Important Terms used in OTC Foreign Exchange Margin Transactions

Additional Margin
An amount of money to be additionally deposited when, due to a daily change in the market price, the amount of margins on deposit is smaller than the amount required to maintain the customer?fs open positions.


Ask
An indication by a financial instruments firm of willingness to sell a specified product for a specified volume at a specified price. A customer can buy the product at such price.


Bid
An indication by a financial instruments firm of willingness to buy a specified product for a specified volume at a specified price. A customer can sell the product at such price.


Cash Settlement
A method of settling futures transactions or options transactions by paying or receiving cash value based on the computed profits or losses without delivering the underlying assets.


Covering Transaction
A financial instruments firm conducts, for the purpose of reducing the risk of loss which arises from the price fluctuation of OTC foreign exchange margin transactions with customers as a counterparty, on-exchange derivatives transactions or foreign exchange transaction or OTC foreign exchange margin transaction with other financial instruments firm or other person as a counterparty for the same object currencies, purchase or sale and other conditions as the OTC foreign exchange margin transactions with customers. Such transaction is called covering transaction.


Derivatives Transaction
A transaction, derived from an underlying transaction, the price of which is determined by the value of such underlying transaction. Futures transaction and options transaction are included in derivatives transactions.


Financial Instruments Firm
A person registered under the Financial Instruments and Exchange Act to engage in the business handling financial instruments transaction including OTC foreign exchange margin transaction.


OTC foreign exchange margin transactions
A hybrid transaction combining a foreign exchange transaction to exchange currencies and a margin transaction to deal larger amount of transaction by depositing relatively smaller amount of money. Categorized as over-the-counter derivatives transactions.


Hedging Transaction
A transaction of taking positions on an on-exchange financial instruments market or over-the-counter market opposite, in terms of risk, to assets or liabilities which are now held or will be held in the future in order to reduce the risk involved in price fluctuation of such assets or liabilities.


Intermediary Transaction
A transaction in such a financial instruments firm passes its customer?fs order to another financial instruments firm in the name of the customer.


Limit Order
An order in which a customer specifies the limit of price (the lowest price when selling or the highest price when purchasing). On the contrary, an order in which a customer does not specify any price in advance is called market order.


Long Position
An unsettled purchase transaction.


Margin Call
When the usable margin will be below zero, we will close the customer?fs positions on customer?fs account at our sole discretion for preventing the increased loss.However, such loss cut rules may not limit the loss to the amount of margins on deposit if the market changes abruptly and the price gap occurs between the closed price of last week and the opened price on the 1st day of the week.


Margin
Guarantee money deposited for the purpose of insuring the contract fulfillment for futures or options transactions, etc. Margins are sometimes classified into initial margins to be deposited when a transaction is concluded and maintenance margins which must be maintained on deposit for an open position at all times. If the amount of margin on deposit drops under the maintenance margin requirements, the customer is required to make an additional deposit of margin to the level of initial margin requirements.


Mark-to-Market
Procedures for the valuation of open positions in order to reflect a daily change in market prices.


Offsetting Position
Holding of both long positions and short positions for the same products.


Over-The-Counter Derivatives Transactions
A derivatives transaction conducted in a place other than an on-exchange financial instruments market operated by a financial instrument exchange or foreign financial instruments market.


Over-The-Counter Financial Futures Transaction

A derivatives transaction of financial instruments such as currency and interest rate conducted in a place other than an on-exchange financial instruments market operated by a financial instruments exchange or foreign financial instruments market. OTC foreign exchange margin transaction is categorized as an over-the-counter financial futures transaction.


Repurchase
A purchase transaction to offset (decrease) a short position.


Resale
A sale transaction to offset (decrease) a long position.


Roll-over
Carrying forward of open position of OTC foreign exchange margin transactions, which were not offset during the trading day, to the next trading day.


Short Position
An unsettled sale transaction.


Specific Investor
An eligible institutional investor, the national government, the Bank of Japan, etc. which are deemed to have professional knowledge and experience of investment in securities including over-the-counter financial futures transactions. An individual person satisfying a certain criteria may request to be treated as a specific investor and a certain specific investor may request to be treated as a customer other than a specific investor.


Swap Point
Roll-over of OTC foreign exchange margin transactions is deemed to be effectively equivalent to borrowing of sold currency and lending of purchased currency for the period from the settlement day for the trading day until the settlement day for the next trading day. The amount calculated on the basis of the interest rate differential of currencies to adjust such differential is called swap point in the case where the settlement day is carried forward by a roll-over.