The Tokyo Stock Exchange, Asia?s biggest by market capitalisation, plans to make its derivatives market more attractive, as it faces rising competition from India and Hong Kong.
In an interview to Reuters, Masashi Sekizawa, a director of derivatives at the Tokyo Stock Exchange, said, ?Considering the size of the Japanese market compared to places like India, options trading should be growing more here. The problem is liquidity.?
The volume of stock options in the Japanese market lags the Chicago Board Options Exchange, the International Securities Exchange, as well as the National Stock Exchange of India, despite Tokyo?s being the second largest bourse in the world after the New York Stock Exchange.
According to latest data available with World Federation of Exchanges, the total number of stock options traded in 2009 till date on NSE was 88.37 lakh contracts, notionally valued at Rs 2,30,019 crore, while that on Tokyo stood at 3.50 lakh contracts, Hong Kong?s was much larger at 3.17 crore.
The revamp, the news agency said, would begin from Monday, including introducing market makers UBS Securities and Mitsubishi UFJ Securities, to secure liquidity. The exchange will also start using a faster, more powerful trading system that is intended to attract more retail investors to make options their regular investment choice.
TSE began options trading in 1997. Trading in exchange-traded equity derivatives started in India in June 2000 with the launch of Nifty futures contract by NSE.
For the calendar year 2008, NSE ranked 8th among the global derivatives exchanges. It was ranking at 42nd among the global exchanges in 2001. Initially, trading in stock options was limited when it was launched in July 2001.
Building up volumes in each segment has become necessary for stock markets across the world as the markets consolidate. NYSE has tied up with Euronext while the London Stock Exchange is planning a match with the pan-European alternative trading system, Turquoise. Nasdaq, too, has tied up with OMX, while in India, NSE is also exploring possible synergies with exchanges in Asia.
?The NSE derivative segment was able to pick up instantly as it came as a proxy to the earlier badla system practiced in the Indian market. Initially, it was the futures segment that attracted investors. But in the last two years, NSE options segment have emerged as a major tool for hedging,? said TS Harihar, senior VP and derivative analyst, ICICI Securities.