Japan's oil futures market starts late and develops fast

Japan launched the Middle East oil futures in 2001, by virtue of the transparent trading environment, strict regulatory system, has developed into a more mature market in Asia. Unlike the United States and other countries, Japan's oil futures market accounts for many individual investors, which makes the market has a high degree of liquidity. Because of not using the dollar settlement, foreign investors are difficult to operate, which reduces the trouble of exchange rate settlement, but the internationalization of the market to form a constraint.

Japan's annual oil consumption is more than 250 million tons, more than 95% of which is imported, 80% of which comes from the Middle East.

Japan's oil futures market started late, until 1999, the Tokyo Industrial Products Exchange (TOCOM) before the launch of gasoline, kerosene futures trading business, the year's turnover amounted to 10.65 million and 3.62 million respectively. Japan quickly positioned oil trading as the exchange's future development strategy for the most important trading varieties, its gasoline and kerosene futures market has become a more successful futures market in Asia.

In 2001, the TOCOM child out of the Middle East oil futures trading, the contract to the Middle East oil trading as the underlying, the contract provisions for the 1,000 barrels / lot, the use of cash delivery, delivery and settlement price for the Platts energy market information report the month of Dubai and Oman daily oil trade price average.

Because the exchange to Asian crude oil traders to provide transparent price benchmarks and arbitrage tools, coupled with the Asia-Pacific region to use 70% of the oil from the Middle East, in the context of a good spot, TOCOM Middle East oil futures success. 2002, TOCOM gasoline futures traded 20.87 million lots, kerosene futures traded 10.48 million lots, the Middle East crude oil futures trading were 2.04 million lots.

TOCOM launched oil futures soon after the Central Japan Commodity Exchange also launched gasoline and kerosene futures, mainly to attract small and medium-sized investors, and trading is also very active.

In 2003, TOCOM launched diesel futures, which were discontinued in 2006 and reopened in 2010. In order to enhance the internationalization of the exchange, TOCOM established a new trading system and set up a night trading market with trading hours extended to 4 a.m., so that traders in London and New York can trade in the morning of local time.

With the increased transparency and convenience of TOCOM's oil futures market, Nippon Oil decided to become a TOCOM member, and other oil companies subsequently joined, and now all six major Japanese oil companies utilize the oil futures market to hedge their risks. Currently in the Japanese oil market, oil futures become an important pricing reference indicator.

In comparison with institutional investors such as trading companies, who use it for purposes such as hedging risks, speculative trading by individual investors in Japan accounts for the majority of the transactions, and it is difficult for foreign investors to operate artificially because it is not settled in dollars. On the other hand, the participation of individual investors in speculative trading makes the market more liquid and active, which is conducive to the participation of real investment companies, specialized investment companies, funds, etc., which aim at hedging risks.

Japan's oil futures market has developed rapidly through the reform of its rules and regulations and the improvement of its creditworthiness, convenience and operational efficiency. From the perspective of Japan's oil futures market development, there are three aspects of experience worth noting.

One is a transparent and open oil market. Japan's oil futures market has a good foundation for spot trading. Japan's oil futures listed before the oil spot market has been basically open, the oil companies can import oil, for oil futures operation to lay a good foundation.

Japan's information system is well developed, and can provide timely price changes in the domestic and foreign oil markets and other information of concern to Japanese nationals. Although settlement is in Japanese yen, which limits the participation of foreign merchants, the adoption of Platts Energy Market Information News as a benchmark provides a fair and transparent trading environment and fosters an active domestic market.

For historical and policy reasons, before the launch of oil futures, the Japanese oil market price had been monopolized by more than a dozen large oil companies, which had strongly opposed the launch of oil futures. But after the launch of the oil futures market, the futures market than the spot market greater volume, liquidity, marketability and fair and accurate prices, so that the oil companies think it is necessary to participate in the futures market to hedge the risk, thus breaking the monopoly of the big companies on oil prices.

The second is the complete and strict regulatory laws and regulations. Japan on the regulation of the futures market, there are many laws, such as the Securities and Exchange Act, the Investment Trust and Investment Corporation Act, the Banking Act, the Companies Act, the Foreign Securities Dealers Act, the Financial Instruments and Exchange Act, the Securities and Investment Consulting Restrictions Act, the Insurance Act, the Guaranteed Subsidiary Debt Trust Act, the Asset Liquidity Act, the Commercial Code, the Consumer Contracts Act, the Monopoly Prohibition Act, the Fair Trade Act, etc. In addition, there are more than 20 Cabinet Orders, and the Financial Services Act. In addition, there are more than 20 Cabinet Orders. Among them, the most closely related to futures trading is the Commodity Futures Trading Act, which has detailed provisions on exchanges, supervision, settlement, membership, etc., with a total of 375 articles and dozens of bylaws.

Thirdly, it adopts advanced trading system. Japan's exchanges have adopted the world's advanced new electronic trading method from the very beginning in gasoline, kerosene and crude oil futures trading. It is characterized by electronic operation and remote control, unlike the traditional manual trading method, and its hardware system has been aligned with major futures trading markets in Europe and the United States.