Japanese volumes fall once more as March volumes from the eight reporting brokers reinforced the feeling that the binary options market in Japan will remain stagnant until fresh blood is introduced. Fresh blood does not appear on the menu as the Japanese authorities do not apparently wish to allow further brokers into the market.
The JFSA has created a regulatory environment for binary options that has meant that the product on offer to the Japanese retail market falls short of what is required by that market. Subsequently active accounts have been falling since the height of binary options appeal to the Japanese.
The increase in volumes seen in January could not be maintained through February and now March shows a further fall to $336m from the $517m posted in January. The March‘16 volumes was a lot less (43%) than the March’14 volumes.
Volumes by Pairs
The USD/JPY showed a month-on-month drop to $161m, a decline of 22%, which was the lowest USD/JPY volume since May’15.
The loss of interest in the USD/JPY was partially offset by the AUD/JPY rising from a volume of $6.4m to $21.3m. (‘Others’ in the above chart includes AUD/JPY.)
Active Accounts & Volume per Account
The loss of interest in binary options in Japan is reflected by the number of active accounts which dropped off drastically in March from 13,656 to 12,786.
From Apr15 to Nov15 the volume traded per account was remarkably static around $12,000 yet this figure picked up in December and Jan16 resulting in the spike in volumes seen in the above chart. Unfortunately Jan16 provided the peak of both active accounts and volume per account although the latter still remains slightly higher than the norm for 2015.
Operators Profit Margins
The eight binary options providers currently registered with the FFAJ are clearly not taking any prisoners. Quite simply the operators are taking too much edge and providing the clients with prices that are too wide for the client to have any chance of winning in the long-term.
The following chart illustrates the percentage of winning customers trading vanilla binary options for each of the eight operators. JFX is the only operator giving the client a remote chance of winning.
The average percentage of winning customers for the remaining seven operators is less than 25%.
With the touch options there are just two operators in the market and their average number of winning customers is 31%. So the less operators the lower the profit margin? That does not make sense.
The reason the percentage of winning customers is higher is because to provide touch options the binary options provider has to make estimates of the volatility of the currency. When offering short-term options this can be extremely difficult to evaluate, unless you are aware of how to evaluate historic volatility using Double No-Touch options. Yet since IG and FX Trade are still generating losing clients to the tune of 69% I guess they’re not that bothered.
Range options still require a handle on volatility so here FX Trade and YJFX have grasped the nettle.
Japanese Binary Prospects
The prices of the binaries need to be keener and a greater range of instruments offered. Operators only offering vanilla binary options are doing themselves a great disservice as the wider the range of instruments the easier it is to manage the risk ‘book’. This sounds counter-intuitive but nevertheless remains a fact. The wider selection of instruments attracts more trading as clients can now more accurately take a bespoke position to suit the forecast. The more trading the less need of risk management as the more the traders, the greater probability they will hedge each other out. And this therefore means a higher quality of earnings for the operator which can then be shared with the client in the form of sharper prices, hence creating a virtuous circle.