Fiscal 2021 was an active year for the Operations Committee despite the challenging COVID-19 situation.
Back in 2020, we focused on the following 2 key items:
1) Structuring and Recruiting of the Operations committee; and
2) Engagement with FIA Global / Asia Operations Committee to set our 2021 goals
Looking back at 2021 activities, we made some good progress on those points.
1) Structuring and recruiting
We managed to invite 39 individuals from 18 firms, 6 FCMs, 2 broker-dealers, 4 Asset Managers, 2 Trust Banks, law firms and others.
Our members are diverse and represent both buy-side and sell-side, as well as trustees so that we can discuss industry issues with perspectives from the entire futures eco-system. We discussed and identified mutual industry challenges, such as the FIFO logic, Averaged price, Electronification and standardization in pre-confirmation and post-trade, margin and default fund balance adequacy (aka DF/IM ratio) etc. The next step is to identify solutions for the standardization from the perspectives of operational efficiencies and mitigation of operational risk.
2) Engagement with FIA
Another key focus area was enforcing our engagement with FIA, especially with the operations committee in Asia. The challenges we face are the same for FIA Japan and FIA in Asia, but we sometimes lacked unity in this area.
We’ve setup multiple meeting with the FIA Operations committee in Asia and jointly discussed industry agenda throughout the year, such as the introduction of OSE holiday trading, migration from SPAN to VaR and DF/IM ratio.
3) Industry Advocacy
Industry advocacy is another key area for our Operations committee. The introduction of the OSE holiday trading will be the biggest burden for most of the global clearers due to the additional margin born by the clearers, technological restrictions and the operational / systemic risks.
We held multiple FIA/FIAJ joint sessions with the exchanges, CCPs and the regulators on this topic.
One of our achievements for this year is that FIA Japan has been included as an observer in the JPX Listed Derivatives Steering Committee. In the past, the committee was not open to FIA Japan and its members, so that we did not have access to the information.
As an observer of the JPX committee, we would like to bring more transparency and establish an open market for Japan.
4) Education
Education and the continuity of the futures industry in Japan are other key focus areas for FIAJ. Recently, we have seen a number of global FCMs exiting the Japan markets and centralizing execution and clearing operations in their Asia hubs, such as Singapore or Hong Kong.
Thru the Operations Committee, we share knowledge with our members, especially on clearing risk management in derivatives, such as the VaR introduction and margin adequacies.
During our activities in 2021, we understood anew the importance of communication between the exchanges, CCPs, regulators and the global team at FIA. FIA Japan will continue to play this key and important role.
Looking towards fiscal year 2022, we will focus on the following agenda:
1) Work towards the further growth of Japan futures’ industry.
2) Establish regular communication with the exchanges and CCPs in Japan, and liaise with industry participants.
3) Capture and deliver the voice from the futures industry.
4) Continue to engage with FIA globally
5) Focus on standardization and electronification aiming for a robust risk management in the clearing eco-system.
Most recently, we’ve been focusing on a number of topics including:
a) Qualified Invoice System for Consumption Tax: this reform will be implemented in October 2023 and will deeply impact operations at brokerage houses. We are working in collaboration with the FIAJ Legal & Compliance Committee to inform the industry on the planned change and how to best prepare for it to avoid any disruptions.
b) OIS/TONA Futures: following the transition away from LIBOR, we are discussing with JPX/OSE their plans to launch OIS/TONA futures, including contract specifications.
We encourage participation in our activities from all FIAJ members, and welcome input from non-member firms as well. Please contact the FIAJ Office for details.
Shun Yanagisawa
Chairman, Operations Committee