OSE Derivatives

Osaka Exchange, a group company of Japan Exchange Group (JPX, 8697), and Tokyo Commodity Exchange conducted the first holiday trading of stock index futures and other derivatives on 23rd. Trading will be conducted on national holidays when domestic exchanges are closed, with the aim of providing investors with an opportunity to reduce risk when market movements occur in overseas markets. The Nikkei 225 futures contract was down more than 600 yen on the first day of trading, with trading volume swelling to "more than expected," as European and US stock markets fell sharply during the night (Japan time).

The main internet-based securities companies were the main target products, including Osaka Exchange's stock index futures and options, commodity futures and options, and TOCOM's oil futures. Participation in holiday trading was determined on a brokerage-by-brokerage basis. Japan had more holidays and fewer trading days than Europe and the United States. On September 23, Moriyuki Iwanaga, President of Osaka Exchange, mentioned "Being able to trade on holidays is the culmination of our long-standing desire to provide a hedging function for Japanese equities."

The Nikkei 225 Futures (Large) Dec contract traded 47 contracts at 8:45 a.m. on 23rd, the start of intraday trading, marking 26,850 yen, 180 yen (0.67%) below the settlement price (27,030 yen) on 22nd. The pair traded in line with US stock index futures and was down 280 yen, or 1.04%, at 26,750 yen at 3:15 p.m., the end of intraday trading. There were about 3,000 trades during the day.

In the US stock market on 23rd, the Dow Jones Industrial Average was temporarily down more than $800 from the previous day, closing at $29,590, down $486 (1.62%). The S&P 500 stock index also fell below the year's low. The December Nikkei 225 futures contract extended its downward range, keeping pace with the weakness in US equities. At 6:00 a.m. on 24th, the end of overnight trading, the price was 26,420 yen, down 610 yen (2.26%) from the settlement price on 22nd.

According to Osaka Exchange, the trading volume of the December contract, the core of the Nikkei 225 mini futures contract, which trades more than the large contract, was approximately 328,800 contracts as estimated by overnight trading on 23rd. An Osaka Exchange representative mentioned "For a first day, trading was more brisk than expected." "It provided investors with the opportunity to engage in agile trading, and the risk hedging function of the derivatives market was fulfilled" (ditto) in line with the large movements in the US and European stock markets, and the exchange took this as a good start.

The challenge for the future will be how to expand the number of brokerage firms participating in the transaction. Osaka Exchange plans to list "Nikkei 225 Micro Futures," whose trading unit is 1/10 of "mini," by around April to June 2023. If offering convenient products to investors boosts business, securities firms that are currently reluctant to participate may be inclined to do so.