The FSA finalized the regulatory notice designating certain transactions pertaining to the adoption of substituted compliance based on equivalence assessment regarding margin requirements for non-centrally cleared OTC derivatives. This regulatory notice prescribes a framework of substituted compliance for avoiding duplicative application of Japanese and foreign margin requirements.

This framework allows Financial Instruments Business Operators etc. to exchange initial and variation margin in complying with foreign margin rules provided that such rules are deemed as equivalent to the corresponding rules in Japan and at least one of the counterparties is subject to appropriate supervision by the foreign authority. Based on the dialogue between the FSA and foreign authorities, the regulatory notice designates the margin rules of U.S. Commodity Futures Trading Commission and Office of the Superintendent of Financial Institutions of Canada as rules deemed as equivalent to the corresponding rules of Japan. The regulatory notice was enforced on October 21, 2016.

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