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

Takatoshi Ito and Wen-Ling Lin

No 1996/117, IMF Working Papers from International Monetary Fund

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: 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 (search for similar items in EconPapers)
Pages: 50
Date: 1996-10-01
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Citations: View citations in EconPapers (2)

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