How To Improve The Trading Environment At The Japanese Exchange Group

Transcription

1 Summary of Midterm Management Plan (Fiscal ) March 2015 Tokyo Commodity Exchange, Inc.

2 Principle Management Strategies 1. Create a stable business model that is minimally impacted by external factors Creating a stable revenue stream minimally affected by external factors is a top priority. Market revitalization measures to increase trading volume for each product needs to be swiftly implemented. Take aggressive measures to develop a Gold Daily Futures,to be listed in fiscal 2015, to create adequate market liquidity at the early stage of its listing and create a new potential revenue source Position options as the next growth market. This includes review of gold options specifications prior to the use of the JPX next-generation derivative trading system. This could also include the commencement of oil and rubber options contracts Initiatives toward the creation of a comprehensive energy market Promote initiatives to establish a comprehensive energy market. This could include the creation of an electricity futures contract, in anticipation of the liberalization of retail electricity and gas markets. This could also include analysis of a liquefied natural gas (LNG) futures contract, which would be based on our experience in the OTC market. 3. Further coordination with other exchanges ⑴ Further coordination with the JPX The commencement of the joint use of the JPX next-generation derivative trading system in 2016 provides an opportunity to develop a one-stop trading environment for market participants and to strengthen ties with the Japan Exchange Group (JPX). ⑵ Further coordination with overseas exchanges

3 Priority Initiatives Initiatives to achieve revenue growth ⑴ Initiatives to increase trading volume 1 Attract a wide range of new market participants Implement measures to encourage retail investors to participate Attract new market intermediaries and General Clearing Participants Expand the investor base to include new investor groups Strengthen international sales efforts Develop and implement revitalization measures, based on the characteristics of each market, to expand trading volume from securities companies, institutional investors, commercials, etc. 2 Expand the product portfolio List new products List a Gold Daily Futures Contract (scheduled for May 7, 2015) Make preliminary analysis for the listing of TSR20 rubber Revitalize the options markets Change gold options to European style, cash-settled (same as Nikkei Average options) contracts in advance of installation of the next-generation trading system Discuss the possibility for options on oil and rubber 3 Further improve infrastructure and systems to enhance convenience and reliability Extension of trading hours Provision for longer contract months ⑵ Initiatives to increase the open interest size Increase the volume of hedging transactions by commercials Develop financial instruments whose underlying assets are listed commodities of the Exchange and increase the balance of such financial instruments ⑶ Create a strategic Exchange Fee structure 3

4 Priority Initiatives Reduction of system costs through joint use of the JPX next-generation system Significantly reduce system costs through the joint use of the JPX next-generation system from Continuation of cost-cutting efforts Consider cost reductions through the efficient use of human capital Strengthen PR to improve the recognition and perception of commodity futures trading Improve the recognition and perception of commodity futures transactions in coordination with other industry organizations Open a public facility for commodity futures (e.g. TOCOM Square) in coordination with other industry organizations. Provide information through seminars for retail investors, etc. and support the sales activities of commodity derivatives business operators Improve market convenience and reliability Respond to the tightening of risk management regulation Promote a better understanding of hedge accounting and taxation for commercial hedging Respond to the tightening of risk regulations by U.S. and European regulators

5 Priority Initiatives 5 Implement the following measures in anticipation of electricity and gas market liberalization 1. Preliminary analysis for the creation of an electricity market 2. Preparation for the creation of an LNG futures market 3. Research the listing of coal, liquefied petroleum gas (LPG), etc. 4. Strive to make the Japan OTC Exchange (JOE) markets more active Increase coordination with the JPX Increase coordination with the JPX as we approach the joint use of the JPX nextgeneration system from 2016 Strengthen exchange ties Strengthen coordination with exchanges in other countries

