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New OSE CEO Yokoyama Discusses Plans for JPX in Exclusive Interview

FIA Japan: Congratulations on your recent appointment as the new CEO of Osaka Exchange and as the Chair of Tokyo Commodity Exchange. Can you please tell our readers about your background and the career that led you to this position, as the head of the largest derivatives exchange in Japan?

I started my career in the industry when I joined Tokyo Stock Exchange in 1986, before Japan Exchange Group was established via the business combination between Tokyo Stock Exchange Group and Osaka Securities Exchange. Until recently, I was responsible for the entire JPX system as Chief Information Officer for 6 years, and before that I had overseen the system for more than a decade.

I experienced a lot while working on JPX system developments and the experience that I gained from being involved in the process of strengthening the system brought me to my current position. Also, I am very thankful to former president Mr. Atsushi Saito, who I worked for as a secretary for two years, as I learned a lot from him, including about the business mindset.

FIA Japan: What is the main message that you wish to convey at this time and what are your priorities for OSE going forward?

The stable operations of our markets is the first priority. Although, we are engaged in derivatives transactions using OSE’s system, it is not only the system that is essential but also the people. Derivatives are traded almost around the clock every day, and since holiday trading started last year, our staff have had quite a lot on their plates. We believe it is fundamental to automate various operations to reduce the burden on our staff, and make it easier to work, while keeping operations running in a stable way.

The expansion of derivatives trading has been strongly called for in JPX's Medium-Term Management Plan. We will focus on expanding the derivatives market, including with the introduction of new products that meet the needs of both global and domestic investors, and by attracting new investors.

FIA Japan: In July 2020, TOCOM-listed commodities were migrated on OSE except the Energy products (e.g: Crude Oil etc.), which continue to be regulated by METI under the Commodity Derivatives Act (CDA), while the now OSE-listed commodities, including gold futures, fall under the FIEA with oversight by FSA. The two separate sets of regulations and separate exchange memberships/rules make it difficult for some players to enter the energy market. What are your views on this situation and how could it be improved?

In general, it is more efficient and convenient for market participants in terms of systems and administration if the markets are operated under a single law. Therefore, we would like to work toward the unification of the markets in the future.

However, due to the history of the group and other factors, OSE and TOCOM are two separate exchanges that are efficiently operated by taking advantage of their respective characteristics.

For now, it is important to increase trading of commodities (precious metals, rubber, and agricultural products), which were transferred to OSE in July 2020, so as to demonstrate the achievements of commodity derivatives under the FIEA, and we will strive to accomplish this objective.

FIA Japan: We see a shift in business model amongst global exchanges, with more revenue originating from data services and less from exchange fees. Do you expect growth in data services and if so, what is your strategy?

Yes, we, JPX Group, do expect further growth in our data services.

In our “Medium-Term Management Plan 2024” which started in FY2022, we stated that digitization in the securities field and enhancement of our market data services are top priority projects, and our goal is to build “G-HUB”, a global, comprehensive finance and information platform.

To achieve this goal, as of April 1, 2022, we launched a new JPX subsidiary named “JPX Market Innovation & Research, Inc."("JPXI"). JPXI’s mission is to handle JPX Group’s indexes, data, and digital-related services, and to play a key role in creating “G-HUB”. In JPXI, several new indices as well as some new data content and a new data distribution platform are under consideration.

As for derivative data content, for example, last year, the System Stats Data in Alternative Data Services were updated, and we believe that this can meet the demands of potential customers.

FIA Japan: Recently there has been significant cybersecurity issues with global market implications, such as the cyberattack on ION Trading earlier this year. What is your opinion on this issue? What regulations, if any, should be implemented in Japan?

As a part of the financial infrastructure, we recognize that cyber-attack measures are one of the most important management issues, and the impact of the cyber-attack on ION Trading reminds us of this importance.

Cyber-attacks are becoming more sophisticated and diverse, and we believe that maintaining and improving cyber-security is an issue that not only our company, but also the financial industry as a whole, must address in order to achieve stable market operations.

FIA Japan: Last year in September, OSE launched Holiday Trading and FIA/FIA Japan members participated in several discussions ahead of the launch. How would you describe the response from market participants so far?

 We would first like to thank the FIA and FIAJ for your helpful and insightful feedback during our discussions regarding the launch of derivatives holiday trading.

 Since the start of the Autumnal Equinox Day on Friday, September 23, 2022, the number of transactions has been approximately 20-40% of weekday transactions, and exceeding our initial expectations of around 20%. Therefore, some securities companies that initially decided not to participate in holiday trading have now decided to participate in response to requests from customers.

 For this year’s Golden Week, holiday trading was conducted on consecutive days for the first time without any major problems. Due to large market fluctuations that occurred in Europe and America during the holidays, trading volume exceeded more than 30% the level of weekday transactions. In Japan, where there are many national holidays, we hope that more investors will use this opportunity as a useful hedging tool.

FIA Japan: Please share an update on your recently listed new products and what OSE is consider launching in the near-to-mid-term.

We recognize that it is important to develop new products that accurately meet the requirements of market participants and to encourage trading in the overall market. On May 29, 2023, OSE launched 3-Month TONA Futures, Nikkei 225 micro Futures and Nikkei 225 mini Options, and more.

OSE already lists JGB Futures, and by adding 3-Month TONA Futures, we hope to create a highly convenient yen interest rate market where both long-term and short-term interest rate products can be traded. We will promote the benefits in terms of capital efficiency such as discounted margin which is achieved by offsetting risks between 10-year JGB Futures and short-term interest rate futures. We expect that Nikkei 225 micro Futures and Nikkei 225 mini Options will help expand the base of participants in the derivatives market by offering a hedging tool for individual investors to be used for smaller investments.

We will also continue to contribute to the sustainable development of the overall market by developing and listing new products that properly recognize and meet the requirements of investors and market participants.

FIA Japan: What role do you think FIA Japan could play in helping further develop the Japanese financial market or areas where our Association should focus moving forward?

I believe one of FIAJ's strengths is to have derivatives professionals who are well versed in domestic and international circumstances engage in constructive discussions for the expansion of the Japanese market.

In order to strengthen the competitiveness of the Japanese market, we expect FIAJ to continue to give recommendations to the financial industry while considering the unique circumstances in Japan and best practices in other countries.

Through close collaboration and cooperation with FIAJ, OSE will be dedicated to Japan’s derivatives market development.

FIA Japan: Thank you very much.



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