Tokyo Stock Exchange Group and Tokyo Commodity Exchange to establish joint venture for emissions trading

Tokyo Stock Exchange Group and Tokyo Commodity Exchange to establish joint venture for emissions trading

29/10/09

On October 29, 2009, Tokyo Stock Exchange Group, Inc. (TSE Group) and Tokyo Commodity Exchange, Inc. (TOCOM) reached an agreement to establish a joint venture in the future. The objective of the new company will be to set up an emissions trading exchange, in order to contribute to the reduction of greenhouse gases and facilitate emissions trading. Both parties had already signed a Memorandum of Understanding (MOU) on comprehensive mutual cooperation in January 2008.

In a bid to stop global warming, worldwide efforts are being made to reduce greenhouse gases. In Japan, achieving numerical targets agreed in the Kyoto Protocol and drafting post-Kyoto mid-term targets have become an important policy issue. In addition, the “experimental introduction of an integrated domestic market for emissions trading” began last autumn.

In light of this situation, while an expansion of emissions trading is foreseen in the future, the recent financial crisis has led to the re-acknowledgement of the importance of the features of an exchange such as high levels of liquidity and transparency as well as stable and reliable settlement.

Under such circumstances, the TSE Group and TOCOM concur that it is necessary to take concrete steps toward the establishment of an emissions trading exchange. The two parties have vast experience and expertise on forming effective markets and large participant bases in the course of operating their respective securities and commodities exchanges over the years. They agree that it is their social responsibility to jointly apply such knowledge and experience to the establishment of an emissions trading exchange.

In addition, both parties will work together to consider the design and rules for the emissions trading exchange. Last year, the Tokyo Stock Exchange (TSE), a market operator wholly-owned by the TSE Group, set up the “TSE Carbon Market Study Group” to examine practical issues required to establish a carbon market exchange with experts on emissions trading. The study group is scheduled to be re-launched soon as a study group jointly operated by both TSE and TOCOM. It will be a venue for discussions and examinations in more detail.

The joint venture company is also expected to gather opinions from concerned parties for carrying out studies in a wide ranging field related to emissions trading.