6 [Reference] Fiscal 2015 Business Plan Create a stable business model that is minimally impacted by external factors I. Initiatives for revenue growth 1. Initiatives to increase trading volume/position size (market revitalization) ⑴ Cross-market measures (Targeted to specific market participants) Take specific measures to attract a greater diversity and greater numbers of market participants (i.e., targeted marketing to retail investors, market intermediaries, foreign market participants, and commercials) 1 Activities targeting retail investors Encourage the participation of retail investors following revisions to solicitation regulations. In coordination with commodity derivatives business operators and industry organizations, such as the Japan Commodity Futures Industry Association and National Futures Protection Fund, use TOCOM Square as a PR facility to provide information on and to improve the recognition and perception of commodity futures trading. 2 Activities to attract new market intermediaries and General Clearing Participants For the purpose of enhancing the diversity and size of the Exchange s base of market participants and regarding as a turning point the commencement of the joint use of the JPX next-generation derivative trading system (hereinafter, the next-generation system ), take measures to attract new market intermediaries (securities companies, FX companies, etc.) and general clearing participants (clearing members) who will be new members acting on behalf of foreign investors and professional investors 3 Attract overseas market participants Strengthen sales activities to attract prospective overseas customers (proprietary trading firms, high frequency traders (HFTs), etc.) who are potential new providers of liquidity. This includes systemic incentives: direct market access (DMA), a market maker program and an incentive program. It also includes infrastructure improvements such as high-speed communication channels between data centers in Chicago and Tokyo. 4 Activities targeting financial institutions organizing ETFs/ETN Encourage financial institutions while strengthening coordination with the JPX 5 Increase trading volume with commercial participants Provide seminars for commercial participants using case examples to increase their understanding of hedge accounting and taxation 6 Support larger investors and commercial participants To attract investors and commercial participants that trade block orders, increase the volume of off-market trading by establishing a membership bulletin board ( TOCOM Window ) to improve convenience 6

7 [Reference] Fiscal 2015 Business Plan Create a stable business model that is minimally impacted by external factors ⑵ Market-specific measures Organize a cross-departmental project team to take specific market revitalization measures in the following markets: precious metals, oil market (including the Chukyo-Oil Market), rubber, and agricultural) ⑶ Other (mid- to-long-term matters) 1 Prepare for joint use of the JPX next-generation system Prepare for joint use of the JPX next-generation system from Coordinate with the JPX to provide members with accurate, timely information to ensure smooth transition 2 Preliminary analysis for the listing of TSR20 rubber Conduct preliminary analysis of product design, market needs, etc., for the listing of TSR20 at the time the next-generation system comes into use (currently scheduled in fiscal 2016/2H) 3 Efforts to revitalize options markets To prepare for commencement of the next-generation system, conduct interviews on the market design of gold options with the existing members and market participants of Nikkei Average options, who are the potential market participants. Conduct preparation for preliminary analysis on energy and rubber options markets to begin shortly after installation of the next-generation system through interviews with commercial companies. 4 Further improvement of infrastructure and systems to enhance convenience and reliability Determine the appropriate trading hours at the time the next-generation system becomes operational. Conduct research/preliminary analysis on longer-dates contracts, such as three years and five years in the oil and other markets 2. Construction of a strategic Exchange Fee structure II. Review the current Exchange Fee structure by product and conduct analysis from the strategic perspective toward the introduction of Exchange Fee structure that distinguishes differences in products/contract months, proprietary/customer transactions, etc. Continuation of ongoing cost-cutting efforts Further cost reduction efforts, including the efficient use of human capital within the Group III. Respond to the tightening of risk management regulation Respond to the global tightening of regulations on risk management by U.S. and European regulators 7

8 [Reference] Fiscal 2015 Business Plan 8 Initiatives toward the creation of a comprehensive energy market 1. Analyze the potential for an electricity futures contract Conduct preliminary analysis for the development of an electricity contract to coincide with the liberalization of the electricity market from fiscal 2016 Conduct research and analysis of business model of the electricity exchanges in foreign countries 2. Prepare to create an LNG futures market Prepare for the creation of an LNG futures market as the electricity market is liberalized 3. Research possible listing of futures on coal, liquefied petroleum gas (LPG), etc. Start research and analysis of thermal coal, LPG, bunker oil and other energy products 4. Endeavor to grow the JOE markets Support the OTC market to increase activity as a prerequisite for the creation of an LNG futures contract Increase coordination with other exchanges 1. Increased coordination with the JPX Increase coordination with the JPX prior to joint use of the JPX next-generation system from Strengthening coordination with exchanges in other countries