1. Sumitomo Mitsui Banking Corporation (“SMBC”) in the U.S.
SMBC is a foreign banking organization incorporated under the laws of Japan. SMBC maintains state-licensed branches in New York, New York; Los Angeles, California; and San Francisco, California; and representative offices in Chicago, Illinois; Dallas, Texas, Houston, Texas; Menlo Park, California; and White Plains, New York. SMBC is supervised by the states in which it maintains branches and representative offices, the Board of Governors of the Federal Reserve System, and the Financial Services Agency of Japan.
SMBC does not accept deposits from the general public. SMBC is not a member of the Federal Deposit Insurance Corporation (“FDIC”), and deposits placed with SMBC are not insured by the FDIC.
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT OR ESTABLISHING A NEW CUSTOMER RELATIONSHIP
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person, including any legal entity, that opens an account or establishes a customer relationship. Federal law also requires all financial institutions to obtain, verify, and record information that identifies the beneficial owners of a legal entity that opens an account or establishes a customer relationship.
What this means for you: When you enter into a new customer relationship with SMBC, SMBC will ask for your name, address, date of birth, and other identification information. When you enter into a new customer relationship with SMBC on behalf of a legal entity, SMBC will ask for the legal entity’s name, address, and taxpayer identification number, and may ask for certified articles of incorporation and other identifying documents of the legal entity. SMBC will also ask for the names, addresses, dates of birth, and other identification information of the beneficial owners of the legal entity, and may ask for other identifying documents of such beneficial owners. This information will be used to verify the identity of the legal entity and its beneficial owners. If required information or documentation is not provided, SMBC may be unable to open an account or establish a relationship.
USA PATRIOT ACT CERTIFICATION
Pursuant to the Sections 5318(j) and 5318(k) of Title 31 of the United States Code, as added by sections 313 and 319(b) of the USA Patriot Act of 2001, SMBC has posted a Global Certification for use by any financial institution that requires a Patriot Act Certification from any SMBC office or branch. Please use this Global Certification in place of requesting individual SMBC offices or branches to provide a separate certification.
Global USA Patriot Act Certification | Sumitomo Mitsui Banking Corporation (smbc.co.jp)
Notice to all customers regarding the Unlawful Internet Gambling Enforcement Act (UIGEA) of 2006
The Unlawful Internet Gambling Act (UIGEA) of 2006 prohibits the U.S. branches of Sumitomo Mitsui Banking Corporation (SMBC) from processing restricted transactions through your business account. Restricted transactions are transactions in which a person accepts credit, funds, instruments or other proceeds from another person in connection with unlawful Internet gambling.
The UIGEA, prohibits any person engaged in the business of betting or wagering (as defined in the Act) from knowingly accepting payments in connection with the participation of another person in unlawful Internet gambling. The United States Department of the Treasury and the Federal Reserve Board has issued a joint final rule, Regulation GG, to implement this Act.
As defined in Regulation GG, unlawful Internet gambling means to “place, receive or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable federal or state law in the State or Tribal lands in which the bet or wager is initiated, received or otherwise made.”
As a customer of SMBC, these restricted transactions are prohibited from being processed through your account or banking relationship with us. If you do engage in an Internet gambling business and open a new account with us, we will ask that you provide evidence of your legal capacity to do so.
FOREIGN EXCHANGE TRANSACTIONS
This disclosure applies only to Sumitomo Mitsui Banking Corporation New York Branch.
1. Compliance with laws, regulatory requirements, and market practice
Sumitomo Mitsui Banking Corporation (hereafter “The Bank’’) will comply with applicable domestic and overseas laws and regulations, market standards to be complied with, and proper market practices when entering into Foreign Exchange (FX) transactions.
2. Roles and capacities of the Bank: Acting as Principal
The Bank engages in FX transactions with customers as an at-risk principal, on an arm’s length basis, for its own account. A principal is a type of market participant who acts on its own behalf as counterparty to its customer. Hence, prices offered by the Bank to a customer and the executed price based on an agreement between that customer and the Bank will be solely applied to a specific transaction based on that agreement. The Bank does not act as broker, agent, fiduciary, advisor, or in any similar capacity on behalf of customers in connection with FX transactions. Statements made to customers should not be construed as recommendations or advice as the customer’s advisor.
