Differences between the Nikkei 225 Futures Contracts on SGX, CME Group and OSE

05 Jun 2024

By Danish Lim, Investment Analyst, Phillip Nova

 

The Nikkei 225 Index Futures are offered on 3 exchanges – the Singapore Exchange (SGX), the Osaka Exchange (OSE), and the Chicago Mercantile Exchange (CME Group). Read on to learn about the subtle differences between the contracts and pick the right Nikkei 225 Futures contract for you.

Singapore Exchange (SGX):

  • Contract size: ¥500 multiplied by the index futures price
  • Tick size: 5 index points or ¥2,500 per contract
  • Tick size (USD): 5 index points or US$25
  • Liquid market available for trading during onshore Japan holidays
  • Currency Option: USD or JPY
  • Mutual Offset System with CME enables round-the-clock trading

 

Mutual Offset System (MOS): CME and SGX have a special arrangement that allows traders of yen- and USD-based Nikkei 225 contracts to take positions at either exchange and clear them at the other on the same trading day. This provides flexibility and convenience for traders operating in different time zones.

 

Chicago Mercantile Exchange (CME Group):

  • Contract size: ¥500 multiplied by the index futures price
  • Tick size: 5 index points, or ¥2,500 per contract
  • Tick size (USD): 5 index points or US$25 per contract
  • Currency Option: USD or JPY

 

Osaka Exchange (OSE):

  • Contract size: is larger, ¥1,000 multiplied by the index
  • Tick Size: 10 index points or ¥10,000 per contract
  • Currency Option: JPY only

 

Additionally, the Mini-Nikkei 225 Futures is a smaller version of the Nikkei 225 futures contract. It has lower margin requirements than the standard contract, making it more accessible to individual investors. The Mini-Nikkei 225 is offered on SGX and OSE. OSE also offers the even smaller Micro Nikkei 225 Futures contract.

 

SGX Mini Nikkei 225 Futures:

  • Contract size: ¥100 multiplied by the index futures price
  • Tick size: 1 index point or ¥100 per contract

 

OSE Nikkei 225 Mini Futures:

  • Contract size: ¥100 multiplied by the index futures price
  • Tick size: 5 index point or ¥500 per contract

 

OSE Nikkei 225 Micro Futures:

  • Contract size: ¥10 multiplied by the index futures price
  • Tick size: 5 index point or ¥50 per contract

 

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An Exchange Traded Fund (ETF) is a marketable security that is formed to track nearly anything, ranging from a specific index, sector, commodity, or increasingly, theme. They are most commonly used to track a basket of stocks, and can typically be accessed through the same channels as regular stocks. ETFs are typically separated into passively-managed ETFs that simply mirror the security they are tracking (e.g. the STI), and actively managed ones that attempt to deliver higher returns or specific investment objectives, often with a pre-specified theme in mind (e.g. ARK Invest’s Innovation ETF).

Why should I trade in ETF CFDs?

  • ETFs have been growing in popularity over the years. 2020 was the best year for ETFs yet, with global equity ETFs seeing more than $1T in inflows within a 12-month period. Using CFDs to gain exposure to ETFs allows for greater capital efficiency because only a portion of the contract value is required as margin to establish a position.
  • ETFs are particularly popular with investors seeking a relatively hassle-free investing experience, while desiring exposure to a range of specific and relatively understandable securities. Trading ETF CFDs brings greater convenience by eliminating the need for traders to hold multiple currencies in order to access global ETFs.
  • An investor wanting exposure to the post-pandemic economic recovery could open a position in the well-known SPDR S&P 500 ETF (SPY), which tracks the performance of the S&P 500. Another investor that may be convinced of the future importance of Environmental, Social and Governance concerns (ESG) may find the increasing selection of ESG-themed ETFs that track a basket of high ESG-rating companies to be a good investment, rather than cherry-picking individual equities by hand. ETF CFDs can act as a powerful tool for traders can profit from both directions of the market by taking on long or short positions.

A look at two ETF CFDs we offer:

1) Has the ARKK been sunk?

ARK Innovation ETF (ARKK) ARKK is an actively managed ETF by ARK Invest that invests in a range of companies based on their innovative and industry-disrupting potential. ARKK’s largest holdings are in companies such as Tesla, Square, and Zoom. ARKK is down around -33% from peaking on 12th Feb and is currently in the red for the year to date as the market experiences a risk-off outflow of funds. Superstar fund manager Cathie Wood has however been consistently doubling down on her bets, buying even more shares in growth stocks that are going through their own tumultuous periods such as DraftKings, Peloton, Teladoc, and Tesla. In her view, ARKK is playing the long game, and remains steadfastly convinced in the long-term prospects of these growth stocks beyond this current bout of volatility. Similarly on outflows, investors are still betting big on ARKK as ARK Invest has only lost about $1.2B in assets this year across all its six funds, compared to seeing an inflow of $15.1B during the same period. Recently, investors have been nervously eyeing ARKK’s basket of tech stocks as their future earnings potential remain vulnerable to erosion through high inflation – the dominant concern of the market in recent weeks. As commodities – the major contributor to the recent heightened inflation fears – drops sharply from record highs, are investor concerns over hyperinflation overblown?

2) Searching for exposure to Asian equities?

iShares MSCI Asia ex Japan ETF (AAXJ) The AAXJ is currently trading -10.6% adrift of all-time highs seen in February, giving up gains in tandem with an Asia-wide equity sell-off at the time. Given that slightly over 40% of the ETF’s holdings are based in China, the ongoing tumult seen in Chinese equities currently have carried over nearly perfectly in the AAXJ, as Chinese investors take a breather after the stellar gains made over the past year. Looking ahead, Asia – and particularly China, is steaming ahead with its economic recovery. China is widely expected to be one of the best-performing major economies this year, providing a major boost to the outlook for corporate earnings. As the rest of Asia and the world gradually opens up their own economies, AAXJ is likely to again benefit from strong Asian outperformance amidst a strengthening trade outlook.

CFD is available for trading on Phillip MetaTrader 5 (MT5).

Features of trading CFD:

  • Trade in both the bull and the bear markets
    The ability to enter a long and/or short position allow traders to take advantage of both rising and falling markets.
  • Smaller barrier to entry
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  • No expiration date or risk of delivery
    Unlike futures which commonly have a fixed expiration date, CFD allows traders to perpetually hold the position(s). CFD is cash settled, no need to worry about the delivery of the underlying asset.

 

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