technological innovation and the role of exchanges in risk management and monitoring are becoming increasingly important. increased use of futures for asset management third, i would like to briefly touch on the effects of the widespread movement to use futures for asset management. participants in futures markets are broadly divided into three classical categories : ( 1 ) hedgers, who hedge against price risks in underlying assets ; speculators, who take on such price risks ; and ( 3 ) arbitrageurs, who seek arbitrage between spot and futures markets. however, during the last 10 years since the global financial crisis, futures markets have witnessed the growing presence of new investment players that take long positions in the medium to long term, such as investment trusts and exchange - traded funds ( etfs ). the increased use of futures for asset management, in addition to hedging and speculation, can be viewed favorably because it provides households with more options for portfolio selection. furthermore, the growing presence of new buyers with medium - to long - term investment horizons could increase the market depth of futures markets. it can be expected that this would enhance market liquidity, and thereby improve the risk transfer and price discovery functions of futures markets. however, if the diversity of market participants is impaired due to the growing presence of a particular investor type, prices might cease to appropriately reflect the fundamentals behind the transactions because they might be excessively affected by trading strategies employed by those investors. in fact, the growing share of investment trusts and etfs in futures markets has affected the correlation between different asset types. a typical example is the effects observed in price formation of overseas commodity futures such as crude oil. since the global financial crisis, a large amount of investment funds has flowed to commodity futures markets in pursuit of higher yield against the background of global monetary relaxation. in this process, commodities became embedded in the global portfolios of large investors extending across multiple regions and assets. in general, in the event of an exogenous shock, global portfolio rebalancing moves multiple risky asset prices in the same direction. in this regard, for example, returns on commodity index futures showed little sign of correlation with those on global stock indices at least until the middle of the 2000s. however, as a wide range of investors have started to incorporate commodities in their asset portfolios since the financial crisis, the correlation between returns on commodity index futures and those on stock indices has structurally increased ( chart 4 ). in the long run, the impact on futures prices stemming from price

players, who require faster access for transactions in milliseconds, usually place orders from co - location areas ( special areas in the same building that hosts the primary systems of the exchanges where market participants can install their own servers containing trading algorithms ). see, for example, " kabushiki shijyou ni okeru kousoku kouhindo torihiki he no eikyou ( effects of high speed and frequency trading on the stock market ), " bank of japan review, no. 13 - j - 2, january 2013 ( available in japanese only ), which provides a theoretical summary of hft and analysis of the effects on the japanese stock market. in spite of the popular view at one time that attributed the " flash crash " in the u. s. stock market in may 2010 to hft, a joint report by the u. s. securities and exchange commission ( sec ) and the u. s. commodity futures trading commission ( cftc ) concluded that the crash was not directly caused by hft, but rather by a complex combination of factors. however, the report also pointed out that hft players accelerated price fluctuations by rapidly withdrawing liquidity during the propagation of market turmoil. in august 2012, many stocks on the new york stock exchange experienced a " mini flash crash " due to a massive number of erroneous orders. the erroneous orders have been attributed to system issues caused by human error. as i mentioned, assessments of hft have not been entirely positive. it is therefore important to consider measures and initiatives to ensure that the growing presence of hft players contribute to enhancing market efficiency and liquidity through appropriate arbitrage and market - making activities and does not result only in transaction speed competition. for example, if the risks of high speed and frequency trading amplifying price changes due to one - sided algorithmic trades or a malfunction in programs and servers are left unattended, they might impair financial market stability, and in turn weaken the risk transfer and price discovery functions of futures markets. tackling those issues is by no means an easy task, but it is critical to properly consider measures to prevent them. the specific measures to deal with those issues are not to be implemented by exchanges alone because they also rest on regulations on hft and other factors. that said, with the advent of hft and the growing presence of hft players in financial markets, various self - imposed requirements for exchange trades associated with financial