Settlement Procedures for Futures and Options Contracts

Transcription

1 Reference Translation Settlement Procedures for Futures and Options Contracts Items Descriptions Remarks I Purpose II Overview 1. Procedures for setting settlement prices for futures and options contracts (1) Settlement prices for JGB futures The purpose of this document is to describe JSCC s procedures for setting settlement prices of futures and options contracts traded on Osaka Exchange ( OSE ). Settlement prices for each contract month contract of JGB futures, excluding Mini-sized contracts, shall be set every trading day as follows: A) Settlement price of: - the Leading Contract Month; - a contract month which expires earlier than the Leading Contract Month; and - the second nearest contract month on the Last Trading Day of the nearest contract month shall be set every trading day as follows: A Leading Contract Month shall be the contract month with the highest liquidity and designated by JSCC. (a) If a contract is concluded at the close of the Afternoon Session by the Closing Auction (Itayose) method, the settlement price shall be the contract price; 1

2 (b) If the contract in the above (a) is not concluded, the settlement price shall be the last contract price in the ordinary auction trading sessions of a given trading day, excluding Strategy Trade contracts and contracts concluded in the Night Session; and (c) If neither of the contracts in the above (a) nor (b) exists, the settlement price shall be the theoretical price. B) Settlement prices of the contract months other than A) shall be set every trading day by adding / subtracting the latest Contract Spread Price* in the auction trading session, excluding the Night Session, on the relevant trading day from the settlement price of the Leading Contract Month. * If no Contract Spread Price exists, the theoretical spread price shall be used as an alternative to the Contract Spread Price. A Contract Spread Price refers to a contract price of a Calendar Spread Trade, which is defined by OSE as a part of Strategy Trades. C) Notwithstanding the provisions of A) and B), if JSCC deems it inappropriate to set settlement price(s) as prescribed in A) or B) taking into consideration the condition of contract prices and theoretical prices, JSCC shall set settlement price(s) as appropriate considering circumstances such as conditions of quotes placed in auction trading on that day. Settlement prices of Mini-sized contracts shall be the same as the settlement price of the Large-sized contract with the same contract month. However, if JSCC deems it inappropriate to set the settlement price in such a manner, JSCC shall set Mini-sized contract s settlement price in each case considering market conditions and other factors. 2

3 (2) Settlement prices for index futures, excluding dividend index futures Settlement prices for each contract month of index futures, excluding Mini-sized contracts with contract months in a quarterly cycle (i.e. March, June, September and December, hereinafter referred to as Quarterly Contract Months ), shall be set every trading day as follows: A) If a contract, excluding strategy trade contracts, is concluded in the auction trading session between 3 p.m. and the close of a regular daytime auction trading session, the settlement price shall be the last contract price, excluding strategy trade contracts, in the auction trading session; B) In cases other than A) or if JSCC deems it inappropriate to set the contract price(s) prescribed in A) as settlement price(s), the settlement price shall be the theoretical price calculated by the formula specified by JSCC (fractions less than the increment of a quote shall be rounded off to the nearest quote, or rounded up if there are two nearest quotes), or JSCC shall set settlement price(s) as appropriate considering circumstances such as conditions of quotes placed at the close of the auction trading session on that day. Settlement prices of Mini-sized quarterly contracts shall be the same as the settlement price of the Large-sized contract with the same last trading day. However, if JSCC deems it inappropriate to set the settlement prices in such a manner, JSCC shall set the settlement prices of the Mini-sized contracts in each case considering market conditions and other factors. If intra-day margin is called, the intra-day settlement price shall be set in reference to contract prices established from 10:45 a.m. to 11:00 a.m.; the same shall apply to (4)A). For Nikkei Stock Average Volatility Index Futures ( Nikkei 225 VI Futures ), Dow Jones Industrial Average Futures ( NY Dow Futures ) and CNX Nifty Futures, the settlement price shall be the latest middle price of the best quotes placed or the last contract price, whichever is later, on a given trading day. 3

4 Notwithstanding the calculation methods described on the left in A) and B), a theoretical price shall be used as the settlement price every business day for TOPIX Core 30 Futures, TOPIX Banks Index Futures, TSE REIT Index Futures and RN Prime Index Futures, and for other futures contracts, excluding Nikkei 225 VI Futures, NY Dow Futures and CNX Nifty Futures, a theoretical price shall be adopted as the settlement on the last business day of March, June, September or December. (3) Settlement prices for dividend index futures Settlement prices for each contract month contract of dividend index futures shall be set every trading day as follows: A) For a contract month which has a contract price established after a particular time set by JSCC before the close of auction trading session, excluding strategy contracts (the same shall apply in II-1.-(3)), the settlement price shall be the last contract price established after that time (i.e. 3:00 p.m.); JSCC sets the time as 3:00 p.m. 4

