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Patsystems signs contract for TGE continuous market

Tokyo Grain Exchange (TGE) to use Patsystems’ exchange technology to create continuous market for rice futures contracts

Patsystems, the global supplier of trading technology and exchange technology, has today signed a development contract with the Tokyo Grain Exchange (TGE) to provide the infrastructure for the first-ever continuous market for rice futures at the exchange.

The TGE will use Patsystems’ established exchange systems technology as the platform to integrate its existing session-style trading (which already employs Patsystems’ technology) with continuous trading. This solution includes Patsystems’ J-Trader front-end, an order management system and a matching engine.

The details are subject to a confidentiality agreement. However, the contract is expected to generate revenues of approximately £4 million over the next five years, including a substantial element of sourced hardware at a very small margin, and ongoing licence revenue for the use of J-Trader, based on the number of users. The licence revenue is likely to begin at the turn of the year 2005/2006.

The TGE Board of Directors selected Patsystems, in competition with other technology providers, on the strength and cost-efficiency of its solution. This award reinforces Patsystems’ reputation as the leading supplier of end-to-end technology in Japan; since 1996 it has provided four of the five Japanese electronic commodity exchanges (including the TGE) with its session-based trading technology.

Apart from being the first time that the TGE has provided a continuous market for futures trading, the contract has a provision for further development to integrate continuous and session markets from a single trading screen with a single clearing and settlement system. When implemented, this will be the first system in the world to accommodate both continuous and session-style trading on a single platform.

Commenting on the contract win, the CEO of Patsystems Kevin Ashby said: "This is a major award for us in Japan and we are truly honoured to have the opportunity to enhance our long-standing relationship with the TGE. I am confident that the exchange and its members will greatly benefit from the introduction of continuous trading in futures contracts, and from the opportunity to integrate session trading and continuous trading on the same platform at a later date."

Takao Morisane, Chairman of the Tokyo Grain Exchange said: "We are looking to develop a state of the art system that will have an open architecture to provide access to overseas participants through volume contributors such as ISVs (independent software vendors). We are thinking of launching the rice contract (currently under consideration) within a continuous market environment, and as a result we decided to select the proposal submitted by Patsystems. I firmly believe that Patsystems will meet our expectations in fulfilling its role. Through this new initiative we are expecting to be able to offer our members a more diverse environment and a wider range of products."