of all Subject Clearing BrokerageContracts (referred to as “Party A’s Final Obligations” in this Article) and the claimsin the Party A’s Final Obligations shall constitute the claims of Party B to Party A.
8 If Party A owes Party A’s Final Obligations pursuant to the provision of Paragraph 5, Party
A shall perform Party A’s Final Obligations by the time agreed between Party A and Party
B, or promptly, absent such agreement, and in the manner agreed between Party A andParty B.
9 If Party B owes Party B’s Final Obligations pursuant to the provision of Paragraph 7, Party
B shall perform Party B’s Final Obligations by the time and in the manner as designatedby Party A.
Section3 Position Transfer of Outstanding Contracts Due to Default of Other Clearing
Participants
Article 36. Position Transfer of Outstanding Contracts Due to Default of Other Clearing
Participants
1 If JSCC declares the Default of other Clearing Participant who also is a Clearing Broker
for Party B (“Defaulting Clearing Participant”) and if the Cleared Contracts of Party B are
terminated, said Cleared Contracts and other claims and obligations specified in the Rules(collectively “Defaulting Clearing Participant’s Outstanding Contracts”) will be transferred
to Party A through Position Transfer pursuant to the provisions of the Rules, throughsubmission by Party B of request for Position Transfer to Party A and subject to an
acceptance of Position Transfer by Party A.
2 When Party A accepts Position Transfer of the Defaulting Clearing Participant’s
Outstanding Contracts pursuant to the provision of Paragraph 1 and receives the Position
Transfer request form from Party B in accordance with the Rules, Party A must submit therequest form to JSCC within the period of time specified in the Rules. Such request formshall state, among other things, the effect that Party A has received the request to accept
the Position Transfer and it has consented to accept such Position Transfer; that Party B
is requesting such Position Transfer to JSCC; and that Party A is submitting the request
145

form for such Position Transfer to JSCC.
3 Upon the Position Transfer of the Defaulting Clearing Participant’s Outstanding Contracts
to Party A pursuant to the provision of Paragraph 1, the provisions of this Agreement shallapply to the Defaulting Clearing Participant’s Outstanding Contracts transferred to Party
A as if they are the Cleared Contracts subject to Brokerage which are Cleared Contracts(Collateral Type) and the Subject Clearing Brokerage Contracts (Collateral Type) under
this Agreement.
4 Party A and Party B hereby agree in advance that upon the Position Transfer of the
Defaulting Clearing Participant’s Outstanding Contracts to Party A pursuant to theprovision of Paragraph 1, Initial Margin in which Party B has the right to claim return
pursuant to the provisions of the Clearing Brokerage Agreement between Party B and theDefaulting Clearing Participant shall be deemed as Initial Margin deposited with JSCC by
Party B through Party A acting as its agent at the time of such Position Transfer.
Section 4 Participation in Default Auction for Other Clearing Participant
Article 37. Hedge Transaction
1 Under Clearing Brokerage for Party B which is in the same Corporate Group as Party A,
Party A may become a party to the Hedge Transactions set forth in Article 93.1 of theBusiness Rules with JSCC for the account of Party B.
2 When a Hedge Transaction is executed between JSCC and Party A pursuant to theprovision of Paragraph 1, the provisions of this Agreement shall apply as if that Hedge
Transaction is the Cleared Contract subject to Brokerage which are Cleared Contracts(Collateral Type) which comes into effect as a result of Party A’s Clearing Brokerage forParty B, and the legal relationships between Party A and Party B in respect of that Hedge
Transaction is the Subject Clearing Brokerage Contract (Collateral Type) corresponding
to the Hedge Transaction which is deemed as the Cleared Contract subject to Brokerage
which are Cleared Contracts (Collateral Type) pursuant to the provision of this paragraph.
Article 37-2. Cross Margining Liquidation Transaction
1 Under Clearing Brokerage for Party B, Party A may execute Cross Margining Liquidation
Transactions with JSCC on Party B’s book in accordance with Article 93-2.2 of theBusiness Rules.
2 When a Cross Margining Liquidation Transaction is executed between JSCC and Party A
pursuant to the provision of Paragraph 1, the provisions of this Agreement shall apply as
if that Cross Margining Liquidation Transaction is the Cleared Contract subject toBrokerage which are Cleared Contracts (Collateral Type) which comes into effect as aresult of Party A’s Clearing Brokerage for Party B, and the legal relationships between
Party A and Party B in respect of that Cross Margining Liquidation Transaction is the146Subject Clearing Brokerage Contract (Collateral Type) corresponding to the Cross
Margining Liquidation Transaction which is deemed as the Cleared Contract subject toBrokerage which are Cleared Contracts (Collateral Type) pursuant to the provision of thisparagraph.
Article 38. Default Auction
1 Under Clearing Brokerage for Party B which is in the same Corporate Group as Party A,
Party A may participate in the Default Auction for the account of Party B. If Party A winsa bid for the Auction Transactions for the account of Party B, these Auction Transactions
shall come into effect between JSCC and Party A as broker for Party B.
2 When the Auction Transactions come into effect between JSCC and Party A pursuant to
the provision of Paragraph 1, the provisions of this Agreement shall apply as if the Auction
Transactions are the Cleared Contracts subject to Brokerage which are Cleared Contracts(Collateral Type) which comes into effect as a result of Party A’s Clearing Brokerage andthe legal relationships between Party A and Party B in respect of the Auction Transactions
are the Subject Clearing Brokerage Contracts (Collateral Type) corresponding to the
Auction Transactions which are deemed as the Cleared Contracts subject to Brokerage
which are Cleared Contracts (Collateral Type) pursuant to the provision of this paragraph.
Chapter 7 Miscellaneous Provisions
Article 39. Voluntary Termination of this Agreement
1 This Agreement may be terminated by mutual agreement upon consultation between
Party A and Party B.
2 In addition to the provision of Paragraph 1, Party A or Party B may terminate thisAgreement by giving a written notice of termination to the other party not less than XX
JSCC Business Days preceding the date on which it desires the termination.
3 When this Agreement is to be terminated pursuant to the provision of Paragraph 1 or 2,
Party A shall give prior notification to JSCC. Such notification shall be given by the third
JSCC Business Day preceding the desired date of the termination in the event of thetermination pursuant to the provision of Paragraph 1 or without delay after Party A gives
or receives the written notice of termination to or from the other party, as the case may be,in the event of the termination pursuant to the provision of Paragraph 2.
4 The provisions of this Agreement shall continue to govern the Subject Clearing BrokerageContracts executed before the termination of this Agreement pursuant to the provision of
Paragraph 1 or 2.
5 Notwithstanding the provisions of Paragraphs 1 and 2, no termination of this Agreement
shall become effective until JSCC receives the notification pursuant to the provision of147

