JPX forges links with India and Istanbul exchanges

The Japan Exchange Group has signed agreements to list yen-dominated S&P CNX Nifty Index futures with India's National Stock Exchange, and to cross-list exchange-traded funds with the Istanbul Menkul Kiymetler Borsasi.

The Japan Exchange Group (JPX), the newly formed bourse created by the merger of the Tokyo Stock Exchange and Osaka Securities Exchange (OSE), has signed agreements to list yen-dominated S&P CNX Nifty Index futures with India’s National Stock Exchange (NSE), and to cross list ETFs with the Istanbul Menkul Kiymetler Borsasi (IMKB).

The Nifty futures will begin listing on the OSE, which has been traditionally strong in derivatives, next year.

JPX, which officially came into being on 1 January, is working to internationalise and reinvigorate the Japanese capital markets after years of falling volumes and recent losses of market share to the country’s proprietary trading systems.

India’s markets, which had witnessed a fall-off in foreign investment due to uncertainty and dissatisfaction around regulatory and tax issues, are also striving to make themselves more appealing to global investors.

“Offerings like this have a lot of potential as there’s a lot of interest from both retail and institutional Japanese clients in accessing markets like India,” says Makoto Nagahori, from Nomura in Tokyo.

According to Nagahori, the advantages of avoiding India’s high transaction taxes and any potential currency risks also add to the appeal of the Nifty futures, a view echoed by NSE spokesperson Divya Malik Lahiri.

“The STT (Security Transaction Tax) is very high in India, so this a way for foreign investors to access the Indian markets remotely, in their own currency,” Lahiri told

“This is part of our strategy to take the NSE global, there are already Nifty futures traded on the Chicago Mercantile Exchange, as well as in Singapore,” she added.

NSE is unconcerned that listing in Tokyo could take liquidity from its market in India, according to Lahiri: “This will mostly appeal to Japanese investors who haven’t yet traded India.”

The beginning of trading in Singapore Exchange (SGX) Nifty futures resulted in little loss of liquidity in Mumbai, points out Aditya Sharma, vice president, institutional client group, Citibank India.

“India’s markets are still retail-dominated, accounting for about 60% of volumes, so the listing in Tokyo shouldn’t have too much of a negative effect on liquidity,” suggests Sharma. “Though it will be interesting to see if brokers who serve Japanese clients here do see a drop-off once the futures have been running for a few months.”

That the SGX Nifty futures open 2.5 hours before the market in Mumbai, “often sets the tone for the day in India,” notes Sharma. With Tokyo opening another hour earlier, this will add another factor into the mix for the NSE Nifty futures.

Another time-related issue will be the 2.5-hour overlap where NSE Nifty futures are being traded in both India and Japan, and US markets are closed, which may create some arbitrage opportunities, according to market participants.

Nomura’s Nagahori believes that because of regulatory requirements for certification to trade futures, exchange-traded fund listings, such as those for the Turkish IMKB, will be even more appealing to Japanese investors.

With JPX having signed two agreements with overseas bourses in less than two weeks since its inception, there are likely to be more on the horizon.

Torii Natsuho, a spokesperson for JPX, said the bourse wouldn’t rule out, “…any possibility for such arrangements in the future as long as it will offer investors more opportunities to diversify their investment portfolios and contribute to the development of the Japanese capital markets.”