Service

As a Custodian-type Trust Company, we provide all FX trading participants (investors, Financial Instruments Business Operators engaging in foreign exchange margin trading ("FX broker") and financial institutions engaging in cover deals for FX brokers) with a new trust scheme that could not previously have been achieved due to the trust regulation on conventional FX trading (*).

This trust scheme complements and reinforces the conventional trust scheme and further improves its safety in terms of the "trust maintenance" pertaining to each participant's assets for FX trading. It also strongly supports a reliable daily execution of settlement in terms of the foreign exchange gains or losses that arise from the trading between participants.

In addition, we increase the transparency and reduce the credit risk of each trading participant through our regular checks on the trust maintenance situation of the customer's assets by the FX broker, which was not conventionally subject to any periodical checks by a third party.

Structure of the trust

According to Article 43-3(1) of the Financial Instruments and Exchange Act and Article 143(1) of the Cabinet Office Ordinance regarding Financial Instruments Business, etc., FX brokers are obliged to manage margin deposits from customers for FX trading separately from their own properties by entrusting such deposits to a trust company or financial institution engaged in the trust business.

For the separate management of trust assets from customers for FX trading, two beneficiary agents (referred to as "beneficiary agent A" and "beneficiary agent B") are designated to represent all customers (beneficiaries of the trust's principle) of the FX broker.

The FX broker (consignor) calculates the amount required for the separate management of the customer's assets. If the value of the trust assets is less than the required amount, they add the shortfall to the trust ("trust maintenance").

On the contrary, if the trust assets exceed the required amount, the FX broker can redeem the trust for the value less than the excess amount from the trust company (trustee) with the approval of beneficiary agent A (i.e., the internal control manager of the FX broker).

Note that in those cases specified in Article 143-2(1)(iv) of the Cabinet Office Ordinance regarding Financial Instruments Business etc., such as where the FX broker files a petition for the commencement of bankruptcy proceedings, beneficiary agent B (e.g., a lawyer) executes beneficiary rights on behalf of each beneficiary (i.e., the customer), cancels the trust, and transfers the assets held in the trust to the customer.

<<We added the following main functions to the conventional trust scheme>>

1. In order to secure the execution of settlement, the FX broker and its counterparty (CP) engaging in cover deals open their trust accounts with us, where we increase or decrease their trust balance by an amount equivalent to the foreign exchange gains or losses (settlement amount of FX trading) that should be transferred between them.
2. Our unique system enables the flexible deposit and redemption of trust assets.
3. If the FX broker fails, we will flexibly redeem the trust assets to its CP.

Such functions of our trust scheme provide each FX trading participant with various benefits and help to build a trading environment that will contribute to improved convenience for investors.

Benefits of introducing our trust scheme

Participant	Current problem	Benefits of the FX Clearing Trust
Customer	Incomplete trust maintenance Buying and selling is not possible in the event of a system error. It is impossible to entirely prevent the risk of any inappropriate trust maintenance practice by the FX broker.	Pursue the integrity of trust maintenance Future development of a trading environment that permits selling and buying in the event of a system error Increase the transparency of trust maintenance content by the FX broker
FX broker	Cash flow problems arising from the bottleneck caused by an increase in the number of customer transactions Difficulty in financing due to credit risk concerns	Reduction of cash flow problems Reduction of the credit risk
Banks engaging in cover deals, etc.	Concerns as to the risk of being unable to receive foreign exchange gains Insufficient material for risk management of the business partner	Reduce the risk of being unable to receive foreign exchange gains Facilitate the risk management of the business partner

<Customer>

(1) The adoption, by the FX broker and ourselves, of our unique scheme for depositing and redeeming trust assets reduces the time lag between the depositing of the customer's assets at the FX broker and their maintenance in the trust.

(2) We check the trust assets that we have underwritten and the amount required for their separate management, as calculated by the FX broker. This permits regular inspection of the appropriateness of the trust maintenance situation by the FX broker, which was not conventionally checked by a third party.

<FX broker>

(1) The adoption, by the FX broker and ourselves, of our unique scheme for depositing and redeeming trust assets enables us to support the capital needs of the FX broker.

(2) The financial burden on the FX broker is systematically reduced by clearing funds through our trust accounts, which lowers the credit risk of the FX broker and allows them to accept a flow of further transactions from a customer.

<Financial institutions engaging in cover deals>

(2) The execution of settlement is secured in the trust assets that we underwrite by us increasing or decreasing each trading participant's trust balance by an amount equivalent to the foreign exchange gains or losses (settlement amount of FX trading).

(3) Increasing the transparency of the trading flow between our trust scheme participants facilitates the risk management of the FX broker, which is their counterparty.