The envisaged exchange must be a step forward in attracting funds from around the world to Japan's markets, thus helping to invigorate the economy.
It has become certain that Japan Exchange Group, Inc. (JPX), which has the Tokyo Stock Exchange and other services under its wing, will establish a "comprehensive exchange" in which it will handle the trading of various listed commodities.
In the world's major markets, comprehensive exchanges are mainstream. JPX, for its part, will be able to ready itself for global intermarket competition. Steady efforts should be made to realize the comprehensive exchange.
JPX's takeover bid for shares of the Tokyo Commodity Exchange, Inc. (TOCOM), which handles commodity futures, has been completed.
JPX has been offered 97 percent of all shares, and plans to buy all the remaining shares swiftly in the future.
JPX will make TOCOM its subsidiary, as of Oct. 1. In July next year, JPX is scheduled to transfer the trading of commodities handled by TOCOM, such as metals and agricultural products, to the Osaka Exchange, which JPX also operates, thus creating the country's first comprehensive exchange.
With TOCOM coming under the umbrella of JPX, it will be able to respond to diverse needs. As the number of trading participants both from home and abroad, including trading houses and institutional investors, will increase, the market is expected to be revitalized.
But the reality is that even JPX, Japan's largest operator of exchanges, compares poorly with major markets in countries in Europe and the United States or in Asia, in terms of size and functions.
Catch up with rivals overseas
In particular, Japan's commodity exchanges, including the futures market, lag far behind major markets in other countries.
The trading volume on global commodity markets has increased about eight times as much over the period between 2004 and 2017, but in the Japanese markets, it has fallen sharply to one-fifth of what it was.
Should Japan's commodity markets continue contracting, the establishment of appropriate market prices and the risk-hedge functions in commodities trading could be undermined.
To use the creation of the comprehensive exchange to invigorate trading, it is necessary to expand the kind of commodities to be traded. It is important to foster enriched markets, proportionate to the scale of the Japanese economy and its international status.
The bureaucratic sectionalism remaining among ministries and agencies, including the Financial Services Agency and the Economy, Trade and Industry Ministry, which supervise exchanges, is worrisome.
Because of this, commodities now being traded at the TOCOM market will be divided, with the trading of farm products to be transferred to the Osaka Exchange, and that of crude oil and petroleum products to remain at the TOCOM market. The merit of creating a comprehensive market could be reduced.
If the convenience of market participants is to be given more importance, shouldn't the commodity markets be integrated?
Besides JPX, there is also the Tokyo Financial Exchange, which handles foreign exchange contracts and interest rate futures. The Financial Services Agency and market officials concerned should expedite their efforts to solve the remaining issues, thus doing their utmost in realizing a market that can compete well globally.
(From The Yomiuri Shimbun, Sept. 30, 2019)
Read more from The Japan News at https://japannews.yomiuri.co.jp/
.png?w=600)
