Popular Options trading drives Japanese exchange to seek OTC strategy revenue enhancement for ETF listing

Jin10 data reported on August 3rd that Japan’s major securities exchanges are seeking to capture growth opportunities in yield enhancement strategies. At the Tokyo Stock Exchange, trading strategies such as “selling covered call options” (where investors hold stocks while selling call options to earn option premiums) are becoming increasingly popular. To this end, the Tokyo Stock Exchange plans to allow the listing of actively managed ETFs that utilize OTC derivatives. According to Kei Okazaki and Ryutaro Someya from the listing department of the Tokyo Stock Exchange, the exchange is seeking guidance from a consulting firm to promote the listing of ETFs using off-exchange tools such as swap contracts and options. Currently, while listed ETFs can use options from the Osaka Derivatives Exchange, the use of OTC derivatives is still prohibited. The Tokyo Exchange hopes to obtain approval from the Japanese Financial Services Agency by June next year to facilitate the listing of such ETFs. They noted that this transformation will help reduce fund management costs.