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Overview of Japanese and Chinese Equity Index Futures Markets

On September 7, 2022, Japan Exchange Group (JPX) and China Financial Futures Exchange (CFFEX) signed an MOU to enhance their cooperation on the development of both derivatives markets.To get more news about cffex regulated forex brokers, you can visit wikifx.com official website.

This article will take the opportunity to introduce a brief market overview of the equity index futures listed at Osaka Exchange (OSE) under JPX and CFFEX.China and Japan have the second and third largest economies in the world in terms of GDP, so their sizable equities markets also have a significant presence. The market capitalization of the Chinese and Japanese equities markets at the end of 2021 was RMB 91 trillion (equivalent to around USD 14.4 trillion) and JPY 753 trillion (equivalent to around USD 6.5 trillion), respectively.

In addition to these cash-equities markets, both countries have active listed equities derivatives markets. The table below shows the types of the equity index futures listed at JPX and CFFEX.

As of December 2022, JPX has 16 listed equity index futures, underlying Japanese, overseas, REITs, and other indices, while CFFEX has 4 Chinese equity index futures.
In Japan, trading of Nikkei 225 Futures, the most popular listed equity index futures, and TOPIX Futures, a wide used product among institutional investors for hedging purposes, began in 1988.

Since then, JPX has expanded its product lineup and improved its trading rules and sophisticated trading systems to meet the demands of various players, including retail and domestic and overseas investors. JPX’s initiatives that have had a particularly significant impact on market expansion include:

Mini-sized contract futures, Nikkei 225 mini, were launched in 2006. Many Japanese retail investors rushed to equities and derivatives markets in the early 2000s, and the mini-sized products captured their trading demands.
A new derivatives trading system, J-GATE, was introduced in 2011 and upgraded in 2016 and 2021. This state-of-the-art trading system was developed by NASDAQ, providing market services at an international standard level for various investors, including HFTs.
The night trading session was introduced in 2007, and trading hours were extended until 8.00 pm in 2008, 11.30 pm in 2010, 3.00 am in 2011, 5.30 am in 2016, and 6 am in 2021. These changes provided further trading opportunities with overseas investors. In addition, JPX introduced holiday trading for derivatives markets in September 2022.
In China, the first equity index futures, CSI 300 Index Futures, were launched in April 2010, followed by SSE 50 Index Futures and CSI 500 Index Futures in April 2015, and CSI 1000 Index Futures in July 2022.

Upholding high standards with a focus on market stability, CFFEX strives to expand its financial derivatives product lineup to meet market participants’ diversified risk management demands. CFFEX’s chief efforts for market development are:

CFFEX has expanded market access for various types of investors. Over the years, CFFEX has witnessed a steady growth in institutional participation by catering to institutional investors’ hedging and investment needs.
CFFEX endeavors to steadily advance market opening-up, including catering to QFIIs/RQFIIs’ increasing needs to trade equity index futures for risk management purposes.
In consideration of global best practices and domestic market dynamics, CFFEX continues to improve its access channels, trading mechanisms, and risk control measures to ensure orderly market operations and safeguard transparency, fairness, and impartiality.
CFFEX has improved its IT infrastructure and data services. For example, CFFEX has secured three data centers to ensure continuous business operations: a primary data center, a same-city disaster recovery center and a remote disaster recovery center.
Trends in Trading Volume and Open Interests
JPX’s annual trading volume of equity index futures expanded to 338 million contracts in 2022, compared to just 13 million in 2000. Though the monthly trading volume fluctuated between 10 million and 20 million contracts, trading volume was recorded at its highest level in several decades in March 2020 due to market turbulence caused by the COVID-19 pandemic. In contrast, the open interest showed no remarkable trends, moving between a range of 1.5 million and 2.5 million contracts.