Japan's largest commodity exchange Tokyo Commodity Exchange and Dubai Gold & Commodities Exchange plan to sign a memorandum of understanding in August 2006, TOCOM announced on Wednesday.

The two exchanges started discussions on collaborations in January this year as they trade similar commodities, TOCOM said. TOCOM trades gold, silver, platinum, palladium, aluminium, gasoline, kerosene, Dubai/Oman crude oil, and rubber, and DGCX gold, silver, and currency futures.

During a news conference held at TOCOM head office in Tokyo on Wednesday, TOCOM chairman Masaaki Nanagku said an alliance with DGCX will enhance recognition of TOCOM in the Middle East. He added that DGCX positions this alliance as a step forward to take a more active role as a bridge between Asian and European markets.

A senior TOCOM official Mitsuhiro Onozato added that TOCOM member traders will be able to perform arbitrage trade with DGCX, taking advantage of the time differences between the two exchanges. TOCOM's morning session ends at 0230 GMT when DGCX begins to trade, he said.

TOCOM was established in 1984. It stands fifth in the global ranking of commodity futures exchanges worldwide based on the contract turnover volumes in 2005. In the first half of 2006, the exchange saw a turnover of 36,118,889 contract trades, of which 34.2% were gold, 22% gasoline, 15.9% platinum, 14.2% rubber, 8% kerosene and the remaining 5.7% silver, crude oil, aluminium and palladium.

DGCX was founded in November 2005. Gold futures trading started in the same month and silver in March 2006. A total of 79,660 contracts of gold and silver futures were traded during May 2006, according to DGCX.