The Japan Exchange (JPX) has laid out its future plans for growth, which include improving its arrowhead trading system to grow its equity market and make Japanese stocks more appealing.
JPX, which formally came into being on 1 January after the merger of the Tokyo Stock Exchange (TSE) and Osaka Securities Exchange (OSE), has set out a medium-term plan that covers the reinvigoration of the stock market, an expansion of its derivatives market through the migration of OTC derivatives onto exchanges.
In equities, JPX is targeting an average daily trading value of ¥1.7 trillion by 2015, compared to ¥1.55 trillion in 2012. The enhancements to arrowhead will further improve processing speed and reinforce risk management functions as part of efforts to grow electronic trading and participation from high-frequency trading firms. The exchange will also implement a pilot phase for smaller tick sizes and mull the creation of a night time market to diversify its member base.
For derivatives, JPX’s plan recognises that “the Japanese derivatives market global position remains low, particularly in commodities” and sets the goal of expanding trading to 400 million contracts per year by 2015, from 270 million contracts currently.
The market plans to offer new derivatives products based on overseas indices, expand into commodity derivatives, revise derivatives trading rules and plan for the development of a new derivatives trading system.
The final pillar of JPX’s strategic plan relates to global reforms that will encourage exchange trading and central clearing of OTC derivatives. Client clearing of swaps will begin this year, with new products, such as the launch of foreign currency interest rate swaps scheduled for 2014.
Moreover, the integration of TSE and OSE is expected to increase operating revenue by ¥8.5 billion compared to 2012 and a reduction in costs by 15%.