U.S. futures gain expected

Press, 24 April 1987, Page 31

U.S. futures gain expected

By LESLIE ADLER, of Reuters (through NZPA) Chicago United States futures markets should enjoy increases in both volume and liquidity because of a Japanese Government’s ruling allowing that country’s institutions to deal directly in United States futures exchanges, analysts said. “The volume should increase... lots more activity and a lot more liquidity,” said Karen Gibbs, a debt analyst with Dean Witter Reynolds. Previously, Japanese financial institutions were limited to dealing in U.S. futures through their American subsidiaries, and insurance companies were barred entirely from futures contracts, which are agreements to buy financial instruments, or commodities, at a set price at a future date.

Under the rules which take effect some time next month, Japanese banks, securities houses, life and non-life insurance companies, and investment trust management

companies would be able to trade directly, but only on tbeir own behalf, said a Japanese Finance Ministry official in Tokyo. Mr Larry Morgan, an analyst with Dean Witter, said that the insurance companies’ current big participation in the U.S. cash bond market suggests they will leap to .take advantage of the opportunity to hedge in futures. The most direct advantage of the change will be to the new night trading session set to start on April 30 at the Chicago Board of Trade, which was designed to overlap with the morning session in Tokyo. “The change is absolutely crucial for the success of the Board of Trade’s evening trading session,” Morgan said. Analysts agree that the easing on trade, although still barring Japanese individuals from U.S. futures exchanges, has no hidden disadvantages. "I think this makes the market work more efficiently and everyone

should benefit,” ’ aeid Gibbs. The Japanese can play a big role in • U.S. futures markets because of the vast sums of money they could invest, analysts say, but they fee! Japanese participation is unlikely to increase volatility in the long run. Some initial volatility is expected, but it should quickly dissipate. The Japanese are expected to take conservative strate-

gies in futures. "<• Although Japanese investors could cause major movements in futures occasionally, analysts said these would have no more impact than big trades by the large American players. “I doubt if one segment can really influence the ■ market on a long-term basis,” said Mr Steve Nisan, an analyst with E.F. Hutton.