CME Launches Options on Nikkei Futures

Terry Flanagan

CME Group has launched options on CME’s Yen-denominated Nikkei Stock Average futures. CME Group will reference the Osaka Security Exchange’s (OSE) Nikkei 225 (Yen) Futures contract in connection with these options contracts. The contracts are listed with CME, and will be available for trading on CME Globex from January 13, 2014, pending CFTC review.

“The new product is an option on the Nikkei 225 index future,” said Scot Warren, senior managing director, equity index products and index services at CME Group. “It builds on CME’s success in developing the Nikkei futures contract market, reflecting volatility in Japanese markets as well as a desire for overseas exposure.”

Scot Warren, CME

Scot Warren, CME

The new options contracts will be available in American-style and European-style options. The American-style options will be offered in two months in the March Quarterly Cycle, and the European-style options will be offered in two serial months. For European-style options, CME will reference OSE’s Nikkei 225 (Yen) Futures contract prices to make in-the-money and exercise determinations at option expiry.

“The launch of these options is one key output from the ongoing collaboration between OSE (now a part of Japan Exchange Group), and CME Group, and our customers now have greater trading access and convenience,” said Hiromi Yamaji, president and CEO, Osaka Securities Exchange. “Having OSE’s very active and liquid night session of Nikkei 225 Futures and Options parallel to CME Group’s new Yen-denominated Nikkei 225 Options during US core trading hours should also further improve the efficiency in managing risk in the US time zones.”

A stronger global recovery and the results of Prime Minister Abe’s policies have helped to boost Japan’s current surplus and narrow their deficit, although the improvement in trade was less than economists anticipated.

“Due to the government’s efforts to stimulate the economy, the Japanese Yen weakened and this helped to boost overseas investment income, driving the country’s current account surplus to a 5-month high,” said Kathy Lien, managing director at BK Asset Management. “Unfortunately not all news was good news for Japan. The country is still running a trade deficit, which is a major challenge for Abe’s government and bad news for a country that thrives on exports but thankfully they are still moving in the right direction and the people in Japan are responding as indicated by the outlook component of the Eco Watchers, which increased for the second month in a row in October.”

CME president Phupinder Gill referenced a growth in focus on options during the company’s most recent earnings call. “CME’s options on futures complex is up 65%, and this continues to expand our portfolio of index options products,” said Warren. “We are one of three venues that is licensed to trade futures on the Nikkei 225. OSE, which merged with TSE to form JPX, is the largest market for Nikkei futures, and CME has had a longstanding commercial relationship with OSE, and now JPX. Because JPX is providing settlement prices, this expands our working relationship with JPX, recognizing the deep liquidity they have in Nikkei future.”

Lead image credit : Flicker/Stéfan

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