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Race to the Center: Competition for the Nikkei 225 Futures Trade
Author:
Takatoshi Ito null

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Wen-Ling Lin null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1996: Issue 117
Language:
English
Publication Date:
01 Oct 1996
DOI:
https://doi.org/10.5089/9781451941579.001
ISBN:
9781451941579
ISSN:
1018-5941
Pages:
50
Keywords:
WP; cash market; substitution effect; market share; OSE futures; margin requirements; futures price volatility; trading volume; GARCH; SIMEX futures market return; OSE margin requirement; OSE contract size; SIMEX volume; SIMEX contract size; SIMEX contracts number; Futures markets; Futures; Currencies; Stock markets; Arbitrage; Global
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper examines the impact of changes in margin requirements on returns, transaction volumes, and price volatility of Nikkei 225 futures on the Osaka Securities Exchange (OSE) and the Singapore International Monetary Exchange (SIMEX). An increase in margin requirement on one exchange is shown to reduce trading volume in the implementing exchange and to shift trade to the competing exchange. Price volatility or returns are not systematically affected by changes in margin requirements. The loss of OSE’s market share of Nikkei futures trade is partly due to the increased transactions costs (relative to SIMEX), including the margin requirement.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund