TOCOM Announces Rolling Update of Midterm Management Plan

3.15.2011

 

Tokyo Commodity Exchange (“TOCOM” or the “Exchange”) has announced today its new three-year Midterm Management Plan covering fiscal 2011 to fiscal 2013.

To speedily address changes in its business environment, the Exchange has adopted rolling annual updates of its three-year Midterm Management Plans. The actual results for fiscal 2010 and changes in the Exchange’s business environment served as the basis for revising last year’s the three-year Midterm Management Plan for fiscal 2009 to fiscal 2011.

1. Fiscal 2010 Results

As part of the series of planned reforms, trading hours were extended in September 2010.  TOCOM achieved most of the targets for market upgrades, including the adoption of the new trading system as well as trading rules that are in-line with global standards.. As a result, overseas proprietary trading houses and other new market participants have entered the Exchange’s market.

Despite these positive developments, TOCOM has just managed to stop declines in trading volume, which began in fiscal 2004, by holding the line at 110,000 contracts per day (estimated) on average for fiscal 2010. Therefore the target of 150,000 contracts per day were not met and a recovery trend has yet to start.

While this can be partly explained by lower volatility in gold, the Exchange’s most traded contract, efforts were insufficient for turning trading volume upward as well as for compensating in declining trades due to Broker Member departures.

Having said that, open interest has recently recovered to the pre-Lehman crisis level, which  bottomed in May 2009. This represents a positive sign for future development.

2. Overview of Midterm Management Plan Rolling Updates

TOCOM has focused on improving  market capabilities by adopting  trading rules in line with global standards, as well as and other measures, and believes that its efforts will attract new market participants to the TOCOM market.

In order to step forward, the Exchange sets forth five strategic pillars in the new Midterm Management Plan for strengthening market mediation functions and prioritizing the attraction of a diverse set of new trading participants as follows:

(1) Market participants: Strengthen sales activities aimed at gaining a diverse set of market participants

(2) Listed commodities: Develop new contracts tailored to investor needs

(3) Market design: Further improve market convenience
 

(4) Business bases: Bolster the business base in ways that promote commodity market development

(5) Challenge against industry-wide image problems: Improve the image of the commodity futures industry

For details on the new Midterm Management Plan, please refer here.

Based on actual results for fiscal 2010, quantitative targets have been revised downward as shown below.

<Trading Volume Target (Average daily trading volume)>

After revision

Before revision

Fiscal 2011

140,000

200,000

Fiscal 2012

180,000*

230,000

Fiscal 2013

200,000*

-

* Figures for fiscal 2012 and 2013 anticipate an increase in trading volume due to the opening of soft commodity markets and include 10% year-on-year growth.

<Profit Target>

After revision

Before revision

Fiscal 2011

Achieve profitability*

Achieve profitability with ordinary income of 100 million yen or higher

Fiscal 2012

200 million yen or higher*

Achieve greater competitiveness and ordinary income of 500 million yen or higher

Fiscal 2013

600 million yen or higher*

-

* Consolidated ordinary income

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