SGX pioneers interest rate derivatives on Japan repo

Singapore

THE Singapore Exchange (SGX) is launching Asia's first total return futures (TRF) on May 13, in line with its focus on futurised derivatives.

The listed SGX Nikkei 225 Index TRF enables investors to replicate the full economics, including the payout profile, of standard Nikkei 225 Index total return swaps, which are currently transacted over-the-counter.

The TRF, with contract months listed up to 10 years, will also allow investors to trade a particular financing cost, the implied equity repo (repurchase agreements), for the first time.

The TRF will deliver greater transparency and capital efficiency, while offering new customers an opportunity to trade and hedge repo, SGX highlighted.

Michael Syn, head of derivatives at SGX, said: "We are launching a solution that perfectly meets our market participants' needs for trading opportunities with increased transparency and less risk. This is the first product of its kind in Asia, which is testament to our ability to quickly respond to market requirements."

He added: "Repo is a new class of interest rate product that complements our comprehensive Japan equity derivatives offering, enabling participants to risk-manage both costs and benefits in Asia's largest securities financing market.

"The TRF also supports our customers in meeting global financial market regulations."

In 1986, SGX pioneered the world's first futures contract based on the Japanese stock market, the SGX Nikkei 225 Index Futures. The exchange also collaborates with Nikkei Inc on options on the Nikkei 225 Index as well as Asia's first dividend index futures, which was launched in 2010.