Paragraph 3.
Article 40. Compulsory Termination of this Agreement
1 If an Event of Default occurs and is continuing in respect of Party B, Party A may terminate
this Agreement immediately by giving Party B written notice of not more than 20 days,
provided that, in any of the Events of Default, this Agreement shall be automaticallyterminated upon occurrence of such Event of Default as a matter of course without awritten notice from Party A to Party B, if Party A and Party B have so agreed in advance.
2 When JSCC declares the Default of Party A, this Agreement shall be automaticallyterminated as a matter of course without any notification from Party A or Party B uponcompletion of the settlement of all Subject Clearing Brokerage Contracts outstanding asof such time.
3 When this Agreement shall terminate pursuant to the provision of Paragraph 1 or 2, Party
A or Party B shall notify JSCC to that effect in advance or without delay after thetermination.
4 Notwithstanding the provisions of Paragraphs 1 and 2, no termination of this Agreement
shall become effective until JSCC receives the notification pursuant to the provision of
Paragraph 3.
5 If the settlement of the Subject Clearing Brokerage Contracts has not been completed at
the time of the termination of this Agreement pursuant to the provisions of the provision of
Paragraph 1, this Agreement shall continue to govern said Subject Clearing BrokerageContracts and the settlement thereof.
Article 41. Reports
1 Upon request of Party A, Party B shall report to Party A without delay the matters required
to be reported in connection with the Subject Clearing Brokerage Contracts.
2 Upon occurrence of an Event of Default, Party B shall immediately report that effect toParty A in writing.
Article 42. No Assignment of Claims
Neither Party A nor Party B may assign to any third party, pledge or otherwise dispose of
its claims under this Agreement, unless JSCC’s written approval has been obtained inadvance, the request for which shall be made using the JSCC’s prescribed form.
Article 43. Confidentiality
1 Party A and Party B shall keep confidentiality of, and shall not use for any other purpose,business secrets of the other party which it becomes aware in connection with thisAgreement. The “secret” referred to above shall mean confidential facts that are not148otherwise available to general public and may have significant commercial impact.
2 Party A and Party B shall not divulge business secrets set forth in Paragraph 1 to any third
party, except for the following cases or unless there is other legitimate grounds for doingso:(1) When it obtains a prior written consent of the other party;(2) When the disclosure or provision thereof is required by an order or request from a
court, competent authority or any other public institution or a financial instruments
exchange or any other self-regulatory organization, or by law or regulation;(3) When it is disclosed or provided to an attorney, certified public accountant, tax
accountant or other professional or any other Legal Entity (houjin tou) in the same
Corporate Group, to the extent necessary for its performance of this Agreement or
for the protection of its rights; or(4) When it files a report to JSCC or accepts investigations conducted by JSCC.
Article 44. Notice of Changes in Notifiable Matters
Party B shall immediately give a written notice to Party A of any change in its trading name,
name, representative, seal impression or signature registered with Party A, address,
location of its office or other matters.
Article 45. Disclaimer
1 Neither Party A nor JSCC shall be liable for any damage arising as a result of a delay inthe return of Margin requested by Party B or the performance of any other obligation due
to an act of God or other event of force majeure.
2 Neither Party A nor JSCC shall be liable for any loss, destruction of or other damage to
Margin resulting from any of the events described in Paragraph 1.
3 As long as Party A has verified with due care and believed that a seal impression orsignature affixed on a written notification or other document is the same as the seal
impression or specimen signature notified to Party A in advance, Party A shall not be liable
for any damage resulting from forgery, falsification of or other trouble in such document.
Article 46. Effectiveness of Notice
1 Any notice or other communication between Party A and Party B in connection with thisAgreement shall be given by any of the below listed methods to the address or office
notified by Party B to Party A or in accordance with the details of electronic communication
system or e-mail, and shall become effective at such time as set forth below, provided,
however, that the methods of Items (5) and (6) may not be used for a notice or other149