Our receipt of an order from a customer or any indication by us that we are working an order does not create a contract between us and a customer. No transaction or other contract will result from an order until and unless we respond to the customer that we have filled or executed against some or all of the order, at which point the customer will assume the risks associated with the filled or executed order, including market risk and credit risk.
We may look for market opportunities that both satisfies the terms of a customer’s order and allows us to make an appropriate return on the transaction, including while executing other transactions to satisfy our own, competing trading interests and responding to competing orders from other counterparties. As such, except to the extent that we have agreed to different terms of execution with a customer, we will exercise our reasonable discretion in entering into a transaction with a customer based on its order, including with respect to fill quantity, execution time, prioritization, and whether to pre-hedge or enter into such transaction electronically, manually, on aggregated basis with other orders or using internal or external sources of liquidity. Due to FX transactions with customers, the Bank will hold FX positions and from time to time execute a hedge transaction(s) in the FX market to cover and control the risks arising from these transactions with the customers.
Also, the Bank may decide to enter into pre-hedge transactions in a manner the Bank deems proper at its discretion in order to effectively execute the customers’ orders and/or to manage the Bank’s own risks. In addition, the Bank may enter into a full-hedge transaction(s) for a certain customer’s order(s) depending on currency pairs and transaction types. Aforementioned risk hedge related transactions will be carried out by the traders who are duly authorized to execute at the Bank’s discretion.
In general, the execution price applied to a certain transaction with a customer may not be identical to the price at which the Bank executes to cover its position in the FX market. This difference is due to the fact that the Bank has no assurance to be able to execute the cover trade at the same price and/or amount in the FX market.
In addition to the cover transactions that the Bank will execute to control the risk exposure, the Bank will also conduct proprietary trading for its own account. This proprietary trading will be carried out by the duly authorized traders according to the Bank’s risk control guidelines.
3. Information services
The Bank may provide market forecast reports to its customers as part of research services for discussion purposes only. Such reports will be prepared based on information that the Bank determines credible, but it will not guarantee the accuracy and completeness of that information. The forecast and outlook therein just indicate the Bank’s views at that timing, and could be altered without any notice. The view and outlook for the FX market should be determined by each customer at its own responsibility.
Further, the Bank, as one of the market participants, may conduct its own FX trading based on a different market view from that of those expressed in such publicized reports.
4. Factors relating to the price
The executable prices offered by the Bank will be determined based on actual market price as determined by the Bank in its commercially reasonable discretion, which depending on the circumstances may be a bid, offer, mid-market, market-on-close, last-traded, or other price, as well as various factors. Descriptions of the factors relating to the prices on typical transactions are as follows:
(i) Actual market rate based transaction
This rate may take into account (but is not limited to) the following factors:
- Product type and market in which the transaction would occur, such as: (i) the trading venue; (ii) the type of order; (iii) the size and direction of the transaction; (iv) market conditions, including market events, the extent and pace of price changes and time of execution; (v) transparency of the market, including actionable and visible liquidity, trading volume and available external venues or platforms; and (vi) the accessibility of third-party quotations and other pricing information;
- Internal costs, such as hedging costs, funding costs, fees, capital costs and overhead;
- Customer- and transaction-specific factors, such as: (i) the volume, types, size, frequency or speed of trading; (ii) the potential market impact of the customer’s trading activity; (iii) the customer’s credit quality and the Bank’s credit exposure to the customer; (iv) specific terms of the transaction or governing documentation; and (v) the extent and nature of the customer’s business relationship(s) with the Bank; and
- Applicable legal or regulatory requirements.
The relevant impact of each individual factor on the price of a transaction will differ depending upon the specific circumstances of that transaction. As a result, the Bank may quote different prices to different counterparties or at different times for the same or substantially similar type of transaction.
(ii) Telegraphic Transfer Middle Rate (the “TTM”) based transaction
In Japan, the Bank may provide offers based on the “TTM”.
The TTM will be the actual market rate as determined by the Bank at approximately 9:55 AM Tokyo time each business day. The Bank also determine buying/selling rate (TTB/TTS), by adding a spread applied to respective currency. The spread is determined based on costs incurred in relation to the transaction (such as one for position management) and fee.1
Further, the Bank may provide certain favorable treatments applicable to certain specific customers based on certain factors such as the volumes of transactions and type of services. The Bank will transact with customers after the applicable rates are respectively specified and are agreed, but in general, such favorable treatment (if applicable) and other factors relating to the prices will not be disclosed to the customers at each time of transaction.
