JPX’s Osaka Exchange launches smaller Nikkei 225 and ESG index derivatives

Rick Steves

“In recent years, a trend toward smaller investments in the cash equity market has increased demand for more precise risk management tools.”

Osaka Exchange has announced the launch of six derivatives products, including micro and mini contracts, as well as three ESG index futures.

Founded in 1949, the Osaka Exchange’s strength is in derivative products. The OSE is the leading Derivatives Exchange in Japan and it was the largest futures market in the world in 1990 and 1991.

Trend toward smaller investments in cash equity market and ESG products

The six new derivatives products are:

  • Nikkei 225 micro Futures
  • Nikkei 225 mini Options
  • 3-Month TONA Futures
  • S&P/JPX 500 ESG Score Tilted Index Futures
  • FTSE JPX Net Zero Japan 500 Index Futures
  • Nikkei 225 Climate Change 1.5℃ Target Index Futures

Ryusuke Yokoyama, President and CEO of Osaka Exchange, said: “Today, I would like to announce that six new products have been listed and started trading on Osaka Exchange. The first is Nikkei 225 micro Futures and Nikkei 225 mini Options.

“In recent years, a trend toward smaller investments in the cash equity market has increased demand for more precise risk management tools. Therefore, we have decided to introduce these two products, whose contract units are one-tenth of the existing “Nikkei 225 mini” and “Nikkei 225 Options,” to reduce the notional amount. As a result, we will be able to offer a wider product lineup, from small-lot to large-lot. We expect that this will enable futures and options to be used by investors for various purposes, which will further revitalize the market.

Next is 3-month TONA Futures. This is a cash-settled futures contract linked to the daily cumulative compounded Tokyo Overnight Average Rate (TONA; published by the Bank of Japan) over a three-month period. The need for a term risk-free rate for the Japanese yen has been increasing in light of the discontinuation of JPY LIBOR at the end of December 2021. With this in mind, the aim of this product is to provide a wide range of investors with opportunities to trade this indicator and build a market that fully enables price discovery. With the introduction of 3-month TONA Futures, Osaka Exchange is able to offer one-stop trading of short- to long-term interest rates along with JGB futures.

Finally, three ESG index futures products have listed today, linked to the S&P/JPX 500 ESG Score Tilted Index, FTSE JPX Net Zero Japan 500 Index, and Nikkei 225 Climate Change 1.5°C Target Index.

Osaka Exchange is a subsidiary of JPX Group, which set out in its Medium-Term Management Plan the aim to contribute to the realization of a sustainable society by providing solutions that utilize market mechanisms to address a wide range of societal issues. That is way OSE has decided to introduce futures contracts linked to ESG indices so that they can be used in asset management that considers ESG factors.

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