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  • 8.6.3-FUTURES MARKETS-TRADING, LIQUIDITY AND TURNOVER

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  • Trading, liquidity and turnover

     
     
    Trading is exclusively by dedicated computer screens linking the members (FCMs) into the TGE system. Trading is now continuous with the day session starting at 09.00 am and closing at 15.30 pm (Order entry starts at 08.30 am) and the night session running from 17.00 pm to 23.00 pm (order entry starts at 16.45 pm).

    Liquidity and turnover. Considering TGE started operations only in 1998, its turnover quickly rose to quite impressive levels: 4,293,422 arabica contracts and 427,466 robusta contracts during the calendar year 2004. On 28 December 2004 the open interest was 91,529 arabica contracts and 10,050 robusta contracts with the main interest coming from coffee importers, foreign exporters and speculative trading. Roasters have shown less interest, possibly because they see the futures market as mostly speculative in nature, not as a potential source of physicals in that they cannot know what origin or grade of coffee they might receive. This appears to be borne out by the small number of actual tenders.

    Arabica futures turnover reached a healthy 5,591,946 contracts in 2005 but was down to 1,669,181 contracts in 2006 with a year-end open interest of 195,214 contracts. Robusta futures turnover for 2006 was 256,596 contracts with a year-end open interest of 16,160 contracts.

    The sharp fall in the 2006 turnover is attributed to changes in Japanese legislation governing access to the trade in futures, and reduced speculative interest due to coffee’s relative price stability in 2006 compared to more volatile markets as oil and grains.Turnover in the arabica contract fell further in 2007 to 595,871 contracts whereas the robusta turnover was just 72,976 contracts.

    Turnover contraction has continued with, for example, in 2008 only 282,446 arabica contracts and just 11,197 robusta contracts changing hands. For the whole of 2010 the turnover in arabica contracts had fallen to just 50,526 contracts with a year-end open interest of only 2,390 contracts. Robusta turnover more or less disappeared with only 2,981 contracts traded in 2010 and no open interest at year-end.Because of generally declining trading activity and consequent losses the TGE Board announced late 2010 that agricultural futures trading would be transferred to the NASDAQ OMX platform of the Tokyo Commodity Exchange – the change took effect on 4 January 2011 although as of March 2011 the TGE website still provided all usual trading information.

    Updated 03/2011