For pricing derivative products such as FX derivatives or currency swaps, the Bank will take into consideration various risks associated with each transaction in addition to the costs to execute the transaction.
In the case where a customer requests the Bank enter into an FX transaction at a reference price provide by any third-party, the Bank will enter into such a transaction only when the Bank determines it to be acceptable. In such a case, the Bank will manage the applicable transaction in an appropriate manner.
1In principle, the TTB/TTS will be applied by the Bank to the designated transactions (small lot, etc.) during the applicable time zone in the applicable day in Japan, but please note that the Bank may change the TTM/TTB/TTS at any time to reduce its risk if there are fluctuations in the market rate.
5. Risk factors
FX transactions involve the following risks. Other products such as foreign currency deposits or loans and other products or services that have FX exposure will also contain such risks.
(i) Price change risk (market risk)
The FX market is comprised of a variety of market participants using various venues and mediums such as dealing via phone or electronic brokering systems on a bilateral and “off and on” basis. Consequently, the price determination process in the FX market is different from exchanges which are subject to disclosure requirements and other rules.
The executable rate fluctuates constantly depending on various factors such as currency pairs, time zones and market liquidity which can affect the number of participants and transaction volume at any given time. The market rate can also change significantly within a short timeframe due to events such as changes in monetary policies or occurrences of geopolitical events.
The Bank will proceed to manage and mitigate the above-mentioned risks arising from FX transactions with customers upon the execution of the trade or in certain circumstances even before the execution. Therefore, in general, customers will not be able to change or cancel the FX transaction (including similar market products) offered by the Bank after acceptance. Should the Bank agree to change or cancel the transaction upon request from the customer, the Bank may charge to the customer fees and costs, including, but not limited to commissions, reconstruction costs, settlement costs, and any other damages incurred by the Bank as a result of the cancellation. Please refer to the terms and conditions, agreements, or any other documents (if any) for further details.
(ii) Other risks
FX settlements between the customers and the Bank can be disrupted if the credibility of the Bank or the Bank’s nostro agent bank deteriorates, or the Bank or its nostro agent bank goes bankrupt or insolvent. The settlements can also be disrupted if the Bank’s settlement system has technical issues. Such disruption can also be caused by system errors or failures by the FX settlement facilities or financial institutions that are participants of FX settlement facilities.
Currency control and/or restrictions imposed by governments and/or the relevant central banks may also impact customers’ FX transactions and settlements therefor.
6. Execution of orders
The Bank will quote the executable rate upon receipt of an order from the customer. The rate will be offered based on the actual market rate determined by the Bank, with due consideration of the management of any associated risks when executing the transaction.
The Bank, depending on the type of transaction, will decide whether to enter into the transaction or not based on the tradable amount limits predetermined by the Bank per each customer. The bank controls the tradable amount limits based on each transaction amount, term, and currency, etc. and such limits are reviewed from time to time based on the usage record and the credit condition of the respective customer. The Bank may decline to enter into the transaction if the applicable tradable amount limit will be exceeded by accepting the order. The Bank may also decline to enter into the transaction due to the market conditions without regard to the tradable amount limits.
The Bank will manage the limit price orders in accordance with the execution procedures pre-agreed with the customers. However, the Bank may not execute the order if the Bank determines that actual market rate has not reached the limit price designated by the customer.
Additionally, since the Bank holds various orders from multiple customers, the sequence of executed orders may not be the sequence of orders received from the customers. Even in the case whereby there are multiple identical orders in regard to currency pair, buy/sell instruction and rate, some of the orders may not be executed. Such decisions will be made by the duly authorized traders in a reasonable manner as determined by the Bank, based on information sources that the Bank deems credible, the Bank’s execution experiences, market liquidity, and traders’ positioning, among others.
The Bank carries out various market transactions for the purpose of risk management and proprietary trading, and including pre-hedging. This may result in the Bank executing its own trade near or at the prices triggering the customers’ stop-loss orders. In that case, such Bank’s transaction(s) may influence the rate referenced in the customer’s order and can trigger the customer’s stop loss order as a result. Also, in executing an order by a customer, the Bank may aggregate the order with orders by other customers and the Bank’s orders.
