OSE Derivatives

Osaka Exchange, a subsidiary of Japan Exchange Group (JPX), is focusing on expanding trading of securities options for individual stocks. The number of securities that handling the options has increased, and the system has been revised to make trading easier. The exchange hopes to boost the securities options market, which is currently experiencing sluggish trading, and attract more investment.

On November 9th, Osaka Exchange rented a Keihan Electric Railway train and held an event to introduce securities options and other topics. While traveling from Keihan Nakanoshima Station to Demachiyanagi Station, participants enjoyed quizzes about investment and rakugo on the theme of investment. Osaka Exchange President Ryusuke Yokoyama said, “I hope this event will be an opportunity to help people learn more about the topic.”

Options trading refers to the trading of the right to buy or sell a specific financial product at a predetermined price on a future date. Security options target individual stocks and can be used to hedge (avoid) the risk of stock price fluctuations. Although there are also over-the-counter transactions, the Osaka Exchange has about 200 listed security options, which can be bought and sold on the market.

Until now, only two security companies, the Kosei Securities and Interactive Brokers Securities, handled securities options for individuals, but in November, Moomoo Securities Japan (Shibuya, Tokyo), an online securities company from the United States, began handling securities options. The company is actively promoting itself and introducing its services at the Osaka Exchange’s event using Keihan railway.

Moomoo Securities President Francisco Izawa said, “Securities options are not that popular in Japan, but they are quite popular in the United States. There is a possibility that securities options will spread domestically in the future.” With the move from savings to investment, such as the launch of the new Nippon Individual Savings Account (NISA), he said, “Having a variety of financial products available will be an advantage.”

Trading volume of securities options is sluggish. According to the Osaka Exchange, the trading amount (daily average) for 2024 was 13.49 million yen as of the end of November, which is a large difference from other options trading, such as Nikkei 225 options (25.3 billion yen) and TOPIX options (1.8 billion yen).

In addition to the lack of awareness of the product itself, the low liquidity of the product made it difficult for investors to trade. In order to broaden the base, in September, the Osaka Exchange expanded the scope of its “market maker system,” which allows for the constant provision of buy and sell orders to make transactions easier.

Previously, only two exchange-traded funds (ETFs) were available, but the market maker system has now been expanded to a total of 12 securities options, including Toyota Motor Corporation and Nintendo. Osaka Exchange President Ryusuke Yokoyama said, “We would like to emphasize that trading has become easier, and we will continue to consider various measures from the investor’s perspective.”

The year 2024 marks the 10th anniversary of the merger of the former Osaka Securities Exchange with the Tokyo Stock Exchange’s derivatives market to form the Osaka Exchange. The growth of “Osaka, the city of derivatives” is only halfway there. How far can the city increase its presence by leveraging various products? Securities options may be a test for the Osaka Exchange in the future.