Last Updated on 10 February, 2024 by Trading System
The advent of the internet and electronic trading has made it easy to access different markets across the world, and the Asian futures markets have become of particular interest to investors and traders across the world owing to the great number of emerging economies across the region. So, it is great you are asking if you can trade futures in Asia.
Yes, you can trade futures in Asia with the help of international brokers, such as Interactive Brokers and TradeStation, which can give you access to the Asian futures market. All you need to do is to open an account with any of such brokers and trade the Asian futures market of choice.
In this post, we will discuss what futures trading entails, the overview of the Asian futures markets, and how to trade the Asian futures markets, including the trading sessions, the futures products to trade, and the brokers to use.
What is futures trading, and how does it work?
Futures are financial derivative contracts in which two parties — a buyer and a seller — agree to exchange a specified quantity of a given asset for a presently agreed price on a future date. A futures contract gives the buyer the obligation to buy the underlying asset and, the seller, the obligation to sell at or before the contract’s expiration date. Futures trading, therefore, is the process of buying and selling futures contracts for whatever reason — it could be for hedging or speculation purposes.
Futures are traded on futures exchanges in standard contracts. Each futures contract size is set by the futures exchange it trades on. However, the contract size of a particular futures asset tends to be the same across different exchanges. For instance, the contract size for one standard gold futures contract is 100 ounces, and it is the same across different futures exchanges. So, if you are to buy one standard contract of gold, you will be in control of 100 ounces of gold, and if the price of gold moves by $1, the value of the position will change by $100 ($1 x 100 ounces). For a mini contract, the size is one-tenth of the standard contract size. There is also a micro contract whose size is one-tenth of the mini contract. Different assets are measured differently though. Crude oil, for example, is measured in barrels, and 1,000 barrels make one standard contract.
Apart from commodities, such as gold, crude oil, and wheat, which may be settled at expiration with cash or by physical delivery of the asset, some futures contracts are settled with cash on expiration, and they include equity index futures, single stock futures, and volatility index futures.
While some participants in the futures markets, especially for commodity futures, are stakeholders in the respective asset industry who use futures to hedge their businesses, the majority of futures traders are in there for speculative purposes. Speculators trade to profit from price movements.
When a speculator buys a futures contract because of an opportunity he has seen in the market (a potential price movement in a particular direction), he holds it until the opportunity has played out. He then offsets the position before contract expiry. If this trader thinks the asset still has room for further price movement but the contract is nearing expiration, he can roll over the contract to the next one by simultaneously offsetting the current position and opening a new one in the next contract month. Eventually, when the opportunity has played out and the market has reached the profit target, the trader offsets the position.
Overview of the futures market in Asia
Asia is one of the first places where derivative trading started, and commodity futures and options are the oldest derivatives products ever traded. In fact, the first formal futures markets were the rice exchanges in eighteenth-century Japan. Producers and consumers come to the market to hedge against fluctuations in the harvest, and even as at then, farmers and merchants made agreements among themselves for delivery at pre-arranged prices.
Since then the Asian futures market has grown to become one of the largest in the world, attracting traders and institutions from around the globe. Apart from some international futures exchange groups, such as the CME Group and the Intercontinental Exchange (ICE), with presence in the Asian region, the Asian futures market is made up of several local commodity, financial, and equity futures markets spread across the various countries in the Asian region. Let’s take a look at some of them.
China
The futures exchanges in China include the following:
- China Financial Futures Exchange (CFFEX)
- Dalian Commodity Exchange (DCE)
- Shanghai Futures Exchange (SHFE)
- Zhengzhou Commodity Exchange (ZCE)
- Guangzhou Futures Exchange (GZFE)
Japan
Here are the active futures exchanges in Japan:
- The Japan Exchange Group
- Osaka Securities Exchange (OSE)
- Tokyo Stock Exchange (TSE)
- Kansai Commodities Exchange (KEX)
- Tokyo Commodity Exchange (TOCOM)
- Tokyo Financial Exchange (TFX)
Australia
The futures exchanges in Australia include:
- The Australian Securities Exchange (ASX)
- The Financial and Energy Exchange (FEX Global)
New Zealand
New Zealand’s main futures exchange is the New Zealand Exchange.
