Three-month TONA Futures
What is TONATokyo Overnight Average rate (TONA) is JPY interest rate for uncollateralized transactions settled on the same
day as the trade date and maturing the following business day between financial institutions at the interbank callmoney market.

Listing of Three-month TONA Futures
TONA is the designated risk-free rate (RFR) administered and published by the Bank of Japan.
As JPY LIBOR publication was ceased at the end of December 2021, it has become essentially necessary to establish
a RFR based market. TFX has listed Three-month TONA futures in order to provide market participants with pricediscovery, which is the basic functionality of futures, and to improve its recognition of RFR as a benchmark of JPYinterest rate.
Three-month TONA futures designates, as underlying asset, an interest rate per annum that is calculated bycompounding daily TONA during the Three months’ “Reference Quarter”.

◆ Hedging tool for over-the-counter JPY IRS transactions
After the cessation of LIBOR publication, most of JPY interest rate swaps (IRS) have traded by compounding daily
TONA basis in the OTC market.
Incorporating quarterly interest exchange convention into the product specification, Three-month TONA futures
will make an ideal substitution or hedging tool for IRS.

◆ Making risk management and trading operation further efficient
As it is well aligned with IRS, exchange-traded Three-month TONA futures will enable more calibrated market risk
management, mitigating counterparty credit risk and reducing burdensome operations associated with IRS.

Three-month TONA Futures

ALM
manager

Proprietary trader
Arbitrageur
Market participants

SwaptraderProduct outline
ItemOutline

Underlying

Compounded daily TONA during the three-months’ Reference Quarter
100 minus the figure of an interest rate per annum as compounded daily TONA

Quoteduring the Reference Quarter

Tick Value

1 Tick Value = JPY2,500

Tick Size

0.001（0.001% = JPY250）

Contract Month

20 quarterly months（March, June, September and December）（5years）
The third Wednesday in three months of the start of the contract

Final Trading Day（ex）In the case of June 2023 contract, September 20 2023 Wednesday is thefinal trading day

Settlement Day

The following business day of the last trading day

Settlement Method

Cash settlement
8:45 ～ 11:30（ Day session 1）
12:30 ～ 15:30（ Day session 2）

Trading Hours

15:30 ～ 20:00（ Night session）※Day session on final trading day will be 8:45 ～ 9:30

Matching Method

Auction method（ Price/Time Priority）
Refinitiv <0#JO3:>

Ticker CodeBloomberg <YPOA Comdty>
QUICK <030>

Calculation method of TONA’s daily compounded rate and final settlement price[Prerequisite]
Reference Quarter：Suppose the number of calendar days during the Reference Quarter (From the third Wednesdayof the Contract Month to the third Tuesday in three months ahead) is 90.

Business days
1st day
2nd day
3rd dayn day

Day of theTONA「Average」

weekWedThuFri…
Tue（Final Results）
0.019
0.0150.018

1130.017

1

Applicable days

Total 90 days

Interest rate calculation
1 + (0.019/100) ×（1/365）
1 + (0.015/100) ×（1/365）
1 + (0.018/100) ×（3/365)
1 + (0.017/100) ×（1/365）[Step 1]
Obtain the TONA (Final Results of Average) for respective day during the Reference Quarter.
[Step 2]Multiply interest rate for each day (or days) to which the same daily TONA is applied during the Reference Quarter
together and making the compounded rate of the Reference Quarter (90 days).
{1 + (0.019/100) ×（1/365）} × {1 + (0.015/100) ×（1/365）} × {1 + (0.018/100) ×（3/365）}…
× {1 + (0.017/100) ×（1/365）} － 1 ＝ 0.00004625

[Step３]
To annualize the compounded rate of the 90 days at Step 2 above, multiply the rate by 365/90.
0.004625 × 365/90 ＝ 0.000187…
[Step４]
To make it expressed in percentage figure, multiply by 100 and round off at the fourth decimal point, making therate (R). 100 － R will be the final settlement price.
100 － (0.000187… × 100) ＝ 100 － 0.019… ＝ 99.981

Practical use of Three-month TONA Futures
A Three-month TONA futures is an agreement to buy or sell a certain volume of the predetermined compoundeddaily TONA during specific three months’ Reference Quarter.
For example, a price of the contract month of September 202X is indicative of the compounded daily rate during
three months from the third Wednesday of September 202X to the third Tuesday of December 202X, which is thenannualized.
Like quotation of bond price, its price quotation is displayed as 100 － Interest rate (%). Therefore, the following
correlation is found between an interest rate and a futures price.

Three-month TONA futures price fall

Interest rate rise

Bond price fall

Three-month TONA futures price riseInterest rate fall

Bond price rise

（Example）When the annualized compounded daily TONA rate for a certain Contract Month is 1.2%, thefutures will be displayed as 100 － 1.200 = 98.800.

◆ Utilizing Three-month TONA Futures as an indicator of a future interest rate
Price of Contract Month December 2023 at 99.980 → 100 − 99.980 ＝ 0.020％
Price of Contract Month March 2024 at 100.000 → 100 − 100.000 ＝ 0.000％
Price of Contract Month June 2024 at 100.020 → 100 − 100.020 ＝ ▲0.020％
When prices of contract months in the distant terms are higher than those of nearer-term contract months like thecase above, it is expected that JPY short-term interest rate will gradually fall for the next few months.

Interest rate futures, etc. financial futures transactions that involve an amount larger than the amount ofmargins that a customer is required to deposit for the transactions may cause a loss larger than the amountof margins, due to factors such as the fluctuation of interest rates. In commencing interest rate futures,etc. financial futures transactions, you should read a guide to financial futures transactions thoroughly andunderstand what is explained in it.

©TFX 2023.3
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