communications between Party A and Party B in connection with the matters set forth in
Article 29 or 30 of this Agreement. If the timing set forth below with respect to eachmethod of notice is not a day on which commercial banks located in the place designatedby Party B as its address for receiving notices are open for general business, including
the dealings in foreign exchange and foreign currency deposits (referred to as “Local
Business Day” in this paragraph) or after the business hours on a Local Business Day,
such notice or other communication shall become effective on the next Local BusinessDay:(1) Delivery by hand or sending by mail in writing: the date of the receipt;(2) Transmission by telex: the date of receipt of an answerback from the recipient;(3) Transmission by facsimile: the date on which a qualified employee of the recipient
receives it in a legible form;(4) Sending by a contents-certified or registered mail or by equivalent method: the dateof delivery or attempted delivery;(5) Sending through an electronic communication system: the date of receipt; or(6) Sending by e-mail: the date of delivery.
2 In the event of a late delivery or failure of delivery of any notice or other communication
between Party A and Party B addressed to the address or office notified by Party B to
Party A for any reason attributable to Party B, it shall be deemed to have arrived at thetime when it should have arrived under ordinary circumstances.
Article 47. Standard Time
Unless otherwise set forth in this Agreement, any reference to the year, month, day andtime in this Agreement shall be the reference to year, month, day and time in Japan
Standard Time.
Article 48. Reports by Electromagnetic Means
With a consent of Party A, Party B may, instead of submitting a document in writing,provide information to be reported under the provision of Article 41.2 hereof or notify under
the provision of Article 44 hereof (excluding notification regarding changes in its seal
impression or signature) via an electronic information processing system or otherinformation and communication technology. The submission of report or notification in
the above mean shall have the same effect as a report or notification in writing.
Article 49. Execution of Memorandum of Understanding
So long as it is consistent with this Agreement and the Rules, Party A and Party B may
150

conclude a memorandum of understanding or other consent letter on the matters related
to this Agreement or Clearing Brokerage under this Agreement (including the mattersrelated to delinquent charges, bank transfer fees and other matters not prescribed in thisAgreement).
Article 50. Matters not Set Forth in this Agreement
Matters not set forth in this Agreement in connection with the Subject Clearing BrokerageContracts shall be subject to the memorandum of understanding or other consent letterconcluded between Party A and Party B pursuant to Article 49 of this Agreement, if any,
as well as the Rules.
Article 51. Precedence of this Agreement
1 In the event of any inconsistency or conflict between an agreement between Party A andParty B and the provisions of this Agreement or the Rules, the provisions of thisAgreement and the Rules shall prevail to the extent of such inconsistency or conflict.
2 In the event of any inconsistency or conflict between the provisions of this Agreement andthe Rules, the Rules shall prevail to the extent of such inconsistency or conflict.
Article 52. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of Japan.
Article 53. Jurisdiction
1 Party A and Party B hereby agree that the competent court in the location of the head
office or XX branch of Party A shall have the jurisdiction over any legal action relating tothis Agreement or the Subject Clearing Brokerage Contracts.
2 Notwithstanding the provision of Paragraph 1, Party A and Party B may separately agree
on the exclusive jurisdiction or arbitration in respect of any dispute in connection with thisAgreement or the Subject Clearing Brokerage Contracts.
Note 1) Upon execution of the Clearing Brokerage Agreement, Party A and Party B may
elect to use either Exhibit Form 3 (youshiki dai 3 gou) or Exhibit Form 3-2 (youshiki
dai 3 gou no 2) of Handling Procedures of Interest Rate Swap Business Rules.
Note 2) Party A and Party B may determine the number of days to be inserted to “○ JSCC
Business Days” in Article 39.2 of this Agreement by mutual agreement.
Note 3) Party A and Party B may amend Article 43 of this Agreement (except for Article
43.2.(4)) with their mutual agreement.
Note 4) Party A and Party B may delete, or designate and insert a name of certain branch
to, the phrase “ ○○ branch” in Article 53.1 of this Agreement by mutual Agreement.
151

