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Meeting the Needs of Gold Investors Today

By Ryoichi Seki, General Manager, Global Business Development, TOCOM

Published on September 25, 2017

Ryoichi Seki is the General Manager of Global Business Development at the Tokyo Commodity Exchange (TOCOM). With over 20 years of experience at the exchange, Mr. Seki entered his current role as head of international activities in 2011. Mr Seki has led several teams in negotiating regulatory approvals around the world. He has also worked on numerous IT and systems-related projects and brought the to successful outcomes.

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Tokyo Commodity Exchange, Inc. (TOCOM) opened its gold market in 1982 and is the benchmark price for the region, while its platinum market, founded in 1984, serves a similar role. Ryoichi Seki looks at the recent launch of its rolling spot futures contract, and explains how the exchange is innovating to stay relevant in the current market.

Precious metals are the most active contracts on the Tokyo Commodity Exchange (TOCOM), Japan’s largest commodity futures exchange, representing 62% of exchange volume in the first half of 2017. Gold is the most active, comprising 43% of exchange volume. The Gold Standard (1 kg) contract is TOCOM’s flagship, comprising 26% of exchange volume in the first half of 2017, with an average daily volume of 24,348 lots – equivalent to 24 tonnes.

Japanese retail investors and major trading houses active both in Japan and overseas gold markets have contributed to the liquidity of the contracts offered. Japanese gold refineries also participate in the market as members. In addition, many international traders engage in arbitrage between TOCOM and other markets, including New York and London. Currently 55% of Gold Standard contract trading originates outside Japan.

While many new gold markets have opened in Asia in recent years, the TOCOM gold contract remains popular with investors from all over the world, and the exchange continues to innovate, which attracts participants from all over the world.

Expanding precious metals on offer

TOCOM has four physically delivered futures products – gold, silver, platinum and palladium – but it has been expanding the boundaries of the precious metals it offers (Figure 1).

To meet the demand for risk management and investment tools, gold options were introduced in 2004. The 1 kg, American-type contracts were revamped in September 2016 as 100 g, Europeantype contracts. To meet the needs of retail investors, TOCOM added mini and rolling spot contracts for gold and platinum. On top of these derivatives contracts, it began trading physical gold in 100 g and 1 kg quantities in July 2016. TOCOM’s gold market has evolved to include futures, options and physical trading, with a wide variety of hedging and trading opportunities.

Figure 1: Precious metals products offered by TOCOM

Items that meet purity standards will undergo the hallmarking procedures. Items that do not meet standards would then be investigated to determine if it is sub-standard. Fire assaying is an internationally accepted test method to determine the precious metal content present.

Rolling spot futures

Rolling Spot (“RS”) contracts were first introduced in May 2015 for gold and for platinum in March 2017. Unlike traditional futures, the RS contract has just one series that expires each business day. Open positions are automatically rolled to the next trading day. This feature allows participants to hold positions indefinitely, which facilitates longterm trading strategies.

Initially, Gold RS was well received by Japanese retail investors who needed a platform to execute such strategies. The participation of overseas investors made RS a successful contract for the exchange. It is now the second largest in open interest, and third in volume. Platinum RS is also experiencing similar success, with its open interest ranked fifth, just four-months after its launch (Figure 2).

The success of RS contracts is due the fact that they do not undermine existing contracts, but instead give investors additional liquidity. It also demonstrates that RS contracts address the market demand for new investment tools.

Figure 2: Participation in TOCOM rolling spot contracts

Handmarking, whereby articles are hand-struck with a metal punch and a hammer (Image 4), is the most traditional form of hallmarking. Today, laser marking is widespread, and is done using fine, high-powered laser beams (Image 5). This method can also be used to mark signatures and logos.

Expanding physical delivery mechanisms

In July 2017, TOCOM added Brink’s Japan as a designated warehouse, the first of its kind without a Japanese parent company. The addition of Brink’s increases flexibility, especially for international market participants.

At the same time, TOCOM introduced rule changes for physical delivery. In principle, deliveries require a warehouse receipt. TOCOM now allows using alternative delivery arrangements when both counterparts agree to the delivery terms. As such, participants can now choose book entry transfer, or can deliver bullion approved by other industry organisations, such as LBMA Good Delivery bars.

Figure 3: Physical delivery through book-entry transfer

Looking ahead

With current global developments focused on central clearing obligations on OTC products and the introduction of benchmarking regulations, the trend has been to develop and introduce new exchange-traded products that offer solutions to cope with regulatory changes facing the precious metals industry.

While TOCOM has a long history, it continues to innovate, and is introducing a new gold index and is working together with an ETF provider to list ETF/ETN contracts based on the index, targeting its products at pension funds. The exchange is also searching for ways to integrate fintech in its operations, as it hopes to continue to support the global trading community for years to come.

Ryoichi Seki is the General Manager of Global Business Development at the Tokyo Commodity Exchange (TOCOM). With over 20 years of experience at the exchange, Mr. Seki entered his current role as head of international activities in 2011. Mr Seki has led several teams in negotiating regulatory approvals around the world. He has also worked on numerous IT and systems-related projects and brought the to successful outcomes.

TOCOM Adopts Delivery by Physicals for Precious Metals Market

The Tokyo Commodity Exchange, Inc. (TOCOM) announced precious metals market rule changes for Declared Delivery and Customized Delivery. The new rules allow settlement through the delivery of bars instead of warehouse receipts if there is consent between buyer and seller. The updated rules took effect on 1 August 2017.

TOCOM had stipulated, as a general rule, that precious metals market futures must be settled by delivery of warehouse receipt from a TOCOM-approved warehouse for bullion that manufacturers refine and hold in their storage themselves. This rule controls and maintains the quality of deliverable goods in an open marketplace where anonymous participants can trade and conveniently distribute bullion. Recently, an increasing number of market participants, particularly those from abroad, requested that the Exchange permit settlement by the delivery of precious metal bars.

The adjustment defines the requirements for counterparties who wish to deliver through mutual consent. The updated rules substantially ease restrictions imposed on commercial participants and the financial institutions, which do not have warehouse receipt issuance qualifications, when they wish to deliver bullion on the TOCOM market. For example, a local precious metals processor may use gold bars purchased from an international vendor for delivery without having to have a warehouse receipt issued. Other participants may use bars purchased from an overseas financial institution for delivery by transferring ownership at a warehouse.

In conjunction with these rule changes, TOCOM has accepted Brink’s Japan Limited, a subsidiary of Brink’s Incorporated, as an approved warehouse operator, which will increase delivery options.

For more information, please visit:
http://www.tocom.or.jp/news/2017/20170802.html
http://www.brinks.com/en/public/brinks/tocom

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Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

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Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

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Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

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Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

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Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

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Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

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Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

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Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

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Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

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Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

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Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

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Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

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Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

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Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

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Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

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Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

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Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.