Special Report: HFT Regulations

We provide full support in connection with compliance and related issues involving Japan’s newly promulgated high frequency trading (HFT) regulations.

Special Report: HFT Regulations

The Japanese government has recently moved to regulate HFT, with relevant amendments to the Financial Instruments and Exchange Act passing the Diet on May 17, 2017, and coming into effect on April 1, 2018.  After a period of public comment that commenced on October 24, 2017, the details of new HFT regulations were finalized and published on December 27, 2017, together with the responses of the Financial Services Agency (“FSA”) to the public comments.

Under the new regulations, HFT operators will need to register with the FSA and will be subject to surveillance by the FSA.  A person or a corporation already conducting HFT on the effective date can continue conducting HFT for a 6-month grace period, during which an “application” for registration must be made.  However, as it would take a few months to make an official application after starting a pre-application consultation with the FSA, HFT operators will need to start preparation of their applications well in advance.  Before April 1, 2018, the FSA will not accept official applications for registration, but will accept pre-application consultation.  Completion of registration would take around 2 months after application is made.  Unregistered HFT operators would be subject to a penalty of imprisonment of up to 3 years and/or a fine up to JPY 3 million.

The details of the regulations that were recently finalized set out such matters as the definition of HFT, the application process and standards, and the obligations of registered HFT operators.  For more details on the regulations, please read our latest newsletter below.

The FSA has also released forms of the application documents on its website.

Mori Hamada & Matsumoto provides legal advice and support with respect to HFT regulations.  Please feel free to contact us for assistance navigating these new regulations.

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*Please note: Information is current as of the time of disclosure.