Tokyo Commodity Exchange can now give Hong Kong brokers direct access to trades

Tokyo Commodity Exchange encourages brokers to become remote members of its trading system after bourse secures SFC licence

PUBLISHED : Wednesday, 16 July, 2014, 2:21pm
UPDATED : Thursday, 17 July, 2014, 12:26am

The Tokyo Commodity Exchange (Tocom) has secured a licence from the Securities and Futures Commission (SFC) to let Hong Kong brokers have direct trading access to the bourse.

Takamichi Hamada, senior executive manager and chief operating officer of Tocom - which trades gold, rubber, soya bean and oil futures - said the exchange would encourage Hong Kong brokers to become remote members with direct access to its electronic trading system.

"Hong Kong is our market for expansion outside Japan, because we have seen a lot of orders come from Hong Kong brokers, who may trade for mainland and Western customers," he told the South China Morning Post in an exclusive interview.

"Since mainland Chinese are the largest consumers of commodity products, such as gold, rubber and soya beans, we believe the tie-up with Hong Kong would bring huge business opportunities for our exchange."

At present, 40 per cent of Tocom's turnover comes from overseas, with Hong Kong the largest source, accounting for 19 per cent of total turnover.

Of Tocom's international business, 47 per cent comes from Hong Kong, 24 per cent from the US, 20 per cent from Singapore and 6 per cent from Australia.

Hamada said Hong Kong brokers have had to trade through Japanese brokers in the past. But with an automated trading services licence, Tocom can now accept trades from Hong Kong-based remote members. Direct access would make trading cheaper and quicker for them.

Hamada said his bourse would neither compete with Hong Kong Exchanges and Clearing (HKEx) nor its subsidiary the London Metal Exchange (LME), but would cooperate with them as partners.

He and his team hosted a seminar yesterday afternoon at HKEx, speaking to more than 100 local brokers and commodity traders on the commodity market prospects for 2016-2020.

In September, Hamada said Tocom would help promote the LME in Japan.

"We are not competitors of HKEx or the LME, but we are partners. We may offer the same products, but that does not mean we are rivals. This is because if multiple exchanges are offering the same products, it allows arbitrage opportunities for investors and hence boosts turnover," Hamada said.

Tocom is the latest bourse to tie up with HKEx, after Singapore Exchange linked up with the HKEx data centre last week. From October, HKEx will cooperate in cross-border trading with the Shanghai Stock Exchange.

The Japanese bourse started direct access links with its counterparts in Dubai in 2012 and Singapore last month.

Sun Hung Kai Financial executive director Joseph Tong Tang said he did not think too many brokers in Hong Kong would be interested in direct trading in the Japanese commodity market.

"Many customers in Hong Kong have got used to trading in London or the US gold or oil markets. It will not be easy for them to change their habits," Tong said.