TOCOM Announces Fiscal 2011 Business Plan
Tokyo Commodity Exchange (“TOCOM” or the “Exchange”) has announced today its Fiscal 2011 (April, 2011-March, 2012) Business Plan based on its new Midterm Management Plan (fiscal 2011-2013). An overview of the new Business Plan is provided below.
I. Management Policies
In fiscal 2011, emphasis will be placed on increasing the number and diversity of TOCOM market participants, particularly overseas and retail investors. The Exchange intends to achieve this by: 1) attracting new market intermediaries (i.e., brokers); 2) strengthening cooperation with existing Broker Members; and 3) developing new investment products for retail investors. With these initiatives, TOCOM aims to put trading volume on a firm growth trend.
In addition, we will pursue further cost reductions to lower the breakeven point (in terms of trading volume) and bring our operations into profitability (at the ordinary income level on a consolidated basis).
II. Business Strategy
1. Market participants
(1) Attracting new market intermediaries
+ Promote participation in the TOCOM markets of Broker Members and General Clearing Participants through increased sales efforts that target leading domestic and overseas financial institutions whose customer base include overseas and professional investors
+ Increase market participation by retail investors through increased sales efforts that target internet-based securities and Forex brokers
(2) Cooperating with existing Members
+ Promote educational programs for retail investors and potential commercial interests by co-hosting seminars with Broker Members and offering webinars.
+ Support marketing efforts of Broker Members by improving the Exchange website.
+ Work to incorporate the needs of Members by more closely sharing information
(3) Attracting new market participants
# Move forward with overseas marketing initiatives, including regular events and the dissemination of exchange information to foreign proprietary trading houses, funds, commercial interests, etc.
# Address tax issues to facilitate the utilization of co-location services by foreign market participants.
# Coordinate with foreign regulatory authorities (U.S., Hong Kong, etc. ) to expand direct market access
# Work with financial exchanges and Broker Members to co-sponsor seminars for retail investors.
# Strengthen sales activities targeting retail and institutional investors, financial institutions, and commercial participants.
(4) Increasing trades of existing market participants
+ Enhance follow-up initiatives through individual visits and other activities to boost the trading volumes of existing market participants.
2. Listed commodities
(1) Developing new investment products
+ Consider listing new types of investment products based on gold futures, the Exchange’s main contract, tailored to the needs of retail investors.
(2) Preparing to open agricultural commodities markets
+ Build relationships with agricultural commodity commercials, address system issues, and undertake other preparations to open soft commodities markets, with the cooperation of the Tokyo Grain Exchange, Inc.
(3) Redesigning contracts to suit the needs of market participants
+ Redesign the Nikkei-TOCOM Commodity Index futures contract.
+ Consider redesigning other contracts to better suit the needs and convenience of market participants.
(4) Researching emissions trading
+ Consider possibilities for establishing an emissions trading market together with the Tokyo Stock Exchange Group, Inc., based on an examination of the status of domestic emissions trading and other external factors.
(5) Building linkages between OTC and commodity CFD markets
+ Consider possibilities for building linkages between the OTC and commodity CFD markets
3. Trading environment
(1) I mproving trading convenience
+ Consider the adoption of TAS Trading.
+ Revise the give-up system to allow participants to carry out retroactive give-ups over certain periods.
(2) Maintaining stable trading system operations
+ Take necessary performance measures in light of system load circumstances and other factors.
+ Work with the Osaka Stock Exchange Co., Ltd. for the establishment of a backup center.
(3) Preparing for trading system upgrade
+ The license agreement for the current trading system is scheduled for renewal in 2014. It is necessary, therefore, to begin considering the selection of a future system and its operation.
(4) Strengthening clearing functions
+ Respond to the IOSCO’s CCP recommendations by working in unison with the Japan Commodity Clearing House Co., Ltd. to enhance clearing reliability. Also continue considerations of various clearing-related matters.
+ Consider adopting OTC clearing.
(5) Executing self-regulation operations
o Investigate and examine conditions with regard to members’ upholding of various laws and regulations, and the principle of fairness and equity in transactions, as necessary.
o Monitor markets in a manner appropriate for increasing diversity and sophistication of transactions.
4. Business bases
(1) Develop alliances with domestic and overseas exchanges
+ Consider possibilities for the development of ties with domestic and overseas exchanges to further growth of the commodity market and to enhance the Exchange’s value.
(2) Preparing for IPO
+ Undertake internal control (J-SOX) and other preparations for an initial public offering.
5. Improve industry-wide image
(1) Improving image for commodity futures market
+ Undertake ongoing initiatives employing various types of media to improve the image of the trading of commodity futures.
(2) Promoting educational programs and expertise
+ Promote the development of commodity futures professionals and support academic research in related fields by continuing to sponsor classes and lectures at the undergraduate and graduate levels.
+ Enhance expertise of sales representatives of brokers by offering study materials and conducting examinations
III. Quantitative Targets
1. Trading volume (Average trading volume per day)
1. Target an average daily trading volume of 150,000 contracts for the second half of fiscal 2011 (140,000 for the full year) based on anticipation of the impacts of new market participants, contract redesigns, and other initiatives.
+ Target profitability of ordinary income (income net of JCCH minority shareholder (shareholders other than the Exchange) interests).