Second commodities exchange to open in March
JAKARTA (JP): Indonesia's second futures commodity exchange, the Jakarta Commodities Exchange (JACOM), expressed its optimism that it could start trading in March, although it had yet to receive the government's operation permit.
Head of JACOM's preparation team, Joko Prianto said on Monday that the exchange had to complete some legal requirements before appealing for an operation permit from the Commodities Exchange Supervisory Board (Bappebti).
"All of our technical requirements are as good as ready, there only remains some unfinished administration issues," Joko told reporters during a trading simulation session at JACOM.
The exchange plans to trade cocoa and rubber, and will become Indonesia's second futures commodity exchange after The Jakarta Futures Exchange (JFX) opened trading in December last year.
Joko said that the Ministry of Justice and Human Rights had yet to ratify the establishment of PT Bursa Komoditi Jakarta Raya, the company which would operate JACOM.
The Ministry of Justice's approval is a prerequisite for receiving Bappebti's operation permit, he explained.
"I am sure we can receive the ministry's approval by the end of February," he said.
Joko was confident JACOM would not follow JFX's fate, which had to postpone trading several times.
The JFX should have begun trading in March last year, but was unable to keep its schedule due to computer installation problems and incomplete operational requirements.
Joko said that the exchange's technical requirements like hardware, software and other facilities were almost complete.
"We cannot bring the computers to the trading floor now, because we fear they may get broken before we even start operating," Joko explained.
He said JACOM had invested some Rp 5 billion (about US$526,000) so far for the installment of computers, building costs, training and other needs.
"Our whole working capital is about Rp 10 billion," he added.
Joko also dismissed worries that JACOM would experience the same problem of low trading volumes similar to the JFX.
Since its opening, trading at the JFX has been virtually negligible, with a trading volume averaging less than 10 lots a day.
"I think reaching about 4,100 lots within the first month will be an easy target," Joko said.
He said the exchange was aiming to trade 4,100 lots of both cocoa and rubber in the first month of its operation.
Based on contracts for cocoa and rubber, he went on, each lot weighs five tons.
According to him, a kilogram of cocoa is worth between Rp 5,000 to Rp 8,000 at present.
"The wide price range allows for a high price fluctuation, from which traders can gain a lot," he explained.
He could not say how much a kilogram of rubber was worth.
Joko added that the planned exchange would use a trading floor and allow brokers to use vocal noises and hand signals in making a sale or in buying bids. The trading, with a vocal cry and hand signal are aimed at creating market activity, he said.
Under vocal and hand signal systems, brokers are allowed to state their bids or orders at an auction directly, or through hand signals.
According to Joko, traders will get more "emotionally" involved, thus encouraging higher transaction volumes.
During a simulation, traders wearing jackets of different colors, shouted and signaled their bids and offers to one another.
A spot on the trading floor, called the pit, is where brokers carry out a transaction by exchanging their order or bid forms.
After the closing of the auction, traders run to the clearing section to have their transactions registered and confirmed.
A computer then processes the transaction data, and displays price fluctuations on four monitors hanging over the pit.
"For each commodity, we have four 30 minute long trading sessions," Joko said.
During the first two sessions, JACOM registered a transaction volume of 609 lots. (bkm)