Johannesburg - The value and volume of currency derivatives traded in South Africa has more than doubled this year, boosted by global market turbulence, stock exchange operator the JSE [JSE:JSE]
said on Monday.
The JSE said in a statement that 13.2 million currency derivative contracts were traded in the year to end-November, an increase of 103% from a year earlier.
The value of those contracts totalled R91.2bn, an increase of 117% the exchange said.
“The growth also indicates that investors are moving trades onto the regulated market as they are asked to improve their risk profile,” Warren Geers, general manager of derivatives trading and head of the currency derivatives at the JSE said.
“On-market instruments require no foreign exchange clearance and are settled in rand.”
Market players use currency derivatives such as forward contracts to their protect their exposure to volatility in foreign exchange markets.
The rand is a globally traded currency that is often seen as a proxy for risk sentiment.
It has moved widely this year as uncertainty about a deepening debt crisis in the euro zone and debt talks in the United States saw investors vacillate between taking on and dumping risky assets from week to week.
The rand is on track for its worst yearly performance since 2008, after hitting a 2-1/2 year low of 8.61 in November.
The JSE offers derivatives trade in the main currency pairs of the U.S. dollar/rand, euro/rand, pound/rand, Australian dollar/Rand and yen/rand, as well as other less liquid contracts such as the New Zealand dollar/rand and Botswana pula/rand contracts.
The JSE said the relaxation of exchange controls has allowed a wide group of clients to trade currency derivatives, including non-resident individuals and corporates, hedge funds, domestic financial service providers and collective investment schemes.