5 B) For a contract month which has no contract price established after the time described in A), the settlement price shall be the middle price of the best quotes placed at that time; C) For contract months other than those mentioned in A) and B); - If a contract price is established before the time described in A) on the trading day, excluding the Night Session, the settlement price shall be the last contract price on that trading day; or - If there is no contract price established in the auction trading on that trading day, the settlement price shall be the value prescribed in the following (a) or (b): (a) For the Leading Contract Month specified by JSCC and the nearest contract month, the settlement price shall be the settlement price on the previous trading day; and (b) For contract months other than those mentioned in (a), the settlement price shall be obtained by adding the difference of the daily settlement price (i.e. the value obtained by subtracting the settlement price on the previous trading day from today s settlement price) of the Leading Contract Month mentioned in (a) to the settlement price of the relevant contract month on the previous trading day. Notwithstanding the provisions of the above A) through C), if JSCC deems it inappropriate to set the settlement price(s) as prescribed in said A), B) or C) taking contract prices during auction trading and other factors into consideration, or if no contract has been concluded since the new listing of the contract month, JSCC shall set the settlement price(s) as appropriate considering circumstances such as the conditions of quotes placed in auction trading on that day. 5

6 (4) Settlement prices for options contracts Settlement price of each contract month of options contracts shall be set every trading day (every day for options on individual securities) as follows: A) If a contract, excluding strategy trade contracts, is concluded in the auction trading session between 3 p.m. and the close of a regular daytime auction trading session, the settlement price shall be the last contract price, excluding Strategy Trade contracts, in the auction trading session; B) In cases other than A), the settlement price shall be the theoretical price calculated by the formula specified by JSCC (fractions less than the increment of a quote shall be rounded off to the nearest quote). Notwithstanding the provisions of the above A) and B), if JSCC deems it necessary, JSCC may change the settlement price which is deemed appropriate. Notwithstanding the calculation methods described on the left in A) and B), the theoretical price shall be used as the settlement price every business day for options on individual securities, options on JGB futures, and TOPIX options, and for Nikkei 225 options contracts, the theoretical price shall be used as the settlement price on the last business day of March, June, September or December. 2. Formulas for prices of futures and options (1) Formulas for prices of JGB futures For all deliverable bonds of JGB futures, theoretical prices shall be calculated using the following formulas: Theoretical price = (Deliverable bond price - Cost of carry) / Conversion factor 6 Among the theoretical prices of all deliverable bonds for each contract month of JGB futures, the cheapest

7 Short-term interest rate (Deliverable bond price + Accrued interest) Cost of carry = [ Coupon rate - ] t 1 / Accrued interest = Face value (JPY100) Coupon rate (%) / 100 t 2 / 365 theoretical price shall be adopted as the theoretical price of the relevant contract month. The symbols used in the above equations shall be defined as follows: t 1 : the number of days between the delivery date for the cash bond transaction and the physical settlement date for the futures contract (either the start date or end date shall be included); t 2 : the number of days between the previous interest payment date and the delivery date for the cash bond transaction (either the start date or end date shall be included); Short term interest rate: the 3-month Tokyo Repo Rate released by the Bank of Japan on one business day before the date of theoretical price calculation; Deliverable bond price: the average price of reference statistical prices for over-the-counter bond transactions, published by Japan Securities Dealers Association on the date of theoretical price calculation; and (Rounding of fractions) The theoretical prices of futures contracts shall be rounded off to two decimal places. Theoretical spread prices for JGB futures shall be calculated using the following formula: Theoretical spread price = Theoretical price of a near contract month - Theoretical price of a more distant contract month The theoretical spread price shall be calculated every trading day and used for calculating settlement prices on the following trading day. 7

