Options
Market Maker Scheme
Update : Nov. 14, 2011
1. What is the Market Maker Scheme
The Market Making Scheme is a system that creates a trading environment where market makers continually quote bids and offers for designated contracts so that investors can trade the contracts at any time.
Tokyo Stock Exchange, Inc. has adopted the Market Making Scheme for options transactions to ensure market liquidity so that investors are always able to carry out options transactions smoothly.
List of Designated Market Makers
| Market maker | Options on JGB futures | Index options | Single Stock Options | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Trading participant | Underlying Asset Group (See appendix) | ||||||||
| 1 | 2 | 3 | 4 | 5 | 6 | ||||
| UBS Securities Japan Ltd | ○ | - | - | - | - | - | - | - | |
| Newedge Japan Inc. | ○ | ○ | - | - | - | - | - | - | |
| Societe Generale Securities, Tokyo Branch | ○ | - | - | - | - | ○ | - | - | |
| Merrill Lynch Securities Co.,Ltd. | ○ | ○ | ○ | ○ | ○ | ○ | ○ | ○ | |
| Interactive Brokers Securities Japan, Inc. | - | - | ○ | ○ | ○ | ○ | ○ | ○ | |
| ABN AMRO Clearing Tokyo Co., Ltd. | ○ | - | - | - | - | - | - | - | |
| Total number of companies | 8 | 3 | 4 | 4 | 4 | 5 | 4 | 4 | |
(*) Trading participants categorized as "Brokerage" carry out market making with the support of their customers. The figures in the table are the number of companies that can participate in market making, including entrustors.
| Market Making Scheme for Options |
|
2. Bids and Offers made by Market Makers
Market makers are asked to make bids and offers based on the criteria below. Under certain market conditions, such bids and offers based on the criteria may not be available.
| Product category | Options on JGB futures | Index options | Single Stock Options | |
|---|---|---|---|---|
| Underlying asset | Options on JGB futures | TOPIX options | Securities selected by individual market makers | |
| Quoting contracts | Contract months | Nearest 2 contract months | Nearest 4 contract months | Nearest 2 contract months |
| Strike prices | 7 out of 12 strike prices around the ATM (Note 1) for puts and calls | 7 out of 12 strike prices around ATM(*) for puts/calls for nearest 4 contract months(56 series) | 3 out of 5 strike prices around the ATM (Note 2) for puts and calls | |
| Minimum order quantity | 10 contacts | 10 contacts | 10 contacts | |
| Maximum spread between bids and offers | [Nearest contract month] 10% of a buy limit order (or 0.10JPY if the calculation result is less than 0.10JPY) [Second contract month] 15% of a buy limit order (or 0.20JPY if the calculation result is less than 0.20JPY) |
1.0 point or 10% of a buy limit order, whichever is larger | 10% of a buy limit order or the minimum amount as determined by the prices of underlying assets, whichever is larger (See appendix.) | |
The 12 strike prices "around ATM" mean 4 in-the-money (ITM) strike prices, 1 at-the-money (ATM) strike price and 7 out-of-the-money (OTM) strike prices.
(* With regard to Options on JGB Futures, if a contract's underlying is a futures contract of the farther contract month, the continuous quoting obligation and RFQ obligation begin from 5 business days prior to the day the relevant options contract becomes the nearest month.)
(Note 2)
The 5 strike prices "around ATM" mean 2 ITM strike prices, 1 ATM strike price and 2 OTM strike prices.
(Appendix) Maximum Spread between Bids and Offers Made by Market Makers in Single Stock Options
| Price of Underlying Assets | Maximum Spreads | |||
|---|---|---|---|---|
Less than 500JPY |
10% of a buy limit order or |
10JPY |
whichever is larger |
|
500JPY or more |
Less than 1,000JPY |
10% of a buy limit order or |
20JPY |
whichever is larger |
1,000JPY or more |
Less than 3,000JPY |
10% of a buy limit order or |
30JPY |
whichever is larger |
3,000JPY or more |
Less than 5,000JPY |
10% of a buy limit order or |
50JPY |
whichever is larger |
5,000JPY or more |
Less than 10,000JPY |
10% of a buy limit order or |
100JPY |
whichever is larger |
10,000JPY or more |
Less than 30,000JPY |
10% of a buy limit order or |
300JPY |
whichever is larger |
30,000JPY or more |
Less than 50,000JPY |
10% of a buy limit order or |
500JPY |
whichever is larger |
50,000JPY or more |
Less than 100,000JPY |
10% of a buy limit order or |
1,000JPY |
whichever is larger |
100,000JPY or more |
Less than 300,000JPY |
10% of a buy limit order or |
3,000JPY |
whichever is larger |
300,000JPY or more |
500,000JPY |
10% of a buy limit order or |
5,000JPY |
whichever is larger |
500,000JPY or more |
10% of a buy limit order or |
10,000JPY |
whichever is larger |
|
3. Underlying Securities for Market Making of Single Stock Options
Due to the large number of underlying securities for Single Stock Options, the contracts for which the market makers quote bids and offers are divided into six groups.
The market makers are requested to quote bids and offers all the time for the contracts in the highlighted area.
| Underlying Asset Groups for Single Stock Options |
|
4. Request for Quote
TSE has established a request for quote (RFQ) system to ensure smooth trading of contracts, for which market makers do not provide bids and offers.
By indicating the targeted contract (including strategy transactions) and the amount (optional) through the RFQ system, investors can receive bids and offers from the market makers of the relevant underlying assets.