CFTC Staff Letter 03-06: No-Action Relief for Osaka Securities Exchange Futures Contracts

CFTC Letter 03-06
CFTC letter No. 03-06
February 13, 2003
No-Action
Office of General Counsel
Re: Osaka Securities Exchange’s Request for No-Action Relief in Connection with the Offer and Sale of its Futures Contracts Based on the FTSE Japan Index and the MSCI Japan Index in the United States Dear Mr. Felsenthal:
This is in response to letters, attachments, facsimiles and electronic mail dated from July 2, 2002 to January 13, 2003, requesting on behalf of your client, the Osaka Securities Exchange (“OSE”), that the Office of General Counsel (“Office”) of the Commodity Futures Trading Commission (“Commission” or "CFTC") issue a “no-action” letter concerning the offer and sale in the United States (“U.S.”) of OSE’s futures contracts based on the FTSE Japan Index (“FTSE Japan”) and the MSCI Japan Index (“MSCI Japan”) (collectively, “Indices”). We understand the facts to be as follows. OSE currently is the largest equity derivatives exchange in Japan measured by trading volume and contract values.[1] The OSE is an incorporated organization established in accordance with Japan’s Securities and Exchange Law (Law No. 25 of 1948, as amended) (“Securities and Exchange Law”). The OSE is licensed to act as a stock exchange by the Prime Minister of Japan pursuant to a license initially granted by the Minister of Finance of Japan under the Securities and Exchange Law. As a licensed stock exchange, the OSE is authorized to trade stocks, bonds and equity derivatives products. The equity derivatives products authorized for trading include futures and options on security indices and options on equities.[2] Under the Securities and Exchange Law, the Prime Minister has supervisory authority over all stock exchanges in Japan. Among other things, the Prime Minister is authorized to grant licenses to stock exchanges, to approve their Articles of Incorporation, Business Regulations, and Brokerage Agreement Standards, and to approve futures contracts on security indices. The Prime Minister, in turn, has delegated these powers, other than the authority to grant licenses to stock exchanges, to the Commissioner of the Financial Services Agency of Japan (“FSA”). The FSA was established in July 2000 and results from the merger of the Financial Supervisory Agency and Financial System Planning Bureau of the Ministry of Finance. The FSA has broad supervisory responsibility for all aspects of financial services, including inspection, supervision and surveillance of financial activities.[3] The FTSE Japan is a broad-based, modified capitalization-weighted composite security index. Maintained by FTSE International Limited, the FTSE Japan is derived from over 2,200 common stocks listed on the OSE and the Tokyo Stock Exchange (“TSE”). The 330 stocks currently in the FTSE Japan, 10 of which are listed on the OSE First Section and 320 of which are listed on the TSE First and Second Sections, represent approximately 80% of the market value of the Japanese equity markets. Based on file:///S|/Website%20Management/LegacyDataCopyasof2010-04-21/tm/letters/03letters/tm03-06.htm (1 of 7) [5/6/2010 5:38:27 PM]