Overview of a trading participant/Acquisition of trading qualifications

Flow of trading qualification acquisition

  1. For the acquisition of trading qualifications, please contact Trading Participants Relations Office (+81-3666-0141 (Switchboard)). The exchange holds an interview to confirm whether the applicant's meets the qualification acquisition criteria (formal criteria).
  2. In cases where the qualification acquisition criteria (formal criteria) are fulfilled, the exchange explains the procedures and schedule related to the acquisition of trading qualification, and requests the applicant to prepare documents for submission.
  3. Japan Exchange Regulation (the Participants Examination & Inspection department) conducts examinations based on the submitted documents. Examination methods include examinations and hearings based on the documents, visits to main and branch offices to confirm the status of control systems, and interviews with executive officers (e.g. presidents, CEOs). (Almost one to one and a half months are required for the examination period.)
  4. In cases where the exchange deems granting the trading qualification appropriate in the examination, it will approve such acquisition.
  5. Following the approval, after completion of system connection tests* and operational briefings held by the exchange 's related departments, the applicant shall acquire membership on the designated date.
(note)
  • ・Not necessary for an applicant who only trade through Commodity Derivatives Business Operator or Foreign Commodity Derivatives Business Operator.

Outline of Trading Qualification Acquisition Criteria

The qualification acquisition examination criteria are comprised of quantitative formal criteria and qualitative substantive criteria, such as business continuity, sound management structure, and business execution system.

Formal criteria (TSE/OSE)

Item Criteria
Financial Instruments Business Operators Capital stock JPY 300 million or more
Amount of net assets JPY 500 million or more and in excess of the capital amount
Capital-to-Risk Ratio (Non-consolidated) More than 200% (In cases where the applicant is a Special Financial Instruments Business Operators, the consolidated Capital-to-Risk Ratio shall exceed 200%.)
Registered Financial Institute The amount of stated capital The amount of stated capital shall be no less than 300 million yen
Amount of net assets The amount of net assets shall be 500 million yen or more, and exceed the amount of stated capital
Others In the case where the Registered Financial Institution is a bank subject to Uniform International Standards, The Norin chukin Bank, Federation of Shinkin Banks subject to Uniform International Standards or The Shoko Chukin Bank, Ltd., (hereinafter referred to as a “a bank subject to Uniform International Standards, etc.”), it satisfies the requirements set forth in a. to c. below(in the case where it is a foreign bank, the requirements equivalent thereto)
  1. Its non-consolidated or consolidated Common Equity Tier 1 ratio*1exceeds4.5percent; (*1in the case of The Norin chukin Bank, its non-consolidated or consolidated common capital contribution Tier 1 ratio; the same shall apply hereinafter)
  2. Its non-consolidated or consolidated Tier 1 ratio exceeds 6 percent; and
  3. Its non-consolidated or consolidated Total Capital ratio exceeds 8 percent;
In the case of a Registered Financial Institution other than a bank subject to Uniform International Standards, etc., foreign bank and insurance company,its non-consolidated or consolidated capital adequacy ratio under the domestic standards exceeds 4 percent;

In the case of insurance company, its solvency margin ratio exceeds 400%.
Transaction-at-Exchange Operators Capital stock The amount of stated capital shall be no less than 300 million yen
Amount of net assets The amount of net assets shall be 500 million yen or more, and exceed the amount of stated capital
The status of its capital adequacy The status of its capital adequacy shall be appropriate, in light of the properties held, etc.
Operational experience It shall have continuously engaged in the business pertaining to transactions of the same kinds as transactions in securities, etc. for a period longer than 3 years.

The membership acquisition criteria (TOCOM)

Any of the conditions below shall be fulfilled to acquire the membership.

