Akira Kiyota assumed the role of CEO of Japan Exchange Group, Inc. in 2015, after serving two years as President & CEO of Tokyo Stock Exchange, Inc. since 2013. He started his professional career at Daiwa Securities Co. Ltd. in 1969 where he spent 44 years engaged mainly in the bond market. He was named President of Daiwa Securities SB Capital Markets Co. Ltd. in 1999, Chairman of the Board and Corporate Executive Officer of Daiwa Securities Group Inc. in 2008, and Honorary Chairman of Daiwa Securities Group Inc. in 2011. He graduated from Waseda University in 1969 and holds an MBA degree from Washington University.
FIAJ：You were appointed CEO of JPX in June this year. What is your overall vision for JPX, especially for its derivatives business? The vision of JPX is to become “Your Exchange of Choice”, and that is to become the most preferred exchange in Asia. JPX was founded in January 2013 as the result of the merger of TSE and OSE, and this fiscal year is the last year of JPX’s very first three-year management plan. Through this post-merger period, JPX has successfully integrated the cash and derivatives markets and clearing organizations with extensive support from market participants.
Now is the time for JPX to expand its businesses outward to accelerate the processes to reach our vision. First, JPX will renew both of the trading systems; arrowhead, the cash equity trading system, will be updated in September this year and J-GATE, the derivatives trading system, will be updated in mid- 2016. In addition, JPX is preparing to enhance JSCC’s clearing system. The challenge of JPX is how to expand the revenue sources with new IT systems and infrastructure.
Currently, JPX’s derivatives market is the 15th largest derivatives venue in the world, while the cash equity market is ranked 3rd. Looking at the segment breakdown of the trading volume from the derivatives market, a huge portion comes from domestic equity index futures products. To keep growing and expanding the market, JPX recognizes that we always have to enter new segments and products. Recently, JPX has launched JPX-Nikkei index 400 futures last year and Nikkei 225 weekly Options in May this year. JPX also changed the contract specifications of the 20-year JGB futures in July this year. JPX further tries to introduce and expand the product line up into commodity futures and various interest rate products to be competitive against other exchanges in Asia.
FIAJ：The Japanese government is working along with the regulators to establish Tokyo as a global financial center. At the same time, JPX aims to become the most preferred exchange in Asia. What is needed to achieve both goals? Do you have any plan to conduct international merger and alliances to facilitate business expansion outside Japan? JPX should maintain a fair trading facility with various listed products for investors both inside and outside of Japan, to raise the presence of Tokyo as a global financial center. For JPX to become a comprehensive exchange, where not only financial derivatives but also other types of derivatives such as commodity derivatives are traded, which should have a significant impact on the presence of Tokyo as well. I will keep actively interacting with regulators and other related entities to realize the comprehensive exchange scheme and to become “Your Exchange of Choice”, which should definitely bring positive effects on the future of Tokyo as a global financial center.
Regarding international business expansion, there is no doubt that Asia is the strategic focal point for JPX based on key strategic facts in the region, such as high future economic growth expectation, financial asset amounts, and regional link among countries. Especially, I would say the relationships with China and ASEAN countries are what really matters for JPX to achieve its goals. However, this does not directly mean that JPX is preparing to conduct mergers and acquisitions in the region. In fact, JPX has been putting its efforts on developing relationships through support and alliance based on mutual understanding. For example, JPX has been part of the joint venture which was founded to develop the first stock exchange in Myanmar, which is scheduled to launch by the end of this year. JPX opened a representative office in Hong Kong last year following those in Singapore and Beijing to boost the promotion to investors in China and other Asian countries. I would like to cultivate the trust with the countries in Asia following the above examples.
FIAJ：At the FIAJ Financial Market Conference held in Tokyo in May this year, JPX announced its strategic intention to enter the commodity derivatives businesses. What do you think about the comprehensive exchange plan? Major trading venues in the world offer various kinds of asset classes to investors, such as equity, fixed income, foreign exchange, and commodity. This diversification enables those venues to offer access to multiple asset classes to the investors and to secure multiple revenue sources which make the overall business not depend on the market condition of a single product. In Asia, SGX, HKEx, and KRX already have multiple asset class business structures and it is likely that other trading venues in emerging countries will follow the same strategy. Therefore, it is indispensable for JPX to achieve the diversification of asset classes and to establish its identity as a comprehensive exchange.
In Japan, the discussion of the comprehensive exchange scheme started eight years ago. Since then, Cabinet decisions have made four times and the Financial Instruments and Exchange Act has been revised to set up the legislative backbone for the scheme. Recently, the Cabinet Office stipulated in its Revising Japan Revitalization Strategy that the comprehensive exchange should be developed as soon as possible. However, there has not been much progress made so far and meanwhile, the Chinese commodity market been expanding rapidly and gaining more competitive advantage.
JPX and TOCOM agreed that the two exchanges will jointly use JPX’s next generation derivatives trading system which is scheduled to be launched in mid-2016. JPX will keep moving forward to expand JPX’s business segment not only into the commodity market but also into other markets, such as interest rate market, and I also expect the cooperation with related entities and stakeholders help achieve JPX’s goals.
FIAJ：What are your views on the current regulatory changes taking place globally and how do you see this affect the Japanese markets? OTC derivative regulations were dramatically tightened all over the world in the wake of the global financial crisis in 2008. The US market has been particularly dynamic in flexibly responding to these changes by doing things such as introducing swap execution facilities for trading OTC interest rate swaps and shifting from OTC to on-exchange trading by listing deliverable swap futures.
We at JPX have also been pushing for a shift from OTC to on-exchange trading. We previously listed FX futures in the past, and with respect to Nikkei 225 options, we’ve expanded the number of tradable contract months and will introduce on-demand strikes with the introduction of the next generation derivatives trading system. We will continue to make various efforts to draw in flow from the OTC market.
Looking toward the future, I think that margin requirements for non-centrally cleared derivatives will be a key issue going forward.Although postponed from December 2015 to September 2016, the impact of regulations scheduled to come online in this area will be significant because they encompass margin deposits and segregation management for all parties participating in a non-centrally cleared OTC transaction. Traditionally, dividend derivatives and single stock options have been traded on the OTC market in Japan, but we expect these regulations to contribute to a shift to listed market trading.
FIAJ：FIA Japan‘s stated mission is to encourage the growth and success of the Japanese financial markets. How do you think the Association could best work to achieve this goal? FIA Japan is a global organization comprised of a variety of stakeholders such as brokers, banks, exchanges, IT providers, and law firms. The members of FIA Japan have a deep understanding of how markets work and I want them to actively make suggestions to both exchanges and regulators that reflect the collective needs of all participants so we can further improve our markets. For instance, we can see from examples abroad that market participants are the main beneficiaries when a stock market evolves into a comprehensive exchange as the result of things like integrated access and infrastructure. I expect the members of FIA Japan to continue to actively discuss and make suggestions from a global perspective.
Additionally, I hope that FIA will play an active role in educating both retail and institutional investors on the nature of derivatives and how to use them, as well as continually create opportunities to promote the Japanese derivatives market to investors both domestic and abroad through activities such as the “FIA Japan Financial Market Conference 2015” held in May this year.
FIAJ：Thank you for sharing your insights with FIA Japan.