Trading Volumes Increase 30% MoM at Japan’s Commodity Exchange

Geo-political tensions have caused a knock-on effect on trading activity in the global commodities market. Tokyo Commodity Exchange saw strong

Japan’s main commodity trading venue, the Tokyo Commodity Exchange (TOCOM), saw a sharp rise in trading volumes across its range of commodity derivatives contracts. The Tokyo-based exchange benefited from a boost in activity coming on the back of uncertainty in the Middle East & Europe as problems in Iraq and Russia heighten.

Trading volumes were impressive in both energy and precious metals instruments at the venue. TOCOM reported its full metrics for September, its average daily trading volume was 92,040 contracts, up 30.4% from August’s figures. With TOCOM’s main commodities seeing higher volumes, gold increased 44.1% to 39,621 contracts, platinum increased 30.4% to 19,622 contracts, rubber was up 29.3% to 9,672 contracts and crude oil was up 24.7% to 3,360 contracts. The increase in volumes appears to be attributed to an increase in volatility.

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TOCOM’s gold prices were generally directionless during the month. Factors countering one another include declining New York gold prices, a stronger dollar, a weaker yen, expectations of higher interest rates and weak physical demand. Platinum prices slumped as production in South Africa resumed while demand from the Chinese and European automobile industries slowed.

Crude oil prices were range-bound throughout the month. There was some pressure on prices from concerns of slowing economies in Europe and China and from increased shale oil production in the United States. However, prices recovered in response to improved US economic indicators and the possibility of reduced oil production by OPEC.

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Prices of corn and soy beans fell on record harvest forecasts in the United States. Open interest at the end of September 2014 for all listed products totaled 378,825 contracts, an increase of 13,390 (3.67%) from the end of August.

Petra Kuraliova, a London-based trader, commented to Forex Magnates: “I’m currently Long Gold, however I can sense traders taking a modest view as we approach the end of the year. I think gold is being bullied by the current USD movements, we could be seeing figures drop below the 1150 mark (support levels).”

TOCOM recently expanded its offerings to cover the growing LNG derivatives market through a partnership with a Singapore-based entity to form the Japanese OTC Exchange, the move highlighted Japan’s role as a dominant participant in global energy markets. TOCOM offers a number of energy contracts including crude oil, natural gas and kerosene.

TOCOM is one of the world’s most advanced venues for electronic trading in commodity derivatives, the firm offers the CLICK trading platform, a solution that is provided by the NASDAQ OMX Group. The platform was deployed in 2009 to cater to the need of TOCOM’s international client base, CLICK offers sophisticated functionality including, order processing latency which is below 10 milliseconds on average, a fully-automated matching process and circuit breakers to manage hostile trading.

TOCOM is Japan’s largest and most liquid commodities trading venue, in its 2013 annual report, the exchange boasted 93.3% market share of Japan’s commodity market. The exchange was set up as a non-profit organization and regulates trading of futures contracts and option products of all commodities in Japan. The Tokyo Gold Exchange, the Tokyo Rubber Exchange, and the Tokyo Textile Exchange merged in 1984 to form TOCOM.

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