 The JSE recently announced that it had extended its
licensing agreement with the world’s largest commodity
derivatives marketplace, the CME group, to offer South Africans the opportunity to trade rand-denominated platinum, gold, and crude oil futures.
JSE head of commodities
Rod Gravelet-Blondin told Mining Weekly at a media lunch that by extending the agreement the JSE had made exposure to gold, platinum and oil more
accessible to the “man in the street”.
“In South Africa, there has
always been a tremendous interest in these products and, for the first time, local investors interested
in taking advantage of the price movements of these metals are able to trade rand-denominated
gold, platinum and sweet crude oil futures contracts on the JSE’s commodities derivatives market.
“This marks a new focus for the JSE. Until now, only agricul-
tural commodities have been
offered by the exchange,” he
added.
“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.”
Gravelet-Blondin said that the products had been trading for about two months.
“During the past two months, our aim was to ensure that
people knew and understood these products. From here, our focus will be on gradually growing liquidity.”
Previously, investors would have had to trade these commodities on international markets, using their foreign exchange
allowance, and would have been subject to exchange control regu-
lations.
Now individuals and corporates have no limits in terms of trading the three commodities on the JSE. Gravelet-Blondin said that this made it easier for these investors to take advantage of the current
interest in these resources as
alternative hedging or diversification instruments.
However, pension funds and long-term insurance companies would still be subject to their 20% foreign allocation limits and asset managers and registered collective investment schemes would be subject to their 30% foreign allocation limits when trading these commodities.
Further, in terms of the agreement, the locally listed contracts would 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 was a contract traded
on the Nymex or Comex, investors had the added advantage of accessing highly liquid international markets through these rand-denominated contracts.
To make these contracts more attractive to individual investors, the JSE had based the contracts 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, with contracts expiring in February, June, August and December, while in New York the contract minimum is 1 000
barrels,” explained Gravelet-Blondin.
For gold and platinum, each contract size equates to 10 oz with the minimum price movement set at 100c/oz.
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 significant 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 use against the benchmark,” concluded Gravelet-Blondin.
In June 2008, the South African Reserve Bank granted the JSE
approval to trade futures and option contracts on Foreign Referenced Commodities, subject to certain conditions.
In February