Senior executives at two of the largest exchanges – CME Group and Cboe Global Markets – say retail traders are a key part of their growth strategy in the Asia Pacific region.
Julie Winkler, CME’s chief commercial officer, said traders in Asia now account for more than 30% of CME’s global retail business, second only to the retail segment in its home market of North America. One reason for the growing interest – CME’s decision to introduce smaller-sized versions of its flagship equity index and commodity futures.
“Smaller-sized contracts are easier to try for traders new to futures, and they also help more established traders to scale in and out of positions with greater ease,” Winkler explained.
In October 2024, CME launched micro-sized versions of its Nikkei futures, which are denominated in both Japanese yen and US dollars. So far, more than 40% of the volume in that contract is coming from the APAC region, she said.
Another reason – the global visibility of the US stock market. Cathy Clay, global head of derivatives at Cboe Global Markets, said there is a “natural brand recognition” for the major US market indices, and the options that trade on Cboe are an easy way for traders to get exposure.
“Because Cboe is home to the S&P 500, the Russell 2000 and the VIX index options, there is just a natural brand recognition when it comes to those products. And we offer an easy way for those retail clients to access the broad-based exposure that they’re looking for in the US,” Clay said.
Growing enthusiasm
From Mumbai to Shanghai, retail investors all over Asia are becoming increasingly active in futures and options.
Retail traders dominate trading on China’s commodity futures exchanges, which rank among the largest in the world by volume. Retail trading is also driving the meteoric growth of India’s stock index options. India is now home to the largest index options market in the world by number of contracts, with over 500 million traded daily. Roughly 30-40% of that volume comes from retail, estimates Mohit Batra, executive director at Nuvama Investment Advisors, an Indian brokerage firm.
A similar story is playing out in Asia’s smaller markets. At the Taiwan Futures Exchange, half of all activity on the exchange stems from retail investors. In Thailand, retail investors account for about 45% of activity on the exchange.
Hong Kong is another example. David Lutz, a senior vice president in equities product development at Hong Kong Exchanges and Clearing, told MarketVoice that the group’s equity options market has seen rapid growth of retail trading, especially in short-dated options on index options.
In November 2024, the exchange expanded the range of weeklies by launching weekly options on ten stocks with relatively high turnover and volatility, including the Chinese technology giants Alibaba, Baidu and Tencent. The contracts proved to be popular right from the start, and within a few weeks, volume in the new options had grown to 13% of the overall market.
“We’ve been very pleased with the success of weekly stock options,” Lutz said, adding that “strong retail participation” is helping to drive that growth.
Of course, futures and options can be exceedingly risky for the uninitiated. Some critics point to the fact that in India, it is possible to open an account in seven minutes and start trading futures and options and warn that market access can be too streamlined for the market’s own good.
To protect retail investors, the Securities and Exchange Board of India last year proposed a series of measures to add some guardrails, including raising the minimum contract size for index derivatives and increasing exposure loss margins on option expiry days.
Could that kill the boom? Although regulators tend to get a bad rap for discouraging business, Hari K., a former executive at the National Stock Exchange of India and now a consultant, argues that the tightening of some trading rules is good for the long-term health of the market.
Speaking at the FIA Asia Derivatives conference in Singapore in December, he said rules such as a stricter protocol for pledging securities for collateral have actually served to give investors more faith in India’s exchanges.
“I think the SEBI guardrails are not that bad,” agreed Manu Dua, managing director for APAC prime services and equities with Citi Global Markets in Singapore, during a panel discussion at the FIA Asia conference. “The SEBI guardrails protect the market structure and create a certain expectation on how the market should work. I think this gives that assurance to investors that there is a regulator who is looking after the market.”
Distinct markets
For western exchanges, providing access to Asian investors has been a complex task because every market has a particular regulatory slant and product interests.
“They’re all distinct in their own way with their own regulations, and how we need to operate within those regulatory frameworks,” Cboe’s Clay said. “What we’ve done is take a country-by-country look at who the players are, what the obstacles are for them to get access to our exchanges, whether they’ll be getting the data – and then identifying which products they would be interested in trading,” she added.
In South Korea, for example, Clay says, traders who grew up trading the Korea Composite Stock Price Index, or KOSPI, naturally will want to use the same kinds of strategies when trading US indices.
Clay noted that many Asian investors are already quite sophisticated in how they approach the market. “Culturally, in terms of trader sophistication, in terms of interest in trading derivatives and education on how to trade derivatives, many countries in the Asia Pacific region are far along in that journey, just like the US. There are a lot of similarities between how the retail client thinks and operates in these countries,” she said.
This year, Cboe will focus on Singapore, Hong Kong, Taiwan, Japan, South Korea and Australia. “We’re going to have more employees really getting to know the client base better and see if we can help them solve some of the pathway challenges that they might face coming into the US,” she said.
CME’s Winkler adds that online platforms geared to retail traders are an important feature of the Asian market. “The advent of new retail-friendly trading platforms has certainly lowered the barrier to entry for these first-time traders, as well as provided greater access to educational resources, data and analytics – all of which are helping to empower this segment,” she said.
Education
CME is also reaching out with a variety of educational materials on futures and options, including its CME Institute online platform.
“We offer everything from live instruction to a simulated trading environment to test new skills,” Winkler said, adding that retail brokers are invited to embed many of these materials directly in their online platforms. The exchange also works with local partners, such as the Korea Financial Investment Association, to provide educational resources on futures and options.
Cboe is making a similar effort to offer educational materials to retail traders in the APAC region. In 2025, Cboe plans to take its Options Institute curriculum to some Asia Pacific markets where they have regulatory approval. “Our belief is that the more we educate, the better results the retail trader will have, and that’s what we would like to see – a healthy experience and more successful outcomes,” Clay said.
Despite the logistical and educational challenges ahead to growing the retail appetite for futures and options in Asia, the exchanges are generally bullish on the region. “It’s pretty widely believed that there is still a tonne of opportunity in Asia Pacific that’s relatively untapped,” Clay said.
