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Roaring into the year of the tiger

Sponsored content - JPX looks ahead to cash market restructuring, derivatives, and fixed income

3 February 2022

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Asia’s Year of the Ox failed to deliver its promised virtues of diligence and wealth, amid yet another pandemic hit year. One month into the new lunar year, the Year of the Tiger is expected to break out of the pandemic with a roar. We are all excited to see the suppressed forces that will bring renewed growth and vitality being unleashed this year.

We at Japan Exchange Group are very keen to position ourselves and build on this pent-up momentum. While the world was in lockdown, we laid the ground to expand our services.

Japan as one of the largest economies in APAC is well positioned to benefit from this re-opening, not only due to domestic reforms that will be initiated by the new political leadership and the so called “Kishidanomics”. Japan’s biggest ever spending plan underlines a pivot from fiscal consolidation to more sustainable GDP growth rates. Kishida’s government estimates growth of 3.2% in fiscal 2022-2023, lifted from previous estimates of 2.2%, which formed the basis of the budget plan.

The aim is to focus on wealth creation and distribution, but also through the growth of many emerging countries in the region, we can look forward to a higher level of dynamism in the Japanese economy.

We are hopeful to capture these opportunities in our cash and derivatives markets as we laid the ground for our continued expansion in 2021 and will continue to work on in 2022. We would like to share some of the key themes that JPX Group will focus on in 2022.

Cash Market Restructuring

April 4th will see the long-awaited launch of the new TSE market structure. Restructuring the market into three distinctly new segments, Prime, Standard, and Growth, providing enhanced governance and transparency by giving these segments clearly defined concepts we anticipate that these efforts will translate into new growth and an increase in investor interest and confidence alike.

Rising Retail Traders on OSE Market
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We envision that over time this restructuring will make the constituents of our various indices more fluid. The increased interest should lead to an overall increase in activity and elevated demand by hedgers and speculators alike.

JPX Derivatives

As September 2021 saw the successful launch of our new trading system, J-GATE 3.0. Based on Nasdaq’s widely employed Genium I-NET technology, J-GATE 3.0 delivers the best-of-breed protocols ITCH and OUCH. By leveraging on this widely used technology, our highly deterministic trading platform can be swiftly integrated into every trader’s playbook.

Following up on that and the market integration of TOCOM, 2022 will focus on the further cultivation of retail trading. In Japan as in many other global markets the pandemic has brought about a new global phenomenon, the so-called rise of the “retail trader.” Ever since the launch of the Nikkei 225 Mini Futures on OSE over a decade ago, retail traders have occupied and steadily increased market share, the pandemic and work from home environment has further elevated this additional activity to the next level.

2022 will also see the long-anticipated launch of our holiday day trading this coming September. Expanding on the increase of retail as well as cross border trading trends we will further cultivate this segment of the market. Initially the calendar will add the following holidays as trading days.

A second pillar to further develop our vision of a world-class derivatives market is the cultivation of the Japanese energy market.

OSE Holiday Trading Starting From September 2022
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Being on of the largest energy markets in the world we are now advancing preparations for the permanent listing of electricity futures and trial listing of LNG futures in April this year.

Renewed Interest in Fixed Income

In Europe and the US, concerns are growing over inflation and central banks are beginning to turn increasingly “hawkish” and there is a more open discussion towards a tightening monetary policy.

As you are all aware, the JGB is one of the three global fixed income benchmark contracts. In line with inflation being on the rise we are experiencing an increased interest in the 20yr JGB futures contract. We are happy to have on-boarded global and domestic banks as market-makers and to provide adequate on-screen liquidity in these contracts. This additional activity will further expand our very successful and highly liquid 10yr JGB futures and overall re-invigorate the full suite of fixed income products traded on our market.

2022 is the Year of the Tiger. As tigers run long distances each day, we are hopeful that this year, in line with Japanese financial proverbial tradition, will prove to be full of vigor and good fortune.

Contact Details:
Osaka Exchange / Tokyo Commodity Exchange
Derivatives Business Development
E-mail: ose-dmg@jpx.co.jp

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