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Japan Exchange to List JPX-Nikkei 400 Futures This Year

Osaka Securities Exchange President Hiromi Yamaji
Hiromi Yamaji, president of Osaka Securities Exchange Co. Photographer: Akio Kon/Bloomberg

Japan’s main exchange operator will start trading JPX-Nikkei Index 400 futures this year, according to the head of the unit that will list the derivatives.

Osaka Securities Exchange may offer the contracts from about November, said President Hiromi Yamaji. Japan Exchange Group Inc. was formed from the merger of the nation’s two biggest bourses last year, with cash trading moving to Tokyo and OSE managing the derivatives business. The JPX-Nikkei 400, a measure with member companies selected for higher return-on-equity and profits, began trading this month.

“I am sure that we will start trading the futures within the year,” said Yamaji, a former executive at Nomura Holdings Inc. who was announced as OSE president in April. “Investors need futures for hedging purposes.”

The Nikkei 225 Stock Average moved an average 1.3 percent each day last year as it surged 57 percent for the biggest gain among developed markets. That compares with 0.5 percent average daily swings on the Standard & Poor’s 500 Index, data compiled by Bloomberg show. The JPX-Nikkei 400 seeks to divert investors toward companies that use cash efficiently and have management that is focused on creating value for investors, Japan Exchange and Nikkei Inc., which compile the gauge, said in November.

Shares Gain

The Government Pension Investment Fund, the world’s biggest pool of retirement savings with 124 trillion yen in assets, is “still considering” whether to use the measure as its benchmark, the fund’s President Takahiro Mitani said in a Dec. 4 interview in Tokyo.

Japan Exchange shares jumped 7.3 percent to 2,711 yen at the close of trading in Tokyo today, the biggest daily advance since Sept. 10. The JPX-Nikkei 400 rose 2.6 percent to 11,347.32.

“There are heightened expectations for JPX-Nikkei 400 trading to increase, having just learned about the listing of its futures,” said Masayuki Otani, Tokyo-based chief market strategist at Securities Japan Inc. “Along with the possibility that the GPIF may use this index, should its futures list, it’ll become even easier to utilize this index.”

Exchange-traded funds and investment trusts worth about 5 billion yen ($49 million) are linked to the JPX-Nikkei 400, with demand for futures set to increase as those products become more popular, according to Yamaji.

The JPX-Nikkei 400, which counts SoftBank Corp., Fanuc Corp. and Honda Motor Co. as its biggest members, fell 6 percent this year through yesterday, matching the Topix’s drop.

Topix Futures

Yamaji joined Nomura in 1977 and spent time at the brokerage’s offices in London and New York as well as a stint as the executive chairman for its investment-banking division.

The Osaka bourse will also seek to list Topix futures in markets such as Singapore and Chicago, Yamaji said. Nikkei 225 contracts are traded in all three markets while Topix futures are offered in Osaka only.

“It would be a win-win situation as it’ll increase volume for us as well as for them,” because investors would trade on price differences between the exchanges, Yamaji said. “Singapore and the CME said they were interested.”

Laurie Bischel, a spokeswoman for CME Group Inc. in Chicago, declined to comment.

“Singapore has always been a strong promoter of Japanese capital markets, and SGX plays a consistent role in supporting the internationalization of Japanese equity listings and derivatives,” said Michael Syn, head of derivatives at Singapore Exchange Ltd., in an e-mailed response to questions from Bloomberg. “JPX is one of SGX’s largest shareholders so we have particular interest in being of service to Japanese markets and our shareholders.”

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