Japanese Binary Volumes Take A Bath

japanese binary volumesJapanese binary options volumes down 21% month-on-month as Brexit chaos calms and Summer holidays rule the roost.

Japanese binary volumes fell from ¥44.6tr in July to ¥35tr in August as the Brexit after shocks dissipated and the Summer holidays held sway. The below bar chart shows the monthly volumes over the last three years with August being the second worst performance on record.

japanese binary volumes

Fig.1 – Trading Volumes ($ms) reported to the FFAJ by the seven operators

In May of this year the volume fell to a record low of just ¥30.4tr ($299m) so August’s volume of ¥35.2 ($345m) is approaching a new low.

Year-on-year shows an even less attractive performance with Aug 2014 and Aug 2015 showing trading volumes of ¥68.8tr ($676m) and ¥48.7tr ($479m) respectively, falls of 49% and 28%.

The average monthly trading volume for 2014 was ¥67.5tr ($662m), for 2015 ¥47.9tr ($470m) while so far for 2016 it has fallen further to ¥42.7tr ($419m). Apart from February every month has shown a correspondingly lower volume than its 2015 equivalent.

This decline in performance is disappointing but nevertheless expected bearing in mind the product that’s being currently offered the discerning Japanese retail trader.

Japanese Binary Volumes by Pairs

From the stacked graphic (Fig.2) it is fairly clear where the damage emanated from. The GBP/JPY pair’s volume fell from $116m in July to just $48m in August. This fall of $68m accounted for 73% of the total volume decline between the two months with a further 16% coming from the decline in volume in the Euro versus the Yen.

Japanese binary volumes

Fig.2 – Japanese Binary Options Volumes by Currency Pairs

Japanese Binary Volumes and Active Accounts

The decline in active accounts has been going on since September 2014 when it peaked at 16,315. The number of accounts is paltry and probably reflects that the vast majority of binary traders in Japan prefer to trade what is on offer from the offshore operators.

Japanese Binary Volumes

Fig.3 – Active Accounts of the Seven ‘Brokers’ and Volume per Account

The Financial Futures Association of Japan (FFAJ) have provided some fairly strict rules that the onshore operators have to adhere to, such as the minimum term of a binary option is not less than two hours. Over a twenty-four hour period the number of options periods is 24/x where x is two hours. Since the overlapping of periods is not permitted the operators have a significant amount of time when the action is sparse, i.e. immediately the new time period starts. This restriction has driven much of the Japanese business offshore to non-regulated entities, thereby the FFAJ is now overseeing a small percentage of the Japanese binary options market which one might argue, is fairly counter-productive.

Clients Winning Percentages

Below are illustrations detailing the number of winning customers by instrument (vanilla binary options, touch options and range/tunnel options) and by operator.

Japanese binary volumes

Fig.4 – Winning Customers by Operator for Vanilla Calls and Puts

 

japanese binary volumes

Fig.5 – Winning Customers by Operator for Touch Options

 

japanese binary volumes

Fig.6 – Winning Customers by Operator for Range (Tunnel) Options

Clearly a prerequisite of an operator is to fleece the client each and every month as illustrated by JFX in Fig.4 who pulled out of the market when they couldn’t make a profit each and every month.

Summary

The Japanese clients are not stupid, the female FX traders are legendary, so it is little surprise the number of active accounts is plummeting.

Furthermore, until the FFAJ allow more binary options providers in to the market there will continue to be a lack of competition between the providers leading to the ludicrous profit margins on offer.

There really is very little point in bringing in legislation such as the FFAJ’s if:

  1. Clients are ripped off by a market that is uncompetitive owing to the FFAJ’s binary options rules, and
  2. Clients are forces abroad into the arms of anonymous operators who, quite simply, thieve from them.
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