Business / Financial Markets

Electricity futures trading kicks off in Japan with launch of Tokyo Commodity Exchange

JIJI

Electricity futures trading was launched on the Tokyo Commodity Exchange (TOCOM) on Tuesday, with the expectation it will help new power companies achieve stable management and thus facilitate competition in the nation’s electricity market.

The futures market got off to a quiet start with low trading volume, at a time when crude oil prices are surging in the wake of Saturday’s attacks on oil facilities in Saudi Arabia.

The day’s trading volume came to a total of 24 contracts, far below some 20,000 for Dubai crude oil futures.

The East Area Peakload electricity contract for October delivery fetched the first price of ¥10.9 per kilowatt-hour, lower than the standard price of ¥11 set in advance by TOCOM. It closed at ¥10.6, while no deal was done for the West Area October contract.

“Considering the situation in the wholesale market, the level of the closing price was appropriate,” an analyst at a think tank said.

“We’ll make efforts for the market’s healthy development as a means of hedging price volatility risks,” TOCOM President Takamichi Hamada said.

Price volatility has been a factor weighing on power industry newcomers, many of which do not maintain their own power-generating infrastructure and procure electricity from the wholesale market.

The listing of electricity futures contracts has been approved for three years on a trial basis by the industry and agriculture ministries. TOCOM hopes to expand trading volume and realize their permanent listing.

TOCOM, slated to become a wholly owned subsidiary of Japan Exchange Group Inc., or JPX, on Oct. 1, is also looking to list liquefied natural gas and other futures products as part of JPX’s plan to become a comprehensive market that offers trading services for energy and other commodity futures, as well as securities. TOCOM’s precious metals, including some other products, are set to be transferred to the Osaka Exchange, also owned by JPX.

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