Derivatives
Tdex Square-Futures&Options-
Update : Jul. 20, 2010
What are derivatives?
Derivatives are financial instruments, whose values are derived from other financial products, such as stock price indices or fixed income. By trading derivatives, one can hedge the price volatility risks of underlying assets. There are a variety of derivatives available all over the world, and they have become an essential part of the smooth circulation of capital in today's economy.
Differences between Derivative trading and Cash trading
Cash Settlement
Since there is no substantial entity in the underlying of a derivative, the settlement method used for Index Futures such as TOPIX Futures is conducted via cash transfer only. Cash settlement is the transfer of a cash position rather than the delivery of the actual principal.
Leverage
Leverage transactions allow for a large rate of return for a relatively small investment. However, this also means that investors carry greater risks in these transactions.
Exempt from short selling regulations
In equities trading, investors who are not in a position to lend equities cannot start by making short selling trades, however in Futures and Options trading, investors can begin with short selling trades. (Short selling of Futures or Options are exempt from short-selling regulations.)
What is Tdex?
"Tdex" is the nickname of the TSE's Derivatives Market. "T" stands for "Tokyo", "de" for "derivatives" and "x" for "exchange". The derivative products listed on Tdex offer investors a variety of effective hedging instruments and new opportunities for investment. The Tdex derivative market currently includes not only domestic investors but also many foreign investors. The following products available on Tdex:
[Index Futures]
- TOPIX Futures
- mini- TOPIX Futures
- TOPIX Core30 Futures
- TSE REITIndex Futures
- TOPIX Electric appliances Index
- TOPIX Banks Index
- Nikkei 225 Dividend Index Futures
- TOPIX Dividend Index Futures
- TOPIX Core30 Dividend Index Futures
[TOPIX Options, Individual Options]
- TOPIX Options
- Individual Options
[JGB Futures, Options on JGB Futures]
- 5-year JGB Futures
- 10-year JGB Futures
- mini-10 year JGB Futures
- Options on 10-year JGB Futures
What is Index Futures?
Index Futures are futures with an underlying based on an index such as TOPIX Index, TOPIX Core30 Index, or TSE REIT Index. Settlement for Index Futures trading is completed via the cash transfer method.:
Products are as follows:
- TOPIX Futures
- mini- TOPIX Futures
- TOPIX Core30 Futures
- TSE REIT Index Futures
- Nikkei 225 Dividend Index Futures
- TOPIX Dividend Index Futures
- TOPIX Core30 Dividend Index Futures
- TOPIX Electric appliances Index
- TOPIX Banks Index
What are TOPIX Options and Individual Options?
TOPIX Options are a derivative with an underlying based on the TOPIX index. The settlement method is cash settlement. Individual Options are derivatives with an underlying based in each Equity, ETF, or REIT and the settlement method used is delivery of the underlying product.
Products are as follows:
- TOPIX Options
- Individual Options
What are JGB Futures and Options on JGB Futures?
JGB Futures are derivatives with an underlying based on Japanese Government Bonds, and Options on JGB Futures have an underlying based on JGB Futures. The settlement method used for 5 and 10-year JGB Futures is delivery of the underlying JGB and the settlement method used for mini-10 year JGB Futures is cash transfer.
Products are as follows:
- JGB Futures
- Options on JGB Futures
Co-Location Service
Tokyo Stock Exchange, Inc. (TSE) is providing "(TSE) Co-Location Service" at the TSE Primary Site. This service is designed to further enhance market convenience for investors and trading participants with the fastest access to the TSE systems.