A complex framework
Many Japanese financial institutions now conduct their derivatives business through their securities firms, but there are a number of legal risks in using a securities dealer as a derivatives trading entity, writes Tan Ser Kiat of Denton Wilde Sapte Kashio Law Office
A fundamental principle of Japanese financial laws is that each type of financial institution can only engage in businesses that are specifically allowed under the relevant laws. Prior to the 1998 financial liberalisation, this meant that banks were, in relation to over-the-counter derivatives business, confined to dealings in foreign exchange, interest rate and currency derivatives,(1) and no type of financial institution was allowed to trade in OTC securities derivatives.
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