Japanese Quarterly Volumes Decline Over 20% on Post-Brexit JPY Standstill

Sluggish volatility of the Japanese yen and post-Brexit reduction in activity the main reasons behind the drop.

The Financial Futures Association of Japan (FFAJ) has published its quarterly bulletin which is focusing the attention of market participants on the figures reported by the industry in terms of on- and off-exchange foreign exchange trading. The data encompasses the period between April and June 2016.

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A total of 125 members of the FFAJ are reporting their numbers with on-exchange transactions reported by 51 market participants of which 43 are domestic and 31 are based overseas. On-exchange margin FX products are provided by 22 Japanese members.

Looking at the over-the-counter (OTC) FX trading the number of companies that are submitting their figures to the Japanese regulator is 99 this quarter with margin FX trading provided by one new member to mark up the total of FX brokers in Japan to 52.

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On-Exchange Quarterly Trading Volumes

The quarterly trading volumes of financial futures transactions on foreign exchange have decreased materially when compared to the previous quarter. Trading volumes for on-exchange products declined by 21 per cent to 18.2 million contracts, while OTC financial futures transactions dropped 24.9 per cent to 12.85 million contracts.

Looking on a comparative basis while the overall trading activity in Japan has decreased, overseas exchange traded contracts have grown steadily. The decrease in open positions has been substantial primarily due to the Brexit shock at the end of the quarter, which has affected materially market sentiment.

On a positive note, the same event was probably the reason why on-exchange traded currency options and interest rate options have increased during the same period.

FX Margin Trading Volumes

The over-the-counter (OTC) segment of Japanese foreign exchange transactions has not fared any better than the exchange traded one. Trading volumes via the click365 platform on the Tokyo Financial Exchange (TFX) have decreased 28.3 per cent, while open positions dropped by 37.2 per cent.

Looking at total OTC volumes, those have declined by 25 per cent, while open positions decreased by 30.8 per cent. Margin deposits of clients have declined by 7.1 per cent during the quarter, dropping to around 11.5 billion U.S. dollars. (¥1.18 trillion)

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