Singapore Exchange (SGX) will start trading its new SGX Nikkei Dividend Point Index futures contract (NDPI) in June, making it the first Asian derivatives exchange to trade a dividend futures contract.
NDPI is the lynchpin of SGX’s strategy to extend its range of international products.
The NDPI is based on the Nikkei Stock Average Dividend Point Index and is calculated using accumulated dividends received by investors from constituent companies of the Nikkei Stock Average over a calendar year.
SGX anticipates that the NDPI will attract pension funds, asset managers and other OTC market participants looking to remove counterparty credit risk via the central counterparty facility.
“The [NDPI] will make price discovery transparent to all customers who need to hedge, or take a view on, dividends of Japanese companies,” said Chew Sutat, executive vice president and head of market development at SGX.
In May, overall derivatives trading volume on SGX
grew 40% year-on-year to 6 million contracts; daily average volume grew 34% to 310,809 contracts.
Currently 30% of Nikkei 225 Index futures trading worldwide is done on SGX.