The provisions of Articles 53.1 and 53.2 of this Agreement may be amended by amutual agreement between Party A and Party B.
Note 5) When Party A and Party B desires to agree otherwise under the provisions of thisAgreement that have reference to “by mutual agreement,” “agreement between
Party A and Party B,” “separate agreement,” “Party A and Party B separately agree
otherwise,” or “otherwise agreed between Party A and Party B,” such agreement
shall be evidenced by a separate memorandum of understanding executed
pursuant to the provision of Article 49 of this Agreement, incorporating suchagreement into the provisions of this Agreement or referring to attachment hereto.

152

<Exhibit Form 4> Letter of Undertaking (Japanese language original format)( omitted )153

<Exhibit Form 4-2> Letter of Undertaking (English language original format)

Letter of Undertaking
Date:
To [

/

/

], President & CEO of Japan Securities Clearing Corporation
Address
Trading Name or Company Name
Name of Representative(Seal)[] (hereinafter referred to as the “Company”) acknowledges that it has confirmed andaccepted the details of the Rules (as defined in the Interest Rate Swap Clearing Business
Rules prescribed by JSCC (hereinafter referred to as the “Business Rules”)) in advance,
and, in accordance with the provision of Article 43.2 of the Business Rules and the provisionof Article 3.1 of the Clearing Brokerage Agreement concluded with [] (hereinafterreferred to as the “Company’s Clearing Broker”) on [ Date ], submits this Letter ofUndertaking (hereinafter referred to as this “Letter of Undertaking”) to JSCC through theCompany’s Clearing Broker.
The terms used in this Letter of Undertaking shall have the definitions used in the Business
Rules unless otherwise set forth in this Letter of Undertaking.
1 With respect to JSCC's IRS Clearing Business, the Clearing Brokerage Contracts (seisan
itaku torihiki) coming into effect with the Company’s Clearing Broker and other mattersspecified in the Rules, the Company hereby agrees to abide by and comply with the Rules,
as may be amended pursuant to the Rules, and the Clearing Brokerage Agreement
concluded with the Company’s Clearing Broker.
2 The Company agrees that:(1) The provisions of the Rules and the Clearing Brokerage Agreement concluded with
the Company’s Clearing Broker shall apply to the existing and future claims andobligations arising from Initial Margin (tousho shoukokin) and the matters listed in
Article 1.1 of the Business Rules;(2) When the provisions of the Rules and/or the Clearing Brokerage Agreement
concluded with the Company’s Clearing Broker are amended in accordance withthe provisions of the Rules, this Letter of Undertaking shall automatically beamended accordingly;154

(3) In the Clearing Brokerage (yuuka shouken tou seisan toritsugi) for Clearing
Brokerage Original Transaction (seisan toritsugi gen torihiki) between a Customer(seisan itakusha) of another Clearing Broker and the Company, such Customer
may make available information concerning such Clearing Brokerage Original
Transaction to its Clearing Broker and such Clearing Broker may receive suchinformation; and(4) JSCC retains this Letter of Undertaking for the benefit of the Clearing Broker or the
Customer referred to in Item (3) above as a document evidencing the Company’s
agreement to the matters set forth in Item (3) above, and may disclose this Letterof Undertaking or any contents thereof to such Clearing Broker or the Customer tothe extent required by laws and regulations.
Note) Upon submission of the Letter of Undertaking , the Company may elect to use either
Exhibit Form 4 (youshiki dai 4 gou) or Exhibit Form 4-2 (youshiki dai 4 gou no 2) ofHandling Procedures of Interest Rate Swap Business Rules (kinri suwappu torihiki
seisan gyoumu ni kansuru gyoumu houhousho no toriatsukai).

155