Tokyo Commodity Exchange (TOCOM) is Japan’s largest and one of Asia’s most prominent commodity futures exchanges including rubber. Apart from rubber, it operates electronic markets for precious metals, oil and soft commodities. While continuing with public awareness programs as well as marketing at home and abroad, TOCOM plans to focus on new important initiatives in 2019

Headquartered in Chuo-ku, Tokyo, Japan, TOCOM offers futures and options contracts for precious metals like gold, silver, platinum and palladium, energy sources like crude oil, gasoline, kerosene and gas oil and agricultural products like soybeans, corn and azuki. In March 2019, Japan Exchange Group (JPX), owner of the Tokyo and Osaka stock exchanges, said that it would take over Tokyo Commodity Exchange to create an all-in-one bourse that would attract more international traders and investors. The takeover bid for TOCOM will be launched in June this year with a view to completing the transaction by October and merging the two exchanges in the fiscal year ending March 2021.

TOCOM was established in 1984 with the merger of Tokyo Textile Exchange founded in 1951, Tokyo Rubber Exchange and the Tokyo Gold Exchange. The exchange became a for-profit shareholder-owned company in 2008. TOCOM grew to be one of the world’s biggest commodities markets, fuelled mainly by yield-hungry retail investors in Japan.

In 2018, TOCOM rolled-out a series of initiatives to expand its investor base and improve market access. It listed TSR (technically specified rubber) contracts in October in response to the needs of the market. “Our rubber market is now more accessible and was greeted with enthusiasm from China, the world’s largest consumer, as well as Thailand and Indonesia, which are major producers,” a TOCOM statement said in early 2019.

Roadmap for 2019

TOCOM wants to continue with public awareness programs as well as marketing at home and abroad in 2019. “We will focus on three important initiatives. First, we are planning to launch electricity futures at the behest of the government of Japan. This project is nearing fruition, with the understanding that it will support an important part of Japan’s industry and economy, said Takamichi Hamada, President & CEO, Tokyo Commodity Exchange in his New Year address.

“Second, along with JPX, we will consider consolidating stock and commodity markets. We will consider whether consolidation will enhance market access and reliability and whether it would contribute to the expansion of the commodity market and industry. We will move forward if such needs can be met. Third, we plan to support AI-based automated commodity trading, known as “robo-advisor” services. The technology will be available to FCMs and is expected to attract less-experienced investors. I hope that 2019 is one of prosperity, brightness and hope for all of TOCOM’s participants and friends,” he added.

Last year, TOCOM’s total trading volumes fell below 24 million contracts, less than a third of a record 87 million contracts traded on the exchange way back in 2003. Trading volumes have dwindled since 2005, when the government tightened restrictions on soliciting business from individual investors. Rubber futures on the Shanghai Futures Exchange, for instance, traded in volumes more than 40 times higher than turnover for a similar TOCOM product in 2017.
The transfer of most TOCOM products onto JPX platforms and the consolidation of clearing facilities is expected to be completed after March 2020, a recent report says.