Published On: Sat, Oct 17th, 2009

T+1 Sessions In Asia

As the velocity of money continues to accelerate in the 24 hour trading environment the creation of the T+1 trading session was no surprise. For stock exchanges to take advantage of international interest in local equities and modern portfolio theory extolling the virtues of diversification T+1 trading flourishes and Asia is no exception.

Japan has been offering T+1 trading since September 2000 in the Japan Government Bond and Euroyen futures from 3:30 pm to 6pm. The Tokyo Price Index (TOPIX) is also available T+1 from 4:30pm.-7:00pm. This session came much later than its interest rate counterparts commencing trading May 2008. The Osaka Exchange has made its Nikkei 225 future and option available too. These products trade T+1 also from 4:30pm-7:00pm.

Australia’s futures exchange offers a T+1 session from 5:10pm to 7am (or 8am during the winter) where you can trade the Sydney Price Index (SPI200) contract. From 5:08pm to 7am (or 7:30am during the winter) the 90 Day Australian Bank Bill futures can also be traded T+1.

For those who aren’t sure what is a T+1 trading session, it is simply trading securities one day before the trades are actually booked and recorded with a Trade date (hence the T). Once a trade date is established the security will be subject to the normal settlement cycle. These sessions always occur after the regular trading session and end before the next trading day regular session begins. Margin and mark-to-market requirements for transactions during T+1 trading will be completed the next business day. Affording more time to use the same dollar to trade more goods.

An interesting twist to the T+1 session concept is happening in Korea January 2010. The Eurex Group is going to offer the world’s most active options contract, the Korea Stock Price Index 200 (KOSPI200) options, on the Eurex platform. Eurex will take advantage of the European and North American trading day and move the trading from the Korea Exchange (KRX) to Eurex for this session leveraging the broad distribution its Members wield. I suspect they hope to earn the number 1 turnover ranking over its rivals the NYSE Group. The session will run from 5pm to 5am (4pm to 4am during Daylight Savings Time) Korea time or 9am to 9pm Central European Time. At the end of the Eurex trading session variation margin is to be paid in Korean Won and the net position transferred from Eurex Clearing to KRX thus, consolidating all open interest at the KRX. Eurex members will be required to open an account with a KRX member to exact delivery of the Eurex KOSPI product. KRX members, in turn, will be required to hold an account with a Eurex member to execute trades in the T+1 session.

There are some other fiats with the Eurex KOSPI product such as it’s a 1 day contract. For more information you can read the PDF HERE

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  1. Steve says:

    As futures exchanges introduced side-by-side electronic trading they noticed a steady shift of volume to the electronic counterpart. Indeed, several exchanges have shut their entire open outcry/pits due to effiencies that the electronic platforms offer.

    However, little thought was put into the electronic trading session’s trading hours and official reporting of trades during those sessions. As trading hours are extended, the less liquid post-settlement trading interferes with some types of analysis that traders wish to perform.

    For example, We are often asked about futures data why the daily settlement price for any given trading session occurs during the middle of a trading session and why they aren’t separately reported. From a trading perspective T+1 sessions are elegantly solves this problem.

    For example, the electronically traded Gasoil futures on ICE Futures Europe trade from 01:00 through 23:00 GMT yet settlement occurs at 16:30 GMT, 6.5 hours earlier.

    A better design for Gasoil futures would be to have a “night” T+1 trading session from 16:45 through the night until 07:30 GMT and a “day” T session from 08:30 GMT through 16:30.

    Hopefully enough traders will contact the exchanges and request such logical changes to be made to the trading sessions. Email your preferred futures exchanges today!

    From Richard Dale

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