Type Conditions
Commercials Those who engage commercially in buying and selling of Listed Commodity Component Products (in the case of crude oil, oil products), act commercially as mediators, intermediaries or agents for buying and selling, or engage commercially in production, processing or use (in the case of electricity, buying and selling of the electricity, act commercially as mediators, intermediaries or agents for buying and selling the electricity, or other acts prescribed in Article 1-8 of the Ordinance) of such goods on a continuous basis
Commodity Derivatives Business Operator Those who are licensed to engage in the Commodity Derivatives Business under Article 190.1 of the Commodity Derivatives Act.
Foreign Commodity Derivatives Business Operator Those who have obtained the same type of license in said foreign state under the provisions of the laws and regulations of said foreign state equivalent to a license under Article 190, paragraph 1 of the Commodity Derivatives Act, with regard to accepting the consignment of transactions similar to Futures Transactions on a market in a foreign state equivalent to a Commodity Market, or engaging in business as a mediator, intermediary, or agent for said transactions
OTC Commodity Derivatives Business Operator Those who have given notice under Article 349, paragraph 1 of the Commodity Derivatives Act that he/she intends to engage commercially in Over-the-Counter Commodity Derivative Transactions with regard to the Listed Commodity Component Products, etc. of the Exchange
Others 1. Banks
2. Type I Financial Instruments Business operators
3. The Shokochukin Bank Ltd.
4. The Development Bank of Japan Inc
5. Shinkin banks and the Shinkin Bank Association
6. Cooperative associations
7. Industrial banks and the Industrial Bank Association
8. The Norinchukin Bank
9. The agricultural cooperatives and the Agricultural Cooperative Associations
10. Insurance companies and foreign insurance companies, etc.
11. Commodities investment advisors or those who are equivalent to in a foreign state
12. The person engages or intends to engage in a business of proprietary transactions (such transactions includes the transactions consigned to other Members) on a commodity market or a market in a foreign state equivalent to a commodity market.

Business Continuity

TSE/OSE

The requirements shall include being "expected to … maintain business continuity", and the specific criteria to be applied are both below (1) and (2).

  1. Business record of trading, etc. in listed securities/listed derivatives for more than two business years at the time of application.
  2. Recorded profit in either of the most recent two business years prior to the year of application and being reasonably expected to continue recording profits based on figures in its plans after acquiring trading qualifications.
(note)
  • ・Even in the case where an applicant does not meet the above specific criteria, TSE and OSE will consider the financial condition of its parent company to determine whether the applicant satisfies the requirement.
    (These revisions were implemented from June 2020.)

TOCOM

An applicant shall not in the condition crushed by debt or question arose in its' audit report, and shall deemed to have sufficient business continuity by the Exchange.

Sound Management Structure

TSE/OSE

The applicant shall not be controlled by parties deemed inappropriate in light of the exchange market operation, etc.

TOCOM

An applicant shall not be controlled by parties deemed inappropriate in light of the exchange market operation, etc., and have sufficient social credibility with sound management structure.

Business Execution System

TSE/OSE

Appropriate business execution systems shall be established from the viewpoint of;

  • Order placement, execution, delivery settlement, and the method of loss risk management in the Exchange market.
  • Disciplinary actions or dispositions by the administrative agencies in accordance with the Laws and Regulations, the Exchange's Articles of Incorporation, the Business Regulations, the Brokerage Agreement Standards, and other rules & regulations as well as just and equitable principles of trade.

TOCOM

An applicant shall establish or will establish appropriate business execution systems to trade in commodity market.

Costs related to Acquisition of Trading Qualifications, etc.

TSE/OSE

The following costs and deposits are required to acquire trading qualifications.

Expense Item Amount, etc.
Admission fee
General Trading Participants JPY 8 million (tax-excluded)
Futures, etc. Trading Participants JPY 3 million (tax-excluded)
Government bond futures, etc. Trading Participants JPY 1 million (tax-excluded)
Commodity Futures, etc. Trading Participants JPY 3 million (tax-excluded)
Qualification Examination Fees JPY 1 million (tax-excluded)
Deposit Item Deposits, etc.
(Securities can be deposited in lieu of cash; provided, however, this is not applicable for a remote trading participant)
Participant bond JPY 3 million
Trading participant security money In the first year, the total amount of "basic fees" + "trading system facility usage fees" and the amount specified by Exchange on a case-by-case basis, taking into account the trading participant's trading record and expected trading activities.

The admission fees of General trading participants, Futures, etc. trading participants, and Government bond futures, etc. trading participants were reduced in June 2020.

In addition to the above costs, fees for system interface and terminal setting related to the Trading System / Market Information System, etc. are also required. (These fees vary depending on the interface composition. The exchange explains details in the qualification acquisition process.)

TOCOM

Expense Item Amount, etc.
Registration fee Per Market Division: JPY 1 million (tax-excluded)
Deposit Item Amount, etc.
Guarantee Fund Per Market Division: JPY 1 million
Member security money* In the first year, the total amount of "basic fees" + "trading system facility usage fees" and the amount specified by Exchange on a case-by-case basis, taking into account the member's trading record and expected trading activities.
(*)Not necessary for an applicant who only trade through Commodity Derivatives Business Operator or Foreign Commodity Derivatives Business Operator.