TOCOM to Reopen Gas Oil Futures Contract in May 2010
okyo Commodity Exchange (TOCOM) announced December 24, 2009 that the Exchange has decided to start working with concerned parties to reopen the gas oil futures contract on May 6, 2010.
The Exchange had been exploring the possibility to reopen the gas oil futures contract, but finally reached its decision following the Government Tax Commission’s announcement on December 22 on its policy towards a large tax revision package for the fiscal year 2010. The Commission declared that “For gas oil futures contract that are properly administered in accordance with the rules and regulations of commodity exchanges, including the clear identification of the gas oil delivery counterparties, we will take necessary measures, such as informing local governments, to make sure that the gas oil delivery tax is properly imposed.”
TOCOM listed the gas oil futures contract in September 2003 in order to serve the hedging needs of commercials, but suspended the contract In February 2006, because of its low level of liquidity.
Recently, there has been a great change in the environment surrounding the trading of gas oil in Japan, such as the expanded volatility of the crude oil price, the increase in gas oil exports and the introduction of market prices-linked formula in oil refiners’ new wholesale pricing. These changes have increased the necessity to use the futures market functions, such as price formation and hedging of price fluctuation risk, for commercials, paving the way for a growing need among these commercial players to re-open gas oil futures trading.
In order to serve such a need, TOCOM aims to re-design the gas oil contract so as to make a wider group of companies (such as distributors, users of gas oil, oil refiners, exclusive agents) able to participate in the delivery process, which will enhance market liquidity. At the same time, the Exchange intends to introduce the necessary measures to prevent the evasion of taxes imposed on gas oil. TOCOM will announce the new gas oil contract specifications once they are finalized.