The Bank has the final and absolute authority in regard to the setting of the transaction amount limit, and the manner of execution, including the decision whether to enter into the transaction or not and the method and timing of execution, and as stated such authority will be exercised in a fair and reasonable manner. The Bank will not disclose the details of the exercise of such authority to any customer individually.
The Bank may provide the customers with the specific order execution services utilizing an algorithm, and in such cases the Bank will make efforts to disclose and explain to the customers the terms and conditions of such services appropriately. Where the Bank receives or executes a customer’s order through electronic infrastructure, such infrastructure may record the date and approximate time of the receipt of, or execution against, respectively, such order. These records are subject to the impact of latencies, including operational latencies or other latencies that may be inherent in, or result from, the messaging or communication channel through which orders are delivered to, or received by, us.
7. Electronic trading platform
The Bank provides FX trading via electronic platform services via the Internet or a dedicated circuit to corporate customers. Such services may include any single dealer platform operated by the Bank as well as multi-bank platforms operated by third parties. Please refer to the applicable terms and conditions for such services for further details.
In regard to an electronic trade, if an electronic message offering a transaction by a customer is not received by the Bank’s system by the prescribed cutoff time, there will be no transaction regardless of the reasons for the non-receipt. If an electronic message offering a transaction by a customer is received by the Bank’s system by the cutoff time, the Bank will decide whether to execute the transaction pursuant to the Bank’s internal procedures within the prescribed time limit. Even where the Bank has indicated that a quote on the electronic trading system is tradable and has received from the customer via the platform confirmation of the customer’s intent to enter into a transaction at such rate, the Bank may decide that such a transaction is not executable. In such case, the Bank will notify the customer of such non-execution of the transaction.
In addition, where the market price for a transaction is at a level beyond a customer-specific threshold applied by the Bank’s trade acceptance logic after receipt of a customer’s request to trade, the Bank will reject the trade request pursuant to its “last look” policies. The Bank generally apply this last look price check symmetrically, in which case it will reject the trade regardless of whether the market price has moved against the Bank or against the customer. Last look allows the Bank to manage its execution risk without downgrading the quality of spreads and liquidity it offers to customers. In the absence of last look, the Bank would potentially have to protect itself by providing less depth of liquidity and wider spreads to counterparties using electronic trading platforms.
The Bank employs last look for the following primary reasons:
- The Bank indicates prices to a broad customer base. Those indicative prices are based on, among other considerations, the Bank’s inventory and risk profile. Last look is in place in order to ensure that the Bank can manage our position and risk profile.
- Communication latencies can cause requests to trade and indicative quotes to become stale. Additionally, some market data is not updated continuously in real time.
- The Bank checks the credit status of its customers and its credit exposure to the customer, which may change in real time.
- The Bank undertakes other customer-based checks, such as customer authorization to engage in a particular transaction, to fulfill our risk management objectives and regulatory obligations.
- Along with risk management, regulatory, and staleness checks, the Bank performs a price check.
The Bank generally applies last look immediately upon, and in some cases after a brief time delay following, receipt of a customer’s order, although the application of last look may vary across different platforms. The Bank may take into consideration a variety of factors in setting last-look parameters, including: product type and platform on which the transaction would occur; the customer’s historical trading characteristics and preferences; and the extent and nature of a customer’s business relationship(s) with the Bank. While a customer’s trade request is pending, subject to completion of last look, The Bank does not engage in any trading activity on the basis of that specific trade request or utilize that information for the purposes of adjusting its pricing.
Notwithstanding the provisions of Clause 4 above, the quotes indicated via platform by the Bank may be formulated based on quotes provided by multiple reliable liquidity providers. The Bank will not disclose the identity of each liquidity provider who provides the Bank with the market rates.
For your information, in addition to the risks stated in Clause 5 above, the transactions using the electronic trading platform of the Bank or a third party may be subject to a delay of notice of the receipt of the order or the notice of the execution or non-execution of the transaction attributable to the third party’s system or the circuit conditions.
Where the Bank provides specific order execution services utilizing an algorithm, the pricing, speed and likelihood of executing an order using such electronic execution algorithms can vary depending on the particular algorithm’s parameters.
