Osaka Exchange (OSE) will list short-term interest rate futures on May 29 for TONA (Tokyo OverNight Average rate). OSE has been providing trading opportunities for long-term interest rates through 10-year JGB Futures. By adding short-term interest rate futures to its lineup, it will further develop its yen interest rate derivatives markets with access to both long-term and short-term interest rate futures on a single platform.
The attention on yen interest rates has increased significantly since 2022. JGB futures are actively traded, with open interest that stood at around 10 trillion yen in 2021, exceeding 15 trillion yen at the beginning of 2023. In addition, Japan Securities Clearing Corporation (JSCC), the clearing house of Japan Exchange Group (JPX), clears OTC interest rate swaps. In March 2023, Overnight Index Swap (OIS) referencing TONA reached a record high of about 200 trillion yen in cleared notional amount. Yen interest rates will continue to be the focus of attention due to expected changes in monetary policy. Therefore, OSE will list 3-Month TONA Futures to respond to future movements in yen interest rates.
There are also benefits in terms of risk management and capital efficiencies: like JGB futures, short-term interest rate futures will be cleared by JSCC, and JSCC's global level of risk management will be applied to short-term interest rate futures, which has been well received by overseas investors who place a particular emphasis on risk management. JPX will also offer a margin offsetting mechanism between 10-year JGB Futures and short-term interest rate futures from the time of the listing. Furthermore, they are planning to offer “cross margining” with OTC interest rate swaps. A cross margining mechanism is already in place between interest rate swaps and 10-year JGB Futures. Also, JPX is on track to introduce cross margining between interest rate swaps and short-term interest rate futures by the first quarter of 2024, which could significantly contribute to improving capital efficiencies by reducing the collateral burden between government bond futures, short-term interest rate futures and interest rate swaps.
JPX will implement various measures to enhance the liquidity of 3-Month TONA Futures. OSE will introduce a market maker program, aiming to create a market where stable, tight and sufficiently deep quotes are offered for a wide range of contract months, not only during the daytime but also at night (until 6:00 a.m.). More than ten market makers have already notified us of their intention to participate in the market. Furthermore, we will seek to reduce execution costs. Trading and clearing fees (including final settlement fees) will be fully waived for approximately one year starting from May 29, the launch date, until March 31 of the following year.
To stimulate trading among diverse investors with different interest rate views, JPX Group will continue to encourage various types of investors to enter the market by leveraging its overall Group contacts with domestic and overseas market participants. JPX intends to contribute to the yen interest rate market by creating a highly convenient short-term interest rate futures market.
For more information on 3-Month TONA Futures, please visit the following webpage:
JPX Website > Derivatives > Products > Interest Rate > 3-Month TONA Futures