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Clearing Participant

  • A person who becomes the other party to the Financial Instruments Obligation Assumption Service is called a “Clearing Participant” (Article 156-7 of the Financial Instruments and Exchange Act (“FIEA”)).JSCC sets forth matters relating to the requirements for Clearing Participants.

Clearing Qualification

  • As JSCC assumes obligations as a Clearing Organization and is exposed to credit risk of each trade counterparty, it needs to manage credit risk of the Participant.For such purpose, JSCC sets out the requirements to qualify as Clearing Participant (acquisition criteria and maintenance criteria), and any person who intends to become a Clearing Participant must apply for an acquisition of the Clearing Qualification to JSCC and obtain its approval.
  • The Clearing Qualification related to listed products at JSCC is classified into three categories, namely, Securities Clearing Qualification, JGB Futures Clearing Qualification and Index Futures Clearing Qualification. These Clearing Qualifications may be obtained according to the status of participation in trading at the exchanges, etc.
  • Each Clearing Qualification is further divided into two types: i.e., Principal Clearing Qualification and Agency Clearing Qualification.The Principal Clearing Qualification only authorizes clearing of trades executed by the Clearing Participant on its behalf at the market (including those entrusted by customers), and the Agency Clearing Qualification authorizes clearing of trades executed by other person at the market, as well as trades executed by the Clearing Participant on its behalf (including those entrusted by customers).
  • If a Financial Instruments Business Operator or a Registered Financial Institution which is a trading participant of an exchange or PTS is a Clearing Participant, it will settle its securities trading directly through JSCC, the Clearing Organization.However, if such Financial Instruments Business Operator or a Registered Financial Institution is not a Clearing Participant, it is not authorized to directly settle its trades executed at the market it participates in, and must settle such trades through a Clearing Participant of JSCC who has obtained the Agency Clearing Qualification.

Criteria for Clearing Qualification

  • Major acquisition and maintenance criteria for Clearing Qualification related to the listed products at JSCC are as follows:
    • (1) To be a Financial Instruments Business Operator, a Registered Financial Institution or a Securities Finance Company.
    • (2) To satisfy certain criteria as to financial conditions (see Table 1 and 2).
    • (3) To have management structure and business execution structure that are appropriate as a Clearing Participant.

<Table 1> Acquisition Criteria

● Financial Instruments Business Operator Principal Clearing Qualification Agency Clearing Qualification
Stated Capital Not less than JPY300mil Not less than JPY300mil
Net Worth (Jun Zaisan) Not less than JPY2bil (*1) Not less than JPY20bil (*1)
Capital-to-Risk Ratio More than 200% More than 200%
Consolidated Capital-to-Risk Ratio (*2) More than 200% More than 200%
● Registered Financial Institution Principal Clearing Qualification Agency Clearing Qualification
Stated Capital or Total Amount of Capital Contribution (*3) Not less than JPY300mil Not less than JPY300mil
Net Assets Not less than JPY2bil (*4) Not less than JPY20bil (*4)
Capital Adequacy Ratio (*5) Uniform International Standard (i) (*6) (1) Common Equity Tier 1 ratio (*7,8): more than 4.5%

(2) Tier 1 ratio: more than 6% (*8)

(3) Total capital adequacy ratio: more than 8%

(1) Common Equity Tier 1 ratio (*7,8): more than 4.5%

(2) Tier 1 ratio: more than 6% (*8)

(3) Total capital adequacy ratio: more than 8%

Uniform International Standard (ii) (*9) More than 8% More than 8%
Domestic Standards More than 4% More than 4%
Solvency Margin (*10) More than 400% More than 400%

<Table 2> Maintenance Criteria

● Financial Instruments Business Operator Principal Clearing Qualification Agency Clearing Qualification
Stated Capital Not less than JPY300mil Not less than JPY300mil
Net Worth (Jun Zaisan) Not less than JPY300mil Not less than JPY20bil
Capital-to-Risk Ratio Not less than 120% Not less than 200%
Consolidated Capital-to-Risk Ratio Not less than 120% Not less than 200%
● Registered Financial Institution Principal Clearing Qualification Agency Clearing Qualification
Stated Capital or Total Amount of Capital Contribution (*3) Not less than JPY300mil Not less than JPY300mil
Net Assets Not less than JPY300mil Not less than JPY20bil
Capital Adequacy Ratio (*5) Uniform International Standard (i) (*6) (1) Common Equity Tier 1 ratio (*7,8): not less than 2.25%

(2) Tier 1 ratio: not less than 3% (*8)

(3) Total capital adequacy ratio: not less than 4%

(1) Common Equity Tier 1 ratio (*7,8): not less than 4.5%

(2) Tier 1 ratio: not less than 6% (*8)

(3) Total capital adequacy ratio: not less than 8%

Uniform International Standard (ii) (*9) Not less than 4% Not less than 8%
Domestic Standards Not less than 2% Not less than 4%
Solvency Margin (*10) Not less than 100% Not less than 400%
*1:
And Net Assets exceed Amount of Stated Capital.
*2:
Only applied to Special Financial Instruments Business Operator which has filed the notification set forth in Article 57-5, Paragraph 2 of FIEA.
*3:
It shall be the total amount of foundation fund (kikin) (including the amount of reserve for redemption of foundation fund) in case of a mutual company.
*4:
And Net Assets exceed Stated Capital or Total Amount of Capital Contribution (or the total amount of redemption fund (including the amount of reserve for redemption of foundation fund) in case of a mutual company).
*5:
For a Registered Financial Institution other than an insurance company, non-consolidated or consolidated capital adequacy ratio under Uniform International Standards if having overseas business office, and non-consolidated or consolidated capital adequacy ratio under domestic standards if not having overseas business office.In case of a foreign bank, it shall satisfy conditions equivalent thereto.
*6:
Apply to banks subject to Uniform International Standard, Norinchukin Bank and The Shoko Chukin Bank, Ltd.
*7:
It shall be Ordinary Investment Securities Tier 1 ratio for Norinchukin Bank.
*8:
Following transitional treatment to apply to Common Equity Tier1 Ratio and Tier1 Ratio:

・Transitional Treatment for Clearing Qualification Acquisition Criteria

Item Common Equity Tier1 Ratio Tier1 Ratio
From March 31, 2013 to March 30, 2014 3.50% 4.50%
From March 31, 2014 to March 30, 2015 4% 5.50%

・Transitional Treatment for Clearing Qualification Maintenance Criteria

Item Common Equity Tier1 Ratio Tier1 Ratio
From March 31, 2013 to March 30, 2014 1.75% (3.5%) 2.25% (4.5%)
From March 31, 2014 to March 30, 2015 2% (4%) 2.75% (5.5%)

The level shown in parenthesis to apply to Agency Clearing Participants.

*9:
Apply to Registered Financial Institutions having overseas business office other than banks subject to Uniform International Standard, Norinchukin Bank and The Shoko Chukin Bank, Ltd.
*10:
Apply to insurance companies.

(Note) For acquisition and maintenance of Securities Clearing Qualification, in addition to an account for Book-Entry Transfer System for Stock, etc., an account for Custody Services for Foreign Stock Certificates, etc. at JASDEC needs to be opened and maintained as an account for securities settlement.