How JPX boosted its derivatives offering

By Cinnober - 2018.05.17


In the beginning of 2018, the Japan Exchange Group (JPX), went live with a new derivatives clearing infrastructure. The aim was to strengthen the Group’s listed derivatives business offer but also to move to a flexible and scalable solution that would allow for growing volumes and future business ventures.  

JPX provides market participants with reliable venues for trading listed securities and derivatives instruments, including one of the worlds most traded instruments, the Nikkei 225.

Deciding to invest in a new clearing infrastructure was part of a larger Grand Design Project that had the overall mission to strengthen JPX’s listed derivatives offering. The Group faced sizable competition, in particular in the listed derivatives area.

To strengthen its business offer JPX identified four areas they needed to address:

  1. Speed up product development capabilities and modernize according to global standards, including introducing more sophisticated functions for position- and trade management.
  2. Create a blueprint for sophisticated risk monitoring, including the facilitation of a flexible, multifunctional risk monitoring model with cross-product and real-time monitoring.
  3. More efficient use of clearing participants’ collateral capital.
  4. Optimize the overall infrastructure by eliminating overlapping functions, achieve cost reductions by using a state of the art solution, overall increasing efficiency.

JPX chose Cinnober as the technology partner to deliver the new solution, based on its real-time clearing system that is used by clearinghouses globally for clearing of a wide array of asset classes and financial instruments. It successfully went live in Tokyo on February 13, amongst other benefits offering improved risk monitoring and management of margin requirements, as well as transparency.

Real-time risk monitoring

JPX can now calculate and visualize the clearing participants’ risk and margin requirements in real time, and on a more detailed level. The clearing members themselves, can get instant overview of their risk.

Improved transparency and capital efficiency

Another benefit for JPX’s members and their clients, is that they have more transparent accounts at the clearinghouse: in addition to omnibus accounts, JPX now also offers individually segregated client accounts, and the omnibus accounts have been made more transparent. This allows for a better understanding of the risk and allows for netting between positions that belong to the same client. In the end, enabling more efficient use of the market participant’s capital.

Parallel risk calculations

Multiple risk calculations can be run in parallel using different parameter settings. The benefits? It permits separating and visualizing the night session as the day session closes, allowing for end of day activities while monitoring risk for the ongoing night session. In a longer perspective, this also enables an easy transition to future risk methodologies that JPX might want to apply.

“By launching this new generation clearing system we have created a cutting-edge post-trade infrastructure. We are happy to have improved services to our clearing members and clients and that we now offer easier access through standard protocols.” - Ryusuke Yokoyama, Senior Executive Officer & CIO, JPX

In addition to the clearing system Cinnober also delivered a risk management system, TRADExpress CCP Risk, that provides a single-entry point for risk- and collateral management across JPX’s markets, asset classes and instruments. Built explicitly for clearinghouses, it serves as a second line defense after the initial margin (IM) level and provides JPX with sophisticated tools for stress-testing against different scenarios.


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