CME Group launches six new Japanese energy futures contracts

The derivatives marketplace CME Group today announced four new Japanese electricity futures contracts and two new LNG futures contracts will be available for trading on 8 February, 2021, pending regulatory review.

The addition of four new electricity futures contracts expand CME Group’s suite of global power futures and options and fill a gap in the Japanese electricity futures market, providing traders a platform for block-trade submission to CME Clearing.  The two new LNG contracts offer Japanese power producers an efficient tool to manage their price risk.

Izumi Kazuhara, CME Group Head of Japan said:

Izumi Kazuhara, CME Group

Izumi Kazuhara
Source: LinkedIn

The Japanese wholesale electricity market is now fully liberalized with hundreds of retail firms and producers, creating an opportunity for a more robust derivatives market alongside it. We are pleased to launch these new futures contracts that offer participants an efficient risk management tool. At the same time, the launch of the two new yen-denominated LNG contracts will be relevant for market participants who want to trade the spread between LNG and electricity futures.

CME Group

The four new electricity contracts are:

  • Japanese power (Day-Ahead) Tokyo base-load futures
  • Japanese power (Day-Ahead) Tokyo peak-load futures
  • Japanese power (Day-Ahead) Kansai base-load futures
  • Japanese power (Day-Ahead) Kansai peak-load futures.

The contracts are denominated in Japanese yen using the arithmetic average of the 30-minute Spot Market (Day-Ahead) prices published by the Japan Wholesale Power Exchange (JEPX) for the relevant region (Tokyo or Kansai) based on base/peak loads over the period defined by the contract.

The new LNG contracts will be settled in Japanese yen and include the Japan/Korea Market (Platts) futures and the Japan Crude Cocktail (Detailed) futures. The former is a financially-settled contract based on the DES Japan/Korea daily LNG marker (JKM) by Platts, while the latter is a financially settled contract based on the average price of nine custom-cleared crude oils reported by the Japan Ministry of Finance and Customs.

CME Group’s Japanese electricity and LNG futures contracts will be available on CME Globex, for submission for clearing through CME ClearPort and will be listed with and subject to the rules and regulations of NYMEX.

The company reported reaching average daily volume (ADV) of 19.1 million contracts during the year, 16.2 million contracts during the fourth quarter and 14.2 million contracts during the month of December. Earlier in the December CME Group announced its plans to launch Ether futures starting 8 February, 2021.

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