Prior to using an electronic execution algorithm, a customer should independently assess the suitability of the algorithm and any associated parameters for its needs based on all information available to the customer and its advisers.
By using an electronic execution algorithm, a customer assumes the risks generally associated with algorithmic execution and strategies, including, but not limited to: that market conditions may prevent the algorithm from functioning in accordance with its strategy, parameters, risk controls or the customer’s expectations; the potential vulnerability of algorithmic order execution to the conduct of other market participants trading on the platforms where the algorithm sources liquidity; and technological or operational delay, failure or malfunction at any level or from any source (including, but not limited to, external platforms, the customer’s trading connection or interface, our interfaces, systems or network) that directly or indirectly impact the functioning of the algorithm.
As a result of delays in the dissemination of price updates, market infrastructure, communication and internal processing latencies, short-lived trading discrepancies may exist between the externally sourced prices utilized by the Bank’s algorithms and current pricing on the relevant external platforms.
The Bank’s selection of a platform or other liquidity source for an algorithm or routing prioritization may present certain conflicts of interest. Specifically, algorithms may be designed to access both external and internal sources of liquidity. The Bank may derive additional benefits from that activity, including, among others, reduced transaction costs when we use internal liquidity and ownership or other economic interest (such as the right to receive payments or other fees or revenue sharing) in an external venue or platform where we trade to pre-hedge or pre-position against a counterparty’s order (including trades involving such counterparty’s use of one of our electronic execution algorithms). It is our policy to conduct this activity in a manner designed to avoid disadvantaging such counterparty. All compensation or other economic interests resulting from such arrangements will accrue to the Bank’s account and not the counterparty’s account.
8. Conflict of interest management and other governance systems
The Bank will follow its conflict of interest management policy, when entering into FX transaction with customers. The Bank’s conflict of interest management policy is available at the Bank’s website.
Outline of the Bank’s Conflict of Interest Policy
The Bank has adopted the following control systems in order to manage risks (including conflict of interest) for the FX transactions.
(i)Training of the duly authorized traders dealing with the FX transactions
The Bank provides adequate training to both traders and other employee participating in FX transactions. The training covers relevant laws and regulations, compliance as well as the code of conduct including the conflict of interest management.
(ii) Monitoring by the risk management department and the audit department
The Bank’s risk management department properly monitors the transactions to prevent inappropriate market transactions. The independent audit department also performs internal audit reviews to establish appropriate governance system on a periodic basis.
(iii) Management of transaction information
The Bank takes all necessary measures to adequately manage the customers’ transaction information. If the transaction information includes the confidential information, the Bank will take care of such information pursuant to the applicable information control system such as the limited sharing of the information to the extent necessary in the Bank. The Bank also adopts the timely recording system of the receipt of the order from a customer and the execution of a transaction as much as practicable depending on the type of the transaction.
(iv) Risk Management
The Bank aims to manage its own risks appropriately based on its trading strategies, its position, foreseeable risks, and market liquidity etc.
The Bank is bound by contractual and regulatory obligations relating to confidential information and has adopted policies and procedures to assist it in meeting these obligations. Where consistent with these obligations:
- The Bank may make use of information provided to it as principal in order to effectuate and risk manage transactions, as well as for other risk management purposes. Specifically, unless otherwise agreed, the Bank may use the economic terms of a transaction (but not the counterparty identity) in order to evaluate and/or source liquidity and/or execute risk-mitigating transactions or determine what prices the Bank quotes to third parties. Such use could adversely affect the customer who provided the information to the Bank. In addition, as part of the Bank’s obligations as a regulated entity, the Bank shares customer and transaction information as required by its global regulators.
- The Bank analyzes information regarding executed transactions on an individual and aggregate basis for a variety of purposes, including credit and market risk management, sales coverage, and counterparty relationship management. Unless otherwise agreed, the Bank may analyze, comment on, and disclose anonymized and aggregated information regarding executed transactions, together with other relevant market information, internally and to third parties, as market color. The Bank may also use such anonymized and aggregated information in products, services or data that the Bank offers as part of its business.
The Bank conducts the foreign exchange business in compliance with the FX Global Code established by the Global Foreign Exchange Committee.
Please refer to the following disclosure materials in the format recommended by the FX Global Code.
Disclosure Cover Sheet
Statement of Commitment to the FX Global Code