SBI Japannext, an alternative trading system for Japanese equities, has called for changes to margin trading rules to encourage growth on its platforms and has implemented improvements to its trading infrastructure.
While SBI Japannext, known in Japan as a proprietary trading system, has experienced impressive volumes growth in recent months – including a daily record of ¥121.5 billion in equity turnover on 6 February – the venue’s market share has not grown in synch.
According to Japannext, the problem lies with the inability of PTSs to offer margin trading. The PTS said that while its sister company SBI Securities controls around 40% of all Japanese retail flow and is plugged into Japannext, 60% of this flow is traded on margin, and therefore inaccessible by the venue.
SBI Japannext will lobby regulators to lift restrictions on margin trading for PTSs to create a more level playing field among Japanese markets.
“Given our PTS has absolutely no access to 60% of Japan Exchange’s retail flow (approximately ¥288 billion), we firmly believe this factor has a negative impact on our market share,” read a statement from SBI Japannext.
But the PTS added that despite an unfavourable market share trend, it is receiving greater participation among market participants, for example through the inclusion of its data in Bloomberg’s JP Composite index from 4 March.
This will enable Bloomberg users to include Japannext trades as part of market analyses.
Moreover, the trading venue will migrate to Nasdaq OMX’s OUCH protocol, having installed the US exchange operator’s X-Stream INET trading platform last September. The new connectivity protocol will reduce latency to 50 microseconds from 400 microseconds, offering virtually unlimited daily transaction processing capabilities and increasing the maximum messaging process rate to 40,000 message per second per port.