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Johannesburg - The JSE has launched a new initiative on foreign currency contracts, namely the "Any Day Expiry".
"These new currency derivative contracts broaden the exchange's existing range of currency futures and options contracts, and allow investors the flexibility to pick the expiry date of the contract," the bourse said.
The introduction of this new currency product was in response to the wholesale market looking to hedge its currency risk with increased precision.
"This new contract meets the needs of certain clients, for example hedge fund managers working on a short-term currency strategy, or those in the import and export arena who would like to match exact expiry dates with those of the delivery of goods," said Warren Geers, general manager of derivatives trading at the JSE.
The contract was designed with wholesale investors in mind, with a minimum exposure of one million of the foreign underlying currency (for example, $1m or £1m).
Apart from the added flexibility of picking the expiry date, other contract specifications and fees remain the same as the existing currency derivative products, which expire on set quarterly close-out dates.
The local currency market was first established in 2007, but institutional investors and corporates only entered the market in 2008 after a special dispensation in that year's budget address.
Since then, 20 million contracts worth R165bn had been traded, Geer said.
Dollar-rand contracts made up more than 80% of the trading activity on the exchange, he added.
"An attraction of the JSE currency derivatives suite is that they require no foreign exchange clearance and are settled in rands.
"Local contracts also offer the reassurance of Reserve Bank and Financial Services Board regulation, and SA's five major banks as counterparties."
The JSE's clearing house (Safcom) acted as the central counterparty to all trades, and any counter-party risk was offset using a method known as margining.
"Many investors prefer using over-the-counter (OTC) derivatives because traditionally they are more flexible than their listed counterparts, but the reality is that they have a number of disadvantages, including counterparty risk and opaque pricing.
"Products like the Any Day Expiry currency derivative demonstrates that the JSE is cognisant of investors' needs for both flexibility and sound risk management," Geers noted.
In line with international trends, the JSE was seeing a greater demand for customised derivatives products that were traded on-exchange, he said.
"These new currency derivative contracts broaden the exchange's existing range of currency futures and options contracts, and allow investors the flexibility to pick the expiry date of the contract," the bourse said.
The introduction of this new currency product was in response to the wholesale market looking to hedge its currency risk with increased precision.
"This new contract meets the needs of certain clients, for example hedge fund managers working on a short-term currency strategy, or those in the import and export arena who would like to match exact expiry dates with those of the delivery of goods," said Warren Geers, general manager of derivatives trading at the JSE.
The contract was designed with wholesale investors in mind, with a minimum exposure of one million of the foreign underlying currency (for example, $1m or £1m).
Apart from the added flexibility of picking the expiry date, other contract specifications and fees remain the same as the existing currency derivative products, which expire on set quarterly close-out dates.
The local currency market was first established in 2007, but institutional investors and corporates only entered the market in 2008 after a special dispensation in that year's budget address.
Since then, 20 million contracts worth R165bn had been traded, Geer said.
Dollar-rand contracts made up more than 80% of the trading activity on the exchange, he added.
"An attraction of the JSE currency derivatives suite is that they require no foreign exchange clearance and are settled in rands.
"Local contracts also offer the reassurance of Reserve Bank and Financial Services Board regulation, and SA's five major banks as counterparties."
The JSE's clearing house (Safcom) acted as the central counterparty to all trades, and any counter-party risk was offset using a method known as margining.
"Many investors prefer using over-the-counter (OTC) derivatives because traditionally they are more flexible than their listed counterparts, but the reality is that they have a number of disadvantages, including counterparty risk and opaque pricing.
"Products like the Any Day Expiry currency derivative demonstrates that the JSE is cognisant of investors' needs for both flexibility and sound risk management," Geers noted.
In line with international trends, the JSE was seeing a greater demand for customised derivatives products that were traded on-exchange, he said.
