Japan's leading commodities bourse hopes to boost dwindling turnover by extending trading hours from January, but the most noticeable result at first could be higher costs and increased burdens for smaller domestic brokers.
The Tokyo Commodity Exchange will extend trading in metals, energy and other contracts by two hours to 5:30 pm (0830 GMT) from January 7, bringing the end of the Tokyo day closer to the start of the London day.
Turnover on the exchange totalled 47.07 million contracts in 2007, down more than 25 percent from last year. The drop in Japanese commodity trade has come while the rest of the world has enjoyed a trading boom.
"TOCOM's trading hours will come close to London trading hours, but this doesn't necessarily mean that volume will rise in line with the extended trading time," said Shuji Sugata, manager at Mitsubishi Corp Futures and Securities. "We really cannot tell now whether participation from overseas will increase, or whether more domestic players will help push up turnover."
Hindered by a poor image because of past cases of high-pressure sales tactics, commodity markets in Japan have seen their turnover fall steadily since such sales practices were outlawed in May 2005. Of Japan's four exchanges that specialise in commodities, TOCOM has more than 70 percent of the total turnover. TOCOM lists futures contracts on items such as crude oil, gasoline, gold, platinum and rubber.
TOCOM is hopeful that the longer trading hours will attract more investors, especially from overseas, in metals, rubber and energy, although it has not set any turnover targets, exchange officials said.
"We really cannot make any estimate about the volume and it's inappropriate, but we'll try our best in raising the volume," TOCOM Chairman Masaaki Nangaku said earlier this month.
Many traders see the longer trading hours placing a greater burden on smaller brokers, with no guaranteed pay-off. "For small- and mid-sized brokerages, there will be more demerits than merits because the extension will force them to hire more people," a senior trader at a Japanese trading house said.
The longer hours could encourage more trading from Europe and elsewhere in Asia, some traders said, and international precious metals traders were watching with interest.
Precious metals futures - gold, platinum, silver and palladium - account for about 60 percent of TOCOM's overall volume. As a next step, TOCOM plans to extend its hours further to 11 pm (1400 GMT) by March 2009 and upgrade its trading systems. By September 2009 it aims to start round-the-clock trade.