Tokyo Commodity Exchange

The Tokyo Commodity Exchange (TOCOM) is a commodities derivatives exchange located in Tokyo, Japan. Throughout its history, TOCOM has aimed to facilitate the trading of products that are based on the Commodity Derivates Act (the act that regulates any business around domestic commodities in Japan). This article discusses the best brokers for Tokyo Commodity Exchange trading, alongside its history, products and trading hours.

What Is The Tokyo Commodity Exchange?

The Tokyo Commodity Exchange Inc. (TOCOM), known locally as Tokyo Kogyoin Torihikijo (Commodity Exchange), is a commodities futures exchange in Tokyo, Japan. It is Japan’s largest and one of Asia’s most prominent commodities exchanges. Through the exchange, traders can purchase futures and options on a range of energy and Chukyo oil products. According to the 2020 annual report, the Tokyo Commodity Exchange received total revenues of over US$38 million.

The Japan Exchange Group (JPX) purchased the Tokyo Commodity Exchange (TOCOM), after which TOCOM was converted into a wholly-owned subsidiary of the JPX. Following this, many products were transferred to the Osaka Securities Exchange, another subsidiary of the JPX.tokyo commodity exchange 2021 trading guide

Brief History Of TOCOM

The Tokyo Commodity Exchange was established in 1984 as the result of the merger of three exchanges:

  • The Tokyo Textile Exchange (established in 1951)
  • The Tokyo Rubber Exchange (established in 1952)
  • The Tokyo Gold Exchange (established in 1982)

Initially, the Tokyo Commodity Exchange focussed on products like rubber, gold and silver. However, over the following decades, they broadened their range and added assets such as palladium, aluminium and crude oil.

In 2013, the Tokyo Commodity Exchange acquired the Tokyo Grain Exchange. Following this, they launched their Agricultural Product and Sugar Market, offering all the products previously traded on the Tokyo Grain Exchange.

In 2019, the Japan Exchange Group (JPX) put in an offer for TOCOM’s shares. The Tokyo Commodity Exchange was then converted into a subsidiary of the Japan Exchange Group, joining the Tokyo Stock Exchange (TSE) and Osaka Securities Exchange (OSE).

What Can You Trade On TOCOM?

Until recently, the Tokyo Commodity Exchange operated markets for metals, oil, rubber and agricultural commodities. Traders could purchase futures and options contracts on the following:

  • Gold
  • Corn
  • Silver
  • Azuki
  • Gasoline
  • Crude oil
  • Platinum
  • Kerosene
  • Soybeans
  • Palladium
  • Natural rubber

However, following the transition to the Japan Exchange Group (JPX), many of these commodities were transferred to the Osaka Securities Exchange (OSE), another exchange owned by JPX. Today, the Tokyo Commodity Exchange only offers trading on these products in the energy and Chukyo oil markets:

  • Gas oil
  • Gasoline
  • Kerosene
  • Dubai crude oil
  • Chukyo gasoline
  • Chukyo kerosene
  • East area baseload electricity
  • West area baseload electricity
  • East area peak load electricity
  • West area peak load electricity

What Are Futures & Options?

Through the Tokyo Commodity Exchange, traders purchase futures and options contracts for different products.

Futures and options are derivatives that both give investors the chance to make money or hedge current investments. An option gives the buyer the right to buy or sell an asset at a specific price within the life of the contract. With options, the buyer is not obligated to buy or sell the asset in question. Typically, buyers pay a premium for options contracts.

A futures contract operates in a similar way to an option, except that the buyer is obligated to buy or sell the asset by the expiration time of the contract. These are important for commodities like crude oil. The seller wants to lock a price in case market prices fall, while the buyer wants to lock in an acceptable price in case the market price soars by the time the crop is delivered.

Futures and options are both derivative forms of investment. This means that, until the contract is closed, the buyer does not have actual ownership of the underlying assets.

TOCOM Trading Platform

The Tokyo Commodity Exchange has been using an electronic trading platform since 2009 when they launched a platform based on the Nasdaq OMX technology.

In September 2016, the Tokyo Commodity Exchange started using the new J-Gate trading platform developed by the Japanese Exchange Group (JPX). This allowed seamless integration with the rest of the JPX Group’s trading systems. Over-the-counter (OTC) and physical contracts were added to the platform as well.

TOCOM CEO & Members

The Tokyo Commodity Exchange is spearheaded by the president and CEO, Takamichi Hamada. Beneath him, TOCOM has 80 members and 54 Futures Commission Merchant (FCM) members. As of 2010, the exchange has allowed foreign commodity brokers to trade in its markets through intermediaries. This expanded the opportunities for foreign investors to trade on TOCOM.

TOCOM Regulation

One of the features of the Tokyo Commodity Exchange is that it oversees its own regulation as a self-regulatory organization (SRO). The process for self-regulation and the establishment of a self-regulatory Committee (SRC) is set by the Financial Instruments and Exchange Act in Japan.

The self-regulating committee is required to be composed of outside directors. This is to ensure that there is no conflict of interest and the committee is independent of the trading, clearing and any other operations of the exchange.

The Tokyo Commodity Exchange’s self-regulatory committee covers the following areas: the examination of members qualifications, sanctions against members and examination of trades and trade practices.

