Tokyo Commodity Exchange Inc. started farm futures trading Tuesday, taking over the operations of a smaller bourse as Japan moves to revitalize its raw materials markets through consolidation.
Tocom, as the exchange is known, listed corn, soybeans, raw sugar and “azuki” beans, expanding trade from industrial commodities and giving it control of more than 99 percent of raw materials trade on bourses in Japan.
The Tokyo Grain Exchange is poised to dissolve itself after passing its contracts to Tocom because of shrinking volume and losses.
Tocom, the world’s largest commodity bourse after the New York Mercantile Exchange until 2003, slumped to 12th and is headed for a fifth year of losses after Japan tightened rules to protect individual investors.
The Ministry of Economy, Trade and Industry recommended the exchange pursue an alliance with overseas bourses to arrest a slump that threatens the survival of raw materials trading in Japan.
“Adding agriculture futures will help boost trading volume on Tocom,” said Takaki Shigemoto, an analyst at research company JSC Corp. “The exchange must take additional steps to ensure its survival.”
President Tadashi Ezaki told reporters Tuesday the bourse aims to boost trading volume of farm futures to more than 10,000 contracts a day in the near future. Daily volume on the Tokyo Grain Exchange averaged 3,994 contracts last month.
Ezaki said in an interview Feb. 1 that Tocom is in talks with U.S. competitors to integrate trading systems and attract more participants from abroad. He declined to identify the bourses he has approached.
A possible partner may be CME Group Inc., which includes the Chicago and New York mercantile exchanges, or NYSE-Liffe, the derivatives arm of NYSE Euronext, according to Sadakazu Osaki, a research chief at Nomura Research Institute.
Besides agriculture futures, the exchange trades gold, silver, platinum, palladium, rubber, gasoline, kerosene, gas oil and crude oil.
Tocom’s daily volume averaged 138,736 lots in January, exceeding the break-even level of 120,000 lots for the bourse for the first time since September 2011, according to exchange spokesman Kosuke Araki.
The increase was led by trading in gold, with volume surging 25 percent to 1.28 million lots last month from a year earlier as a decline in the yen against the dollar attracted investors.
Tocom posted a ¥387 million operating loss in the six months that ended Sept. 30, following a ¥475 million loss in the fiscal year through March 2012. Trading volume tumbled to 25.5 million contracts last year from a peak of 87.3 million contracts in 2003.
There were seven commodity bourses in Japan as recently as 2005. Tighter regulation between 2004 and 2009 that was meant to protect individual investors from overaggressive sales tactics also reduced volume, cutting profitability.
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