Monthly Report

Japan power futures trading volumes on EEX and TOCOM surge in H1 2024

July 30, 2024
Japan Power Futures
Japan power futures are traded on EEX and TOCOM.

Japan power futures transaction volume on both the European Energy Exchange (EEX) and the Tokyo Commodity Exchange (TOCOM) surged in the first half of this year compared to the same period last year according to the two exchanges’ operators.

EEX’s operator said Japan power futures “trading volumes surged 3.4x in the first half of 2024 compared to last year’s same period, with 28.9 TWh traded in just six months.” According to Japan Exchange Group (JPX), TOCOM’s owner, the total Japan power futures trading volume on TOCOM in the second quarter of 2024, i.e., between April and June 2024, was 397 GWh. That represents an approximately eightfold increase compared to the previous quarter.

TOCOM’s last quarter performance was also the second highest since the exchange started offering Japan power futures in 2019. The highest volume was recorded in the same April-June quarter of 2022 when, according to JPX, “hedging needs swelled against the backdrop of greater volatility in fuel prices following the Russian invasion of Ukraine.”

“The expansion of ‘market maker programs,’ in which designated market makers keep quoting reference prices, was successful and led to an increase in transactions over the summer months. Continued increase in transactions will be a challenge in the future,” said JPX about the performance.

Through the programs, market makers designated by TOCOM provide reference prices for other players by submitting both sell and buy orders. The exchange also increased the minimum quantity for orders to 20 lots from the previous five and narrowed the bid-ask spread from up to 0.8 to 3 yen to a uniform maximum of 0.5 yen.

While TOCOM’s traded volume has increased overall, it remains small compared to the volume traded on EEX. “Challenges remain in the volume of transactions. European Energy Exchange (EEX) has more than 90% market share in Japanese electricity futures,” said TOCOM about the situation.

TOCOM started offering Japan power futures on a trial basis in 2019 before adding them permanently to its offering in 2022. EEX entered the market in May 2020. Both companies offer Tokyo and Kansai area baseload and peakload futures. TOCOM, however, only offers weekly and monthly futures, while EEX also offers quarterly, seasonal, and annual. For the Tokyo area, EEX also offers daily and weekend futures.

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