Trayport Exchange Systems Helps the J-Oil Exchange Add New Rack Fix, Float and Swap Contracts

Trayport(R) Exchange Systems announced March 17 the addition of new oil contracts for Rack Fix, Float and Swap to the J-Oil Exchange (JOX). Trayport supplies JOX with its GlobalVision Exchange Trading System(SM) and the contracts added have extended the number traded on JOX to 609.

JOX was established in 2001 as a market place in which traders could buy and sell physical spot (“dated”) and forward oil products and paper swaps. Based out of Singapore, it was set up as a new venture with approximately 40 trading companies, and around 80 traders. JOX offers different tiers of membership in terms of participation, and there are currently 29 active trading members covering almost all the main players in Japan, plus some with read-only trader access to prices on the exchange. The product portfolio includes gasoline, kerosene, gasoil, low sulphur additive oil, “A” class and high sulphur “C” fuel oil. These have delivery destinations of Chukyo, Ohnishi, Hanshine and East Japan.

Trayport Exchange Systems was able to complete the addition of the additional oil contracts in 7 working days to take the new Rack Fix and Float contracts (70 in total) from concept though implementation and testing to deployment. Trayport has worked with JOX since 2007 and the recent project was completed by Trayport’s team based in its Hong Kong regional office.

“We believe JOX’s model for offering domestic oil contracts electronically has been proven a successful one. JOX is the only forward contracts oil exchange using electronic trading and it is the only successful IT led oil business in Japan. Trayport’s help in achieving this has therefore been crucial,” said Kazunori Yamamoto, Chief Operating Officer of JOX and Corporate Executive Officer of Showa Shell Sekiyu KK. “Trayport’s GlobalVision Exchange Trading System represents a $1mn difference in potential revenue gains from our old system, which is a substantial benefit.”

For 2010, JOX wants to add more capability and in doing so increase membership above its 29 main members. These 29 members are the largest corporate trading companies in Japan. To increase membership further will mean JOX targeting small to medium size trading companies and wholesalers.

JOX is also starting to initiate links to clearing houses. JOX expects to see the first cleared transactions on its exchange from the third quarter 2010. Trayport is assisting JOX by building links to clearing systems and also by developing a system to offer bilateral position keeping, a necessity for those hedging physical oil forwards on JOX.

Jeremy Harris, VP for Asia Pacific at Trayport, said, “We looked carefully at how we could support JOX to produce a fully integrated front and back office system to allow the exchange to develop as it needs. Key features of the Trayport Exchange Trading System include its multi-asset class capabilities, the ability to support cleared and over-the-counter (OTC) markets, integration capabilities for straight through processing, flexibility and scalability. This provides JOX with the capacity to add new contracts and so increase membership numbers.

Mr. Harris concluded, “The introduction of clearing links for JOX is an exciting opportunity that will complement and strengthen JOX’s existing position as a significant player in the oil industry. We are proud to partner and assist JOX. Trayport’s Exchange Trading System has allowed JOX to continually adapt to meet the needs of its customers and markets in the largest domestic oil market in Asia. We look forward to continuing to work closely with JOX over coming years.”