Osaka Securities Exchange: Revisions Of Futures And Options Trading Rules With Introduction Of New Derivatives Trading System

OSE is in process of preparing for the introduction of a new derivatives trading system equipped with the standard trading functions and the highest level of order processing performance in the world, from the viewpoint of further improving the international competitiveness of the OSE markets. OSE will revise the futures and options trading rules as below with the launch of the system in order to increase liquidity of the OSE markets and improve the convenience for investors.

Main Points of the Revisions (Outline)
- (1) Revision of Matching Rules
  - Abolishment of Douji-Yobine Rules
    - So-called “Douji-Yobine Rules (Simultaneous Bid/Offer Rules: giving the same time priority to all bids/offers placed before determining the opening price)” shall be abolished and all transactions shall be made in accordance with “price priority and time priority”.
  - Change in Trading Method at the Session End
    - “Closing Auction” (The order acceptance period shall be set to participate in Itayose (a kind of call auction) , the same as Opening Auction, and at the same timing of closing the order acceptance period, matching shall be made.) shall be introduced as the trading method at the session end.
- (2) Enhancement of Price Regulations
  - Introduction of Immediately Executable Price Range Rule
    - In cases where orders, if matched, which brings the contract price up or down beyond the Immediately Executable Price Range from the last contract price are submitted, trading in such issue shall be halted temporarily (a kind of Dynamic Circuit Breaker) after the bids/offers which can be matched within the Immediately Executable Price Range (a kind of Dynamic Circuit Breaker Price Range) are executed.
    - Rules for Special Quote (Tokubetu-kehai) and Attention Quote (Chui-kehai) shall be abolished, because the Immediately Executable Price Range Rule can play the same role as the Special Quote Rule etc.
  - Revision of Price Limit Rule and Circuit Breaker Rule
    - Price Limit Rule and Circuit Breaker Rule shall be revised while maintaining and strengthening the purposes and the functions of those rules and made clearer for worldwide investors.
- (3) Introduction of the Rules and Functions Commonly Used in Overseas Markets
  - Expansion of Order Functions
    - The standard order functions in the overseas exchanges (for instance, FOK condition, with which all the volume shall be invalid in the case where all the volume is not executed immediately) shall be newly introduced.
  - Introduction of Strategy Trades
    - Strategy Trades, with which the trading of the combination of several issues can be made by one order as strategy order, shall be introduced in order for investors to execute various investment strategies more smoothly.
  - Introduction of Fully-fledged Market Maker System
    - In view of characteristics of derivatives products (i.e. there exist a large number of issues and liquidity is dispersed), fully-fledged Market Maker System shall be introduced for option contracts and a part of the future contracts with low liquidity.
Schedule
- The above revisions are scheduled to be implemented on the launch date of the new derivatives trading system (around the fourth quarter of FY 2010.).

For details, please see the following:

Revisions of Futures and Options Trading Rules with Introduction of New Derivatives Trading System
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