8 (2) Formula for prices of index futures Theoretical prices of each contract month of index futures shall be calculated using the following formula: Theoretical price = Se (r-δ)t The symbols used in the above equation shall be defined as follows: S: the latest underlying index price (when calculating the settlement price, the last underlying index price of the day); e: the base of a natural logarithm; r: interest rate; δ: the expected dividend yield related to the underlying index specified by JSCC ; and T: the number of days between the following day and the business day following the last trading day of the futures contract / 365. When releasing the theoretical prices calculated by the formula on the left, fractions less than one yen shall be rounded off for index futures linked to the Nikkei Stock Average, and fractions less than 0.1 yen shall be rounded off for index futures linked to RNP Index, TOPIX, TOPIX Core30, TOPIX Banks Index Futures and TSE REIT Index Futures. The interest rate shall be the Japanese Yen Tokyo Interbank Offered Rate published by the Japanese Bankers Association on the previous day, with an appropriate maturity derived from the number of days through the business day following the last trading day of the relevant contract month. (3) Formulas for Theoretical prices of each contract month of options on individual securities shall be calculated using the following formulas: When releasing the theoretical prices calculated by the formulas on the left, 8

9 prices of options on individual securities The theoretical price of a put option =-S'N (-d 1 ) + Ke -rt N (-d 2 ) The theoretical price of a call option =S'N (d 1 )-Ke -rt N (d 2 ) where, n S'= S- D i e -rti i 1 d 1 ={ln (S'/K) + (r+σ 2 /2) T}/σ T d 2 =d 1 -σ T The symbols used in the above equations shall be defined as follows: S: the latest contract price of the underlying security traded on the Financial Instruments Exchange designated by OSE (when calculating settlement price, the last contract price of the underlying security traded on the exchange on the day); e: the base of a natural logarithm; D i : the expected dividends for the i-th period for the underlying security; T: the number of days between the following day and the exercise day / 365; t i : the number of days between the following day and the ex-dividend day for Di / 365; r: interest rate; N(x): cumulative probability density function of standard normal distribution; K: exercise price; Ln: natural logarithm; and fractions less than 0.1 yen shall be rounded off. Expected dividends shall be based on the summary of financial statements and other documents disclosed by the issuer of the underlying security. The interest rate shall be set in the same manner as prescribed in (2) (i.e. the rate with an appropriate maturity derived from the number of days through the exercise day). The same shall apply to (4) and (5). Volatility shall be the implied volatility of the issue (i.e. the value calculated backwards based on the theoretical price calculation formulas, referring the latest middle price of the best quotes placed in the auction trading or the contract price; the same shall apply to 9

10 σ : volatility. (4). (4) Formulas for prices of options on JGB futures Theoretical prices of each contract month of options on JGB futures shall be calculated using the following formulas: The theoretical price of a put option on JGB futures = e -rt [ EN (-d 2 )-SN (-d 1 )] The theoretical price of a call option on JGB futures = e -rt [ SN (d 1 )- EN (d 2 ) ] where, d 1 = ln (S/E) / (σ T)+0.5σ T d 2 =d 1 -σ T When releasing theoretical prices calculated by the formulas on the left, fractions less than 0.01 yen shall be rounded off. The symbols used in the above equations shall be defined as follows: e: the base of a natural logarithm; r: interest rate; T: the number of days between the following day and the option expiration date / 365; E: exercise price; N(x): cumulative probability density function of standard normal distribution; S: the settlement price of the underlying contract month contract on a given trading day; ln: natural logarithm; and σ: volatility. 10

11 (5) Formula for prices of index options Theoretical prices of each contract month of index options shall be calculated using the following formulas: The theoretical price of an index put option =-Se -δt N (-d 1 ) + Ke -rt N (-d 2 ) The theoretical price of an index call option = Se -δt N (d 1 ) -Ke -rt N (d 2 ) where, d 1 ={ln (S/K) + (r-δ+σ 2 /2) T}/σ T d 2 = d 1 -σ T When releasing theoretical prices calculated by the formulas on the left, fractions less than one yen shall be rounded off for index options linked to the Nikkei Stock Average, and fractions less than 0.1 shall be rounded off for index options linked to TOPIX. The symbols used in the above equations shall be defined as follows: S: the latest underlying index (when calculating settlement price, the last underlying index on the day); e: the base of a natural logarithm; δ: the expected dividend yield related to the underlying index specified by JSCC; T: the number of days between the following day and the exercise day / 365; r: interest rate; N(x): cumulative probability density function of standard normal distribution; K: exercise price; ln: natural logarithm; and σ: volatility. The expected dividend yield shall be the same as that mentioned in (2). End of Document 11