Equity index trading in East Asia is booming. Following in the footsteps of the Kospi 200 Index exchanges across the region are harnessing the growth of the local retail market and opening up to foreign investors.
Options on Korea Exchange’s Kospi 200 Index are
the most traded ETD contracts in the world by volume with an
average of 15m contracts changing hands every day. Such success
is surprising, given the exchange’s limited
product range of 74 contracts and the fact that South
Korea’s economy, though among the
world’s 20 largest, is about the same size as
those of Mexico or the Netherlands.
The Options contract of the Kospi 200 was a roaring success
from day one. When the contract was introduced in 2004, KRX had
hosted 12.2m trades the previous year. Fast forward one year
and the exchange recorded 2.58bn trades.
Of those, the Kospi 200 Option accounted for 2.51bn, and
that success has continued since then. Many point to the lower
contract size as the reason behind its success. However,
relative the local economy, they are still sizeable. Each
options contract is sized at W100,000 times the index, now
about 250. That means each is for a notional amount of around
$22,000 per contract, significant more than the GDP per capita
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