How to Trade in Japan: A User's Guide to Japan's Capital Markets

Abstract

With high frequency trading (HFT) strategies nearing 20% of equities volumes, it is only a matter of time for Japan to reach the advanced execution levels that characterize a fully modern market.

Celent’s report, How To Trade In Japan: A User's Guide to Japan's Capital Markets, sponsored by NYSE Technologies, provides an overview of the state of Japan’s cash and derivatives markets, the development of advanced trading infrastructure in Japan, and the regulatory framework governing market participation by both onshore and offshore firms.

Most of the building blocks of the mature market structure that characterizes the US and Europe are already in place in Japan. Recent years have seen Japan’s exchanges introducing low latency matching engines, such as the Tokyo Stock Exchange’s arrowhead system, and the establishment of fast off-exchange venues including SBI Japannext and Chi-X Japan. Japan’s remote trading participant system, established by the Financial Instruments and Exchange Law (FIEL) of 2008, makes it possible for offshore firms to trade directly on the Japanese markets, although few firms have yet to take advantage of this access.

“Despite a tendency to conservative regulation, in many ways Japan is Asia's most advanced capital market,” says Neil Katkov, PhD, Senior Vice President, Asia for Celent and coauthor of the report. “Japan’s capital markets are evolving to an advanced market structure, characterized by low latency infrastructure, fragmentation of liquidity, and advanced execution technologies that provide the foundation for new trading strategies and opportunities.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America (New York)
Dana Greenstein
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Tel.: +1 646 364 8254

Europe (London)
Chris Williams
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Tel: +44 (0)208 870 7875

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81.3.3500.3023