TOCOM records first JKM futures trade in two years

The Tokyo Commodity Exchange recorded trades of the yen denominated Platts JKM futures on Aug. 16, the latest TOCOM data showed.

The previous time a trade was concluded for the JKM futures on TOCOM was on Aug. 5, 2022, when one lot was traded.

Total traded volumes reached 50 lots for the JKM November 2024 futures contract, the data showed. This is equivalent to 50,000 MMBtu.

The JKM futures traded at Yen 2,090/MMBtu at 10:08 am JST and Yen 2,110/MMBtu at 3:01 pm JST on Aug. 16, according to TOCOM's website.

Industry sources said it may have been a part of a spark spread trade with Japanese power.

On the same day, 20 lots of November East Area Baseload Electricity Futures were traded at Yen 15.55/kWh at 10:08 am JST.

The JKM futures trades could have been part of a spark spread, where traders trade the spread between electricity price and gas price, as the trade timings for the JKM Futures and East Area Baseload Electricity Futures were the same, according to a TOCOM official.

The spread between East Area Baseload Electricity Futures and LNG (Platts JKM) Futures was $2.078/MMBtu, or Yen 1.054/MMBtu with the assumption of $0.5/MMBtu of regasification cost and a fuel efficiency of 50%.

"The lot sizes for JKM and electricity futures on TOCOM are small, and they are also designed to trade spark spread," the TOCOM official said. "The volume of the spark spread is expected to increase as there is demand."

An LNG broker also noted that the small sizes of the contracts facilitate spark spread trades as it allows traders to trade with fewer risks involved.

The JKM futures was first listed on TOCOM on April 4, 2022(opens in a new tab). The futures represent the daily tradable price of spot LNG cargoes delivered into Northeast Asia.