Midterm Management Plan (Fiscal 2013-2015) March, 2013 Tokyo Commodity Exchange, Inc.
1 Management Objectives 2 Enhance the Exchange s function as industrial infrastructure by offering more active and diverse commodity markets, thereby striving to become a primary exchange with comprehensive commodity market in Asia Change the cost structure to ensure stable market operation [Business environment] Extensive product line including industrials, agricultural product & sugar Improvements being made in the situation surrounding comprehensive exchange Intensifying competition with other exchanges in Japan and overseas Risk money shifting between different markets
2 Basic Strategies 3 (1) Market Participants Strengthen sales efforts to attract a diverse set of market participants (2) Product Lineup Enhance the product portfolio (3) Market Design Further improve market convenience and reliability (4) Business Bases Bolster business base in ways that promote commodity market growth (5) Clearing Services Further develop and strengthen clearing functionality (6) Image Improvement Improve image on commodity futures trading Enhanced Corporate Value
3 Business Strategy 4 (1) Market Participants Attract new market intermediaries and General Clearing Participants Strengthen sales efforts to attract financial institutions operating globally, internet-based securities firms, etc. Attract new market participants Work more closely with existing members Increase trade volume of existing market participants Move forward with overseas marketing initiatives Bolster sales activities targeting retail / institutional investors, financial institutions and commercials Increase support for marketing efforts of existing Broker Members Increase support for efforts to improve the professional skills of sales representative Enhance follow-up initiatives for existing market participants
3 Business Strategy 5 (2) Product Lineup Revitalize existing commodity markets Redesign existing contracts to better suit needs of market participants Consider measures to revitalize options trading Revitalize products other than gold (i.e., oil, rubber, agricultural product & sugar) Develop new contracts Consider creating electricity and LNG futures markets Consider introducing international products listed jointly with exchanges overseas (e.g., crude oil) Continue research on LPG, coal, copper, and emissions trading
3 Business Strategy 6 (3) Market Design Improve infrastructure Improve trading convenience and reliability (including BCP) by improving trading and clearing systems Review various rules and procedures for market revitalization Take action to solve problems in tax and accounting rules in Japan that are related to commodity futures transactions Monitor markets in a manner appropriate for increasing diversity and sophistication of transactions (4) Business Bases Strengthen business bases Consider alliance with domestic and overseas exchanges to further grow the commodity market and enhance Exchange value Consider how to improve the trading system to pursue significant cost reductions to lower the breakeven point (in terms of trading volume) Improve the management system for more efficient group operation Prepare for the public offering of shares
3 Business Strategy 7 (5) Clearing Services Further develop and strengthen clearing functionality Respond to the global standard for risk management Introduce OTC clearing (6) Image Improvement Image Improvement Engage in educational activities to improve the image on commodity futures trading Offer donated courses at universities, etc.
[Reference] Fiscal 2013 Business Plan 8 1. Strengthen sales efforts to attract a diverse set of market participants (1) Attracting new market intermediaries (brokers) and General Clearing Participants Promote participation in TOCOM s markets of Broker Members and General Clearing Participants by increasing marketing to leading domestic and overseas financial institutions that have a customer base of overseas and professional investors. Increase market participation by retail investors through increased sales efforts that target internet-based securities and Forex brokers. (2) Attracting new market participants Overseas Move forward with overseas marketing initiatives, including regular events and the dissemination of exchange information to foreign proprietary trading firms, institutional investors, commercial players, etc. Address tax issues to facilitate the utilization of proximity services by foreign market participants. Discuss with foreign regulatory authorities (U.S., Hong Kong, Singapore, etc. ) permitting in each country for direct market access to the TOCOM market. Domestic Work with financial exchanges and Commodity Futures Transactions Operators to co-sponsor seminars for retail investors. Coordinate with investment trust companies and security companies toward the expansion of investment trusts, ETF, etc. that are linked to the listed products of the Exchange, in addition to the provision of support toward wider acceptance of investment trusts, ETF, etc. among investors. Strengthen sales activities targeting institutional investors, financial institutions, and commercial participants, etc. (3) Working more closely with existing members Promote educational programs for retail investors and commercial interests by co-hosting seminars with Broker Members and offering webinars. Work to incorporate the needs of Members by more closely sharing information. Increase support for efforts to improve the professional skills of sales representative. (4) Increasing trades of existing market participants Enhance follow-up initiatives through individual visits to market participants and other activities to boost the trading volumes.
[Reference] Fiscal 2013 Business Plan 9 2. Enhance the product portfolio (1) Revitalizing existing commodity markets Work towards redesigning other contracts to better suit the needs and convenience of market participants. Consider revamping the product design of options trading toward market revitalization. Strengthen efforts toward market revitalization of products other than gold (i.e., oil, rubber, agricultural product & sugar). Consider coordination with OTC transactions. (2) Developing new contracts Consider the introduction of electricity futures transactions in light of the ongoing discussion on the liberalization of electricity trade by the METI. Consider the introduction of LNG futures transactions in light of the discussion by the LNG futures market council. Consider introducing international products listed jointly with exchanges overseas (e.g., crude oil). Continue research on LPG, coal, copper, emissions trading, etc. 3. Further improve market convenience and reliability Improve trading convenience and reliability (including BCP) for market participants by improving the trading system. Review various regulations toward market revitalization. Smoothly complete the update of the clearing system (including the installation of the back-up site) scheduled in FY2013. Coordinate with regulatory authorities concerned to solve problems in tax and accounting rules in Japan that are related to commodity futures transactions. Monitor markets in a manner appropriate for increasing diversity and sophistication of transactions.
[Reference] Fiscal 2013 Business Plan 10 4. Bolster business base in ways that promote commodity market growth Consider alliance with domestic and overseas exchanges to further grow the commodity market and enhance Exchange value. Consider how to improve the trading system to pursue significant cost reductions to lower the breakeven point (in terms of trading volume). Improve the management system for more efficient group operation. Undertake internal controls and other preparations for an initial public offering. 5. Further develop and strengthen clearing functionality Consider the adoption of risk management that conforms with the global standard including the introduction of the emergency margin in order to strengthen credit risk management. Start the provision of clearing services for swap transactions for domestic oil products (OTC transactions). 6. Improve image on commodity futures trading Continue ongoing media initiatives, including those utilizing information technologies, to improve the image of commodity futures trading. Offer lectures at universities and other educational institutions to promote the commodity futures market.
11 Among TOCOM s plans, strategies and assessments published in this material, those which do not consist of historical facts are forward-looking outlooks based on currently available information, therefore they include a wide range of risks and elements of uncertainty. Consequently, the business results and other data that are to be published thereafter may, due to various factors including the aforementioned, differ subsequently from what have been written in this material.