Market Regulation Advisory Notices View All MRANs. News View All News. Jobs View All Jobs. Open Markets Visit Open Markets. In a related milestone, Nikkei futures debuted at CME Group 26 years ago this year. Led by then Chairman Leo Melamed, CME Group strengthened its strategic partnership with SIMEX by jointly pioneering the revolutionary Mutual Offset System — in , it was one of the earliest and most successful exchange linkages in the history of the derivatives industry.

Through a special arrangement between CME Group and SGX, traders of yen- and USD-based Nikkei futures contracts have the ability to take positions at one exchange and clear them at the other on the same trading day. As a result, traders can execute transactions in two exchanges and have the ability to clear those trades in their preferred time zone.

Leo Melamed is regarded as the founding father of the futures market. His role in developing CME Group as a premier futures market and in setting up the International Monetary Market is legendary in financial markets.

He also led in elevating SIMEX, which later merged with the Stock Exchange of Singapore and Securities Clearing and Computer Services Pte Ltd to form SGX.

The partnership between SGX and CME Group enabled round-the-clock trading and internationalized the Japanese equity futures market. Today, Nikkei Index futures are actively traded all over the globe.

Over the last decade, turnover of Nikkei Index futures listed at CME Group and SGX has grown more than 4 times compared to the previous decade, and the contract has made the successful transition from floor to electronic trading. Since , the Nikkei Stock Average, commonly referred to as the Nikkei Index, is the most widely quoted index of Japanese equities. Many financial products are linked to the Nikkei Index. The Nikkei is a price-weighted equity index denominated in yen , which consists of stocks in the First Section for large companies of the Tokyo Stock Exchange, and the components are reviewed once a year.

The five largest constituent weights of the Nikkei Index are currently made up of a retailer, two telecommunications companies and two manufacturers.

Four-fifths of Nikkei stocks represent four sectors - consumer, industrial, information technology, and healthcare. Apart from domestic economic factors, the performance of the Nikkei Index, like much of Asia in , has been driven by global growth outlooks. Stocks are weighted on the Nikkei Index by giving an equal weighting based on a par value of 50 yen per share.

Events such as stock splits, and removals and additions of constituents impact the effective weighting and calculation of the index. The Nikkei Index is designed to reflect the overall market, so there is no specific weighting of industries.

Offshore Nikkei futures continue to provide investors with high liquidity and ease of access. The top ETFs tracking the Index listed in Japan are the Nomura Nikkei Index, Nikko Nikkei Index, Daiwa Nikkei Index, Next Funds Nikkei Index Leverage, and the Maxis Nikkei Index. Futures are the instrument of choice for investors seeking access to the Japanese equity market for risk management, as sizable positions can be entered or exited easily with the deep liquidity offered on offshore markets, as indicated by Figure 4.

Leverage can also be deployed effectively through futures. Professional traders depend on the liquidity, cross margining, and the MOS between CME Group and SGX to effectively manage risk and express views.

Indeed, the liquidity generated by this linkage fueled the growth of Nikkei futures over the past decades. Though Nikkei futures and options were originally traded via open outcry in trading pits, the contracts have since evolved in line with changing customer needs. Today, SGX and CME Group customers have a choice of currencies and trading venues for this suite of products. Nikkei futures traded at CME Group and SGX are integral parts of the ecosystem that supports access to the Japanese equity market, with each exchange leveraging on its inherent strengths.

Open interest in the contract topped 1 million lots at SGX at the end of July Demand for USD-denominated currencies is typically from the asset manager community. This is met by leveraged money accounts, which go short while going long on the yen position. It requires both currency-denominated contracts to be available and liquid at the same venue, to enable the cross-margining to be economically viable.

In both illustrations, the usage of futures and options contracts to gain exposure to the Nikkei Index is evidenced by the increase in their respective open interest.

In closing, we share the thoughts of Leo Melamed from an interview he gave regarding the early days of the SGX-CME Group partnership during the s.

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Thus, Singapore became my choice. But in a very real sense I understood that the success of our agreement would be fundamental to Singapore's future growth as a center of finance in South-east Asia. From the end of October , SGX will implement its upgrade of its derivatives trading and clearing platforms. As a result, SGX Nikkei Index Futures and Options trading hours will be extended to 4. Block trade registration will also be extended to 4. Other significant benefits from the upgraded infrastructure include industry standard access protocols, extensive self-help functionality and improved straight-through-processing.

The new systems will strengthen risk controls and system safeguards to help market participants manage their trading and clearing positions on a hour basis. To read more economic research reports like this one or subscribe to the mailing list, visit cmegroup.

All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author s and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.

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NXM16 | Futures Profile for SGX Nikkei

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Contract Specifications for SGX Nikkei Index Futures (NK) - Oriental Pacific Futures - Futures Broker Malaysia

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Login CME Customer Center CME Direct Subscription Center. Nikkei Index Futures: About the Mutual Offset System MOS. The Founding Father of the Futures Markets Leo Melamed is regarded as the founding father of the futures market. Endurance of the Mutual Offset System.

About the Nikkei Index. Nikkei Index Performance. Components of the Nikkei Index. Nikkei Futures versus Exchange Traded Funds ETFs Tracking Nikkei Expanding the Nikkei Derivatives Ecosystem. SGX and CME Group Immersed in the Ecosystem.

Reminiscing the SGX-CME Group Partnership. Ng Kok Song Founding Chairman of SIMEX and Leo Melamed.

SGX Extends Nikkei Derivatives Trading Hours With Next-Generation Derivatives Platforms. Session State Eastern Time Remarks Pre-Open T 7. Order entry, modification and cancellation allowed. Order entry allowed but no modification or cancellation Opening T 7. Benefits from New SGX Derivatives Platforms.

Industry Standard Access Protocols Self-Trade Prevention Mass Quote Protection The new SGX trading platform will support the OUCH low-latency binary socket protocol for order entry, providing the fastest, asynchronous interaction with the order book.

Direct Multicast ITCH data feed in market-by-order format for immediate market signals and instant order book updates. Participants benefit from reduced programing complexity in their trading strategies to avoid self-trading. Allows Market Makers to manage exposure risk more effectively and gives Market Makers more confidence to quote with greater quantity or better spread or both. Recommended For You Getting Technical: Trading Falling Wedges Getting Technical: A Primer on Margining Styles for Coal Options A Primer on Margining Styles for Coal Options.

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Follow us for global economic and financial news. CME Group on Twitter CME Group on Facebook CME Group on LinkedIn. View this article in PDF format. The new SGX trading platform will support the OUCH low-latency binary socket protocol for order entry, providing the fastest, asynchronous interaction with the order book.