Johannesburg - In a week in which weak dollar and
inflation fears in the US continued to fuel demand for metals, and gold
reached record prices, local investors interested in taking advantage of the
price movements of these metals began trading rand-denominated gold,
platinum and sweet crude oil futures contracts for the first time on the
JSE's commodities derivatives market, the JSE said on Monday.
This marks a new focus for the JSE. Until now, only agricultural
commodities have been offered by the exchange.
"We are confident that trading will gain traction as more and more
investors realise that they can trade these highly traded commodities in an
easy and more affordable manner," commented Rod Gravelet-Blondin, Head of
the Commodities Division at the JSE.
Until now, investors would have had to trade these commodities on
international markets using their foreign exchange allowance and would have
been subject to exchange control regulations.
Now individuals and corporates have no limits in terms of trading these
three commodities on the JSE.
This makes it easier for these investors to take advantage of the
current interest in these resources as alternative hedging or
diversification instruments.
Pension funds and long-term insurance companies are however, subject to
their 20% foreign allocation limits and asset managers and registered
collective investment schemes are subject to their 30% foreign allocation
limits when trading these commodities, the JSE said.
In terms of a recent agreement signed with the world's largest
derivatives marketplace, CME Group, the locally listed contracts will be
cash-settled using benchmark gold settlement prices referenced from CME's
Comex division and platinum and crude oil prices from its Nymex division.
Given that the underlying instrument is a contract traded on the Nymex
or Comex, investors have the added advantage of accessing highly liquid
international markets via these rand-denominated contracts.
"The two metal commodities should interest local investors as South
Africa is the world's largest platinum producer and the third-largest gold
producer. The price of the commodities is generally linked to the prices of
mining stocks. The liquidity that the current market makers and any new ones
will bring to the market can only be beneficial to investors," said Ashley
Erasmus, Senior Commodities Trader at Nedbank Capital.
Standard Bank and Rand Merchant Bank will also be quoting live rand
prices for investors.
To make these contracts more attractive to individual investors, the JSE
has made the contracts based on smaller lot sizes than those traded on the
US markets.
"We have taken accessibility into account, for instance the minimum
contract size for crude oil on our market is 100 US barrels (15 898.73
litres) with contracts expiring in Feb, June, August and December, while in
New York the contract minimum is 1 000 barrels," explained Gravelet-Blondin.
For both gold and platinum, each contract size equates to 10 troy ounces
with the minimum price movement set at 100 South African cents per ounce.
The gold contract expiry months are April, June, August and December
with a minimum of two expiries always available for trade.
The contract for platinum expires in January, April, July and October
with a minimum of two expiries always available for trade.
"We are particularly excited about the opportunities that a crude oil
contract offers. Oil has a knock-on effect on all sectors of the economy.
Notably, as diesel is a major cost in farming, this will give our
agricultural market a tool to hedge a major input cost.
Organisations in the
transport and manufacturing sectors that use large quantities of fuel may
also want to hedge their energy usage against the benchmark," added
Gravelet-Blondin.
In June 2008, the South African Reserve Bank granted the JSE approval to
trade future and option contracts on Foreign Referenced Commodities, subject
to certain conditions.
In February this year, the JSE listed a Chicago corn contract and
anticipates listing additional cash- settled commodities in the coming year.
- I-Net Bridge