Race to the Center: Competition for the Nikkei 225 Futures Trade

50 Pages Posted: 15 Feb 2006

See all articles by Takatoshi Ito

Takatoshi Ito

University of Tokyo - Faculty of Economics; National Bureau of Economic Research (NBER); Ministry of Finance, Tokyo

Wenling Lin

Office of Comptroller of Currency

Date Written: October 1996

Abstract

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.

Keywords: margin requirements, futures price volatility, trading volume, GARCH

JEL Classification: G13, G18, G2

Suggested Citation

Ito, Takatoshi and Lin, Wenling, Race to the Center: Competition for the Nikkei 225 Futures Trade (October 1996). IMF Working Paper No. 96/117, Available at SSRN: https://ssrn.com/abstract=883013

Takatoshi Ito (Contact Author)

University of Tokyo - Faculty of Economics ( email )

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Tokyo 113-0033
Japan

National Bureau of Economic Research (NBER) ( email )

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Ministry of Finance, Tokyo ( email )

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+81-3-3581-4720 (Phone)
+81-3-5251-2144 (Fax)

Wenling Lin

Office of Comptroller of Currency ( email )

400 7th Street SW
Washington, DC 20219
United States

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