TOCOM Trading Hours

The Tokyo Commodity Exchange operates two separate trading sessions per day during the week, with a break in between:

  • The day session for the Tokyo Commodity Exchange goes live at 08:45 and operates until 15:15 JST (GMT + 9). Orders are accepted from 08:00.
  • The night session then runs from 16:30 to 19:00 JST. Orders are accepted on the exchange from 16:00. The energy market closes at 17:30 JST.

The Tokyo Commodity Exchange is closed on Saturdays, Sundays and national holidays.

TOCOM Trading Calendar

The Tokyo Commodity Exchange has a busy calendar full of trading holidays. Below we have listed the key holidays, which generally stay the same from 2020 into 2021 and beyond.

  • New Year’s Day – January 1st-3rd
  • Coming of Age Day – January 11th
  • National Foundation Day – February 11th
  • Emperor’s Birthday – February 23rd
  • Vernal Equinox – March 20th
  • Showa Day – April 29th
  • Constitution Memorial Day – May 3rd
  • Greenery Day – May 4th
  • Children’s Day – May 5th
  • Marine Day- July 22nd
  • Sport’s Day – July 23rd
  • Mountain Day – August 8th (observed August 9th, 2021)
  • Respect for the Aged Day – September 20th
  • Autumnal Equinox – September 23rd
  • Culture Day – November 3rd
  • Labor Thanksgiving Day – November 23rd
  • New Year’s Eve – December 31st

Types Of Membership

The Tokyo Commodity Exchange offers a variety of different membership classes with different monthly membership fees:

  • Broker Members: JPY 60,000 per market division
  • Trade Members: JPY 50,000 per market division
  • Remote Broker Members: JPY 50,000 per market division
  • Remote Trade Member: JPY 50,000 per market division
  • Affiliate Member: JPY 10,000 per market division

Broker members of the Tokyo Commodity Exchange are granted direct access and voting rights. These are members who have been accredited with a Futures Commission Merchant license. General trade members are not allowed direct access but do have voting rights.tokyo commodity exchange tips and tricks

Margin Requirements

The Japan Commodities Clearing House (JCCH) is tasked with establishing the rules for margin requirements for Tokyo Commodity Exchange customers. Since 2011, the JCCH have used the same model developed by the Chicago Mercantile Exchange in 1988, the Standard Portfolio Analysis of Risk, or SPAN model. This uses grid simulation to calculate the likely loss in a set of derivative positions. This value is then set as the initial payable margin.

TOCOM Market Data

The Tokyo Commodity Exchange provides a wide variety of market data to clients and investors. This includes quotes for individual products, quotes for all products by trade date, quotes for all products by session, spread market data, periodic quotes for all products by trade date, trading volume and much more.

How To Trade On TOCOM

Want to start trading and speculating on products on the Tokyo Commodity Exchange? A great way to do this in the UK is to trade contracts for differences (CFDs) and options through UK brokers. This step-by-step guide will help you get started.

  1. Select A Broker: Before you begin trading products on the TOCOM, you need to select a broker. Key things to look out for when selecting the top broker for Tokyo Commodity Exchange trading are fees, customer service, platforms and product offerings. For a full guide, see here.
  2. Open An Account & Deposit Funds: Once you have found a broker, open an account and go through the appropriate verification steps. This could include proof of address and know-your-customer (KYC) verification. Once this is complete, deposit funds to the account.
  3. Research The Market: Go through all the appropriate market data and analyse it to try and spot assets you believe you could profit from. Make sure to take your time, you do not want to rush in and lose money on bad investments.
  4. Open A Position: When you have found the right product, open a position by purchasing a CFD, future or option contract.
  5. Monitor & Close Position: Monitor the market and check the value of your asset regularly. When the time is right, cash in your instrument and reap the rewards.

Trading Tips

Before you start trading, check out these tips to boost your profits:

  • Stay Up To Date: Staying up to date with news and announcements is key to trading on any exchange, and the Tokyo Commodity Exchange is no different. The news can indicate which way the value of a product is likely to go, giving key information before you make trades.
  • Demo Accounts: If your chosen broker offers it, a demo account is a great place to practise trading before you begin for real on the Tokyo Commodity Exchange. Demo accounts allow you to perfect your trading strategy without the risk of losing money, make the most of one if you can.
  • Keep Learning: Never stop learning new things. The best traders always do all they can to keep studying and learning new trading strategies and tips. Make sure you do the same and make use of the wealth of resources on sites such as YouTube.

Final Word On The Tokyo Commodity Exchange

The Tokyo Commodity Exchange is one of the largest exchanges of its kind. With a rich history in rubber and gold futures and many exciting products in the energy and Chukyo oil markets, the exchange is known all over the world. If you want to start trading products listed on the exchange, follow our tips and guide to get started.

FAQs

When Is TOCOM Open?

The Tokyo Commodity Exchange operates two sessions on weekdays. The first is from 08:45 to 15:15 JST and the second is from 16:30 to 19:00 JST.

Is TOCOM Closed On New Year’s?

Yes, TOCOM is closed over the New Year period. Refer to our list for the full range of holidays.

Can I Trade Rubber And Gold Futures On TOCOM?

Until recently you could. However, following joining the JPX, those commodities have transferred to the Osaka Securities Exchange. TOCOM now deals primarily with energy and Chukyo oil.

Is It Safe To Invest On TOCOM?

The Tokyo Commodity Exchange is a well respected and internationally known exchange that provides secure services to clients.

Can I Purchase Stocks On TOCOM?

No, you cannot purchase stocks on TOCOM. The exchange focuses on energy and Chukyo oil derivatives.

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