Tokyo Commodity Exchange (TOCOM)
The Tokyo Commodity Exchange (TOCOM) is the largest commodity futures exchange in Japan. TOCOM started as the Tokyo Textile Exchange in 1951 and in 1984 merged with the Tokyo Rubber Exchange and the Tokyo Gold Exchange to form TOCOM. TOCOM accounted for around 70% of all commodity futures transactions in Japan in 2007. Market participants on TOCOM include individual speculators, overseas investment funds, commodity index funds, trading companies, proprietary trading firms and investment banks. With the trading hours extended until 4:00 a.m. for most contracts, trading opportunities have been expanded including arbitrage and spread trading between various products on global exchanges.
Futures contracts are continuously traded on TOCOM electronically through its Next Generation System (NGS) that was introduced in May 2009. This system was developed by OMX Technology and NTT Data.
TOCOM Next Generation System (NGS) Features
- Order response time: 10 milliseconds (latency)
- Continuous trading with opening auction before morning and evening trading sessions
- Extended trading hours until 4:00 a.m. for all contracts except rubber (7:00 p.m.)
- Expanded order types including spread trade functionality
- Expanded price fluctuation limits with circuit breaker
- VWAP (Volume Weighted Average Price) price settlement
- Fully automated order matching
- Expanded exchange trading volume capacity
- Wider market data dissemination
TOCOM Trading Hours
- Day Session: 9:00 a.m. to 3:30 p.m. (JST)
- Night Session: 5:00 p.m. to 4:00 a.m. (JST)
Pre-Market Opening Auction
There is an opening auction before trading begins for both the morning and evening trading sessions. Before the morning session opens, orders are accepted from 8:30 a.m. until 9:00 a.m. Before the evening session begins, orders are accepted from 4:45 p.m. until 5:00 p.m. At the beginning of trading for both sessions, all contracts will open at the price where the maximum number of orders can be executed. However, all orders are not guaranteed to be filled and any orders not filled will remain in the system as a FaS order (Fill and Store).
Circuit Breaker System
The circuit breaker system suspends trading when the matching price of buy and sell orders goes beyond the trigger level set by the exchange for the new clearing period. When the circuit breaker is triggered, trading will be halted for 5 minutes and orders will continue to be accepted but not executed. Trading will then resume with an expanded circuit breaker trigger level. The trigger level will be decided during the clearing time (3:30 p.m. to 5:00 p.m.) before the beginning of the night trading session and is based on the settlement price of the previous trading day. If the circuit breaker is triggered in the last 5 minutes of trading in the morning or night session then the session will end at the regular closing time. Circuit breaker trigger levels will be updated on the TOCOM website.
Most Liquid Contract Months
Unlike many overseas commodity futures exchanges, the most active contract month with the highest open interest on TOCOM futures contracts is usually the forward contract month and not the nearby month. This is popular with many market participants as they don't have to worry about near term expiry and delivery months.