I have been looking at the Nikkei futures. It seems to me it is a no-brainer to trade the Nikkei futures contracts from Osaka since they are the most liquid and enjoy the narrowest spread. CME and SGX offer similar Nikkei futures contracts. I do not wish to dismiss them straight away. I am wondering what are some reasons to trade the Nikkei futures contracts in these 2 exchanges. Anyone trades in them?
Firstly, the liquidity and the spread seem to vary depending on the time of day. It seems, for instance, that at the moment (arnd 6AM EST), CME and SGX U7 futures are half as wide as the OSE one, on similar volume. So that's one possible reason. Another reason could be the margin netting that you can get on the CME, for instance. Moreover, CME offers USD-denominated Nikkei futures, so you can play around with those for some interesting quanto fun, in a reasonably capital-efficient way. Just a few possible reasons I can think of...
I trade Nikkei futures locally so I'm not sure of conditions outside of Japan. But from what I understand there are only two brokers that offer Nikkei futures on OSE at reasonable rates. Those being IB and AMP, while many others offer trading on SGX. That could be the major reason.
Could it be related to the active trading hours of these instruments? And/or the currency they trade in? I haven't compared these, so I'm not sure about this.
The OSE Nikkei futures contract is 1000 yen per point with a price quantum of 10 points. The SGX and CME Yen Nikkei futures contracts are 500 yen per point and the price quantum is 500 yen. The mini contract is 100 yen per point but also moves in 5 point quantums. CME has a USD denominated Nikkei futures contract. The opening and closing times of each exchange are different and as mentioned above, the trading fees for each exchange can be significantly different also being dependent upon the futures broker.
On OSE the large Nikkei trades in increments of 1000 yen, but the mini is 500 yen, and is what most retail traders choose to trade. I haven't checked recently but the Nikkei on SGX was dominated by block trades and quite hard to trade.
I think the activity depends a lot on the time of day. For example, 8:45 to 9:00am Tokyo time is when those big private Singapore traders churn the market for a few ticks. T+1 after the cash closes those big boys from GS, NewEdge etc dominate and dictate the overnight market direction. Amazing how a handful of humungous Nikkei futures traders overnight dictate where the cash opens the next day and ultimately the overall sentiment in the Japanese stock market.