SGX vs OSE NKY futures arbitrage

Discussion in 'Strategy Development' started by din, Sep 3, 2010.

  1. din


    Hi guys,

    I'm reading some articles about the arbitrage opportunities between SGX vs OSE NKY futures. But confused how the profit can be realized, are the 2 futures contract fungible?
    example, do ppl buy OSE and then short SGX at the same time and the profit is realized immediately? or do they need to wait for the price to converge and closing out the position by making an opposite trade (i.e. sell OSE/buy SGX)

    And usually how long the arbitrage opportunity last? is this strategy really unbreakable?

  2. The OSE contract is twice the size of the SGX contract. OSE value is 1000Yen x Nikkei index. Minimum price fluctuation is 10 points.
    SGX value is 500 Yen x Nikkei index. Minimum price fluctuation is 5 points.

    Both are heavily electronically traded. Arb guys try to buy or sell on the OSE full tick and unload on the SGX half tick (or vice versa)

    The ARB guys who do this are using HFT type algorithms and fast computers/connections. You can't compete with OTC trading platforms.

    hope this helps
  3. dinn13


    They are not fungible so the trade does need to be closed either by trading out of it or letting it expire. There is also a nikkei 225 contract on the CME which can be arbed in a similar fashion but as waterman33 said this is purely the domain of high frequency players not only due to speed but transaction costs for a retail trader would probably be prohibitive.