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TOCOM plans to launch yen-denominated LNG futures contract based on JKM in 2022 – S&P Global

Tokyo Commodity Exchange plans to launch a cash-settled LNG futures contract based in Yen, using the Platts JKM for settlement.

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The launch is targeted for the first quarter of fiscal year 2022-23 (April-March), TOCOM said July 28.

S&P Global Platts launched the JKM in February 2009. It represents the daily tradable price of spot LNG cargoes delivered into Northeast Asia. Platts launched daily Asian LNG derivatives assessments in June 2012.

Greater liquidity of LNG derivatives has further increased the visibility of the forward curve throughout the trading day. Market participants attributed the greater transactional liquidity to an increase in uncontracted LNG volumes, as well as a bigger need for forward risk management using financial instruments.

JKM derivatives cleared on financial exchanges in Q2, or the April-June period, rose 39% year on year to hit 236,789 lots, or about 46 million mt, according to data from the Intercontinental Exchange and Chicago Mercantile Exchange.

There has also been interest for greater transparency in derivatives pricing, with renewed activity in the Platts Market On Close assessment process in July.

Industry Association GIIGNL estimates that 35% of global LNG volumes were traded on a spot basis in 2020, compared with 27% in 2019.