Hong Kong
The futures exchanges in Hong Kong include the following:
- Hong Kong Exchanges and Clearing (HKEx)
- Hong Kong Futures Exchange (HKFE) [merged]
- Hong Kong Stock Exchange (HKSE) [merged]
- London Metal Exchange (LME)
Singapore
The popular futures exchanges in Singapore include the following:
- Singapore Commodity Exchange (SICOM)
- Singapore Exchange (SGX)
- Singapore Mercantile Exchange (SMX)
- Asia Pacific Exchange (APEX)
India
The major futures exchanges in India are as follows:
- Bombay Stock Exchange (BSE)
- Indian Energy Exchange (IEX)
- Metropolitan Stock Exchange (MSEI) (Formerly known as MCX-SX)
- Multi Commodity Exchange (MCX)
- National Commodity and Derivatives Exchange (NCDEX)
- National Spot Exchange
- National Stock Exchange of India (NSE)
- Petroleum Exchange of India (PetEx)
Thailand
Thailand’s major futures exchanges are as follows:
- Thailand Futures Exchange Public Company Limited (TFEX)
- Bond Electronic Exchange (BEX)
United Arab Emirates
The main futures exchanges in UAE are the following:
- Dubai Gold & Commodities Exchange
- Dubai Mercantile Exchange (DME)
- NASDAQ Dubai
Indonesia
Indonesia’s major futures exchanges are as follows:
- Indonesia Commodity and Derivatives Exchange (ICDX) [3]
- Jakarta Futures Exchange (JFX)
Malaysia
Bursa Malaysia is the main futures exchange in Malaysia at the moment.
South Korea
The main futures exchange in South Korea at the moment is the Korea Exchange (KRX), which was formed from the merger of the Korea Stock Exchange (KSE), Korea Futures Exchange, and KOSDAQ Stock Market under the Korea Stock & Futures Exchange Act.
Taiwan
Taiwan Futures Exchange (TAIFEX) is the only futures exchange in Taiwan at the moment.
Philippines
The main futures exchange in the Philippines at the moment is the Manila Commodity Exchange (MCX).
How to trade futures in Asia
So, as a resident of the US or Europe, how do you gain access to the futures market in Asia and trade the various assets they have to offer? Well, it starts with finding the right futures broker to register with and choosing the markets/ assets to trades, which are what we are going to discuss in this section. Additionally, we will discuss the best trading session for participating in the Asian market and the steps to take to start trading futures in Asia.
The futures brokers to use
You need a reliable broker that will give you access to the Asian futures market. There are two categories of brokers in this regard, and they are as follows:
- International brokers
- The super Asian futures brokers
International brokers
Your best bet for trading futures in Asia is to go through any of those online international brokers with a presence across the world, including the Asian region. Only a few online brokers meet this criterion, and they include the following:
- Interactive Brokers: Present in over 184 countries, Interactive Brokers is, by far, the most popular broker with cross-border services. The broker can easily offer you access to trade any futures market in the Asian region.
- TradeStation: TradeStation is another popular international broker that offers futures trading. The broker is present in over 156 countries across the globe, including all the major Asian financial centers like Australia, Japan, Hong Kong, Indonesia, Singapore, and others, except China. With TradeStation, you can easily trade many futures assets in the region.
- Firstrade: Firstrade is present in about 21 countries, including China, New Zealand, Hong Kong, Singapore, and Taiwan. The broker can offer you access to many of the Asian futures markets.
- Charles Schwab: With a presence in the likes of Australia, Malaysia, China, Hong Kong, UAE, India, and Taiwan, Charles Schwab can offer you access to some of the Asian futures markets.
The super Asian futures merchants
Those international brokers often partner with the major local brokers to access the markets. Some of the major regional players are the CIMB Group, RHB Bank of Malaysia, and the Singapore-based UOB Bullion and Futures Ltd. Those are among regional players adding new futures business and bulking up to “superbroker” size.
These regional merchants are building very successful businesses and franchises, attracting business both from international brokers wanting to work with them, as well as investors within the region. Owing to their vast presence within different parts of the Asian region, these super brokers are able to pick up clients and facilitate access to the local markets.
The markets to trade
The Asian futures market allows you to speculate on a vast range of asset classes, including commodities, Forex, bonds, interest rate, equities, equity index, digital assets, and more.
- Commodity market: The Asian commodity market is so diverse. There are agricultural commodities and softs, such as corn, wheat, palm oil, cotton, and others, which are traded on exchanges, like the Dalian Commodity Exchange, Tokyo Grain Exchange, Osaka Mercantile Exchange, Bursa Malaysia, and many more. Metals and energies are traded on exchanges like the Tokyo Commodity Exchange, Shanghai Futures Exchange, Dubai Gold & Commodities Exchange, and many others.
- Equity market: The Asian market has a vast offering of equity index futures, as well as single index futures. These are traded on exchanges like the Shanghai Futures Exchange, China Financial Futures Exchange The Japan Exchange Group, Hong Kong Futures Exchange, Tokyo Financial Exchange, Jakarta Futures Exchange, and others.
- Bond market: Interest rate futures are traded on the Japan Exchange Group, Hong Kong Futures Exchange, Tokyo Financial Exchange, Jakarta Futures Exchange, and the Bond Electronic Exchange in Thailand.
- Digital asset market: Although nascent, many exchanges are creating a futures market for Bitcoin and other digital currencies. Some of them include the CME Group and the ICE Futures Singapore.
The trading sessions
As you may have known, there are different trading sessions based on time zones. So, if you want to trade futures in Asia, you should be ready to trade during the Asian session, which is usually between 11:00 PM to 8:00 AM GMT.
Depending on where you reside, this time could be in the early hours of the day before work or as the day is winding off after work. If you reside in Europe, the Asian session goes on when you are sleeping at night, so you may have to wake up early to trade the market before getting ready for work. But if you reside in the US, the Asian session happens after work, so you can trade the market before going to bed.
Steps for trading futures in Asia
If you want to trade the Asian futures market, here are the steps to take:
- Study the market: Take time to study the market to know what works and what doesn’t. Try to understand the factors that move the market and why they do.
- Choose the assets to trade: There are many assets you can trade, but you need to specialize in a few. So, choose a few assets and focus on them. They could be commodities or equity indexes.
- Open an account with an international multi-asset broker: Open an account with Interactive Brokers or TradeStation. You will be required to fill the account opening form, where you provide your details and answer some questions about your financial trading experience. You may be required to provide proof of identity and address.
- Start trading: When your account is approved, you can fund it and start trading. Remember, futures trading is leveraged, so you should have a strategy for managing risk to avoid huge losses.
FAQ
What is the history of derivative trading in Asia?
Derivative trading in Asia has deep historical roots, with commodity futures and options being the oldest derivative products traded. The first formal futures markets were the rice exchanges in eighteenth-century Japan, where farmers and merchants made agreements for delivery at pre-arranged prices, laying the foundation for the Asian futures market.
What are the major futures exchanges in China and Japan?
In China, notable futures exchanges include the China Financial Futures Exchange (CFFEX), Dalian Commodity Exchange (DCE), Shanghai Futures Exchange (SHFE), Zhengzhou Commodity Exchange (ZCE), and Guangzhou Futures Exchange (GZFE). In Japan, exchanges like the Japan Exchange Group and Tokyo Commodity Exchange (TOCOM) are prominent.
What are super Asian futures merchants, and how do they facilitate trading?
Super Asian futures merchants are major regional players like the CIMB Group, RHB Bank of Malaysia, and UOB Bullion and Futures Ltd. These brokers partner with international brokers and facilitate access to local markets, building successful businesses and franchises across different parts of Asia.
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