Japan’s Osaka Exchange Speeds Up to Lure More Futures Clients

  • Order processing speeds improve to about 100 microseconds
  • Day and night trading sessions extended to cover key data

Osaka Exchange Inc. on Tuesday unveiled its new trading technology, the latest bourse to speed up in the hope of luring new, super-fast customers.

The revamp of the derivatives market’s systems comes 5 1/2 years after the last major makeover launched the J-Gate platform. The upgrade speeds up the amount of time it takes to process orders to about 100 microseconds from 2 milliseconds -- a 20-fold improvement -- and dramatically increases the number of orders that can be processed at any one time, according to the exchange.

Japan has been moving toward ever greater speed in its markets, with high-frequency traders expanding their share of trading. Exchanges across the world have been upgrading systems to woo the fastest participants. The Tokyo Stock Exchange is one of the world’s fastest, with its last upgrade in September cutting order response time to less than half a millisecond.

“We’re trying to cultivate new investors both domestically and globally,” Hiromi Yamaji, Osaka Exchange’s chief executive officer, said in an interview last month. “We still think the investing pie can become bigger.”

The exchange is also extending the end of the night trading session to 5:30 a.m. from 3 a.m., and shifting the start of the day session to 8:45 a.m. from 9 a.m. The longer day allows for trading when key data comes out. U.S. monetary policy decisions are issued at 3 a.m. local time, while the Bank of Japan releases the Tankan Economic Surveys data at 8:50 a.m.

The additional trading time “is positive if you’re constantly glued to the screen, but I doubt trading volume will increase dramatically,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co. in Tokyo. As for the faster trading speed, he said, “I’m concerned that volatility will increase. Ever since the system changes in 2010, the volatility in Japanese stocks has been getting higher.”

New derivative products also launched Tuesday, including the Mothers Index futures. Contracts traded at 905 as of 12:01 p.m., while the index dropped 3.2 percent at the trading break to 917.25. The changes increase the number of products the Osaka Exchange delivers to 27 from 23, with plans for more. Among new offerings being considered are dollar-denominated Nikkei 225 Stock Average futures.

“There are many investors we haven’t managed to connect with yet,” said Yamaji.

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