Tokyo Commodity Exchange, Inc. (“TOCOM” or the “Exchange”) announced today that the Exchange has scheduled to introduce Remote Membership and Market Maker Program, to qualify proprietary trading firms as Members, and to increase position limit on investment trusts in October 2009. TOCOM aims to facilitate entry into the TOCOM markets by the potential new market participants including overseas commercial players and institutional investors as well as local and foreign proprietary trading firms.
In order to establish itself as a primary derivatives exchange in Asia, TOCOM has been driving forward various reforms to improve reliability and convenience of its markets. In May 2009, for example, the Exchange launched the new trading system with the highest level of performance such as the order response time of 10 milliseconds and started night sessions between 5:00PM and 11:00PM. In line with these efforts, TOCOM decided to implement the following measures:
- Remote Membership is to allow overseas entities to acquire a membership as ”Trade Member” for executing proprietary trading themselves without having to open an office in Japan. Previously, a foreign company that didn’t have a local office could trade on TOCOM only through a Broker Member.
- Market Maker Program is to have TOCOM-designated firms place both buy and sell orders in the market and make a market with other market participants. Market makers’ quotes will help liquidity grow and enhance probability of trades being executed.
- Qualifying Proprietary Trading Firms as “Members”: Proprietary trading firms, which engage in high-frequency trading, have been regarded as liquidity providers and contributed largely to the rapid growth of the derivatives markets. TOCOM’s membership has been limited mainly to the entities involved in the production, processing, or merchandising of a commodity, and also futures commission merchants, but now it will be open to the proprietary trading firms.
- Increasing Position Limit on Investment Trusts: TOCOM will create a new category for investment trusts and increase their position limit, which has previously been the same as that for individual investors. Together with the revision of the Investment Trust and Investment Corporation Act (Japan), which has enabled investment trusts to directly invest in the commodity futures markets, the increased position limit on investment trusts will encourage these entities actively set up mutual funds, such as ETF, investing in the TOCOM markets.
TOCOM tentatively plans to introduce the Remote Membership and to qualify proprietary trading firms as “Members” on October 8, but will decide the exact dates based on the approval from the Minister of Economy, Trade and Industry. As for the Market Maker Program, the Exchange is in the process of finalizing the schedule, while it plans to apply the increased position limit to the investment trusts on October 1.
With execution of the above measures, TOCOM aims to facilitate entry of domestic and global proprietary trading firms and institutional investors to its markets, and to increase new market participants through even more proactive sales and marketing efforts.
TOCOM is poised to continue carrying out reforms to enhance liquidity in order to achieve the goal of establishing itself as a prominent derivatives market in Asia.
