Tokyo Commodity Exchange: Rolling The Midterm Management Plan

Tokyo Commodity Exchange, Inc. has formulated its next Three-year Midterm Management Plan (April 2010–March 2013), starting from fiscal 2010.

Last year, TOCOM formulated a Three-year Midterm Management Plan covering fiscal 2009 through fiscal 2011. However, in order to respond speedily to changes in the business environment, we have adopted a rolling method in which we update our Three-year Midterm Management Plan every year. Consequently, we have revised the plan to reflect our business results in fiscal 2009 and the changes in the business environment surrounding TOCOM.

I. Fiscal 2009 Business Results

The downturn in trading volume at the beginning of the fiscal year was larger than expected, and our FY2009 full-year trading volume averaged 115,000 contracts per day (estimate), falling below our initial target of 150,000 contracts per day. Nonetheless, through our efforts mainly focused on developing our trading infrastructure, including the launch of the new trading platform, positive results gradually materialized as the downward trend in our trading volume, which had continued since fiscal 2004, came to a halt and a recovery trend emerged. In addition, by implementing measures including cost reductions, it is expected that our ordinary profit will be kept at a loss of 1.3 billion yen, as forecasted in the initial management plan.

II. Overview of the new Midterm Management Plan

Through our efforts in fiscal 2009, we believe that the trading environment improvements that have been put into place will help boost market liquidity. In the new plan, we firmly maintain our past basic strategies, and by actually translating past initiatives into increased market liquidity, we will aim to firmly establish the upward trend in our trading volume and to strengthen our competitiveness. 

An overview of the revisions made to each item is as follows. 

1. Analysis of current situation 
In fiscal 2009, major changes took place in the world, including a slow recovery from the credit contraction (reduced trading on OTC markets) resulting from the global financial crisis after the Lehman shock, and moves in the United States to strengthen financial market regulations. However, since these changes already had been factored into the analysis of the current situation, we essentially have left the analysis results in their present form.

 

2. Basic strategies

Although there have been changes in our surrounding environment, as mentioned above, given that those changes had already been taken into account in the current situation analysis and that our past efforts have gradually been producing results, we have left our basic strategies unchanged. 

3. Business strategies 

(1) Business strategy for trading infrastructure

In addition to revisions based on our past efforts that have already been completed, we have added the following items.
• Developing a linkage with OTC trading and commodity CFDs

In addition to financial markets such as those for ETFs and investment trusts, we will study the feasibility of a linkage with OTC trading and commodity CFDs.  

(2) Business strategy for listed commodities  

In addition to revisions based on our past efforts that have already been completed, we also have made the following revisions.
 

< Deleted items > 
• Consideration for listing of type A heavy fuel oil
Since we are planning to reopen gas oil futures trading and because type A heavy fuel oil accounts for a low percentage of the four oil products used in the market price-linked price determination formula, we have removed type A heavy fuel oil from the list of items for consideration.  

• Consideration for listing of commodity CFDs

Since we will introduce the Nikkei-TOCOM Commodity Index Futures Contract as contract day transaction, we believe the objectives of listing commodity CFDs have been achieved, and removed them from the list of items for consideration. In the future, we will consider contract day transaction as an option for market design.

< Added items >

• Consideration for listing commodities linked to OTC trading, commodity CFDs, and OTC clearing

We will conduct a study on linking the TOCOM markets to the OTC market through block trading, etc.

< Other revised items >

• Study on the feasibility of listing commodities such as LPG, LNG, coal, copper, and electricity
We had previously specified LPG, coal, copper, and electricity as products under consideration for listing. We have now grouped them together under a “study on feasibility of listing” item for consideration in the mid to long term. Furthermore, we have added LNG, for which there have been requests from commercials.  

 

(3) Business strategy for market participants

In order to translate the initiatives that we have implemented so far into an increase in market liquidity, we have decided to move forward with effective marketing activities tailored to the different types of market participants.  

< Other business strategies >
No changes made.

< Quantitative targets  >

Based on the results achieved in fiscal 2009, we have revised our numerical targets as follows.

 

< Trading Volume Targets > a(Average Daily Trading Volume)

	New Midterm Management Plan	Current Midterm Management Plan
FY2010	150,000 contracts *1	170,000 contracts
FY2011	200,000 contracts	200,000 contracts
FY2012	230,000 contracts *2	-
Note 1: The FY2010 Target is 150,000 contracts, but our goal in the second half of fiscal 2010 is to achieve 170,000 contracts. Note 2: With the FY2012 Target, our goal is 15% growth from the preceding year.

< Profit Targets >

	New Midterm Management Plan	Current Midterm Management Plan
FY2010	-	-
FY2011	Return to profitability with an ordinary profit of 100 million yen or more	Return to profitability by achieving an ordinary profit of 100 million yen
FY2012	Strengthen our competitiveness further with an ordinary profit of 500 million yen or more	-

* For details, please refer to “Midterm Management Plan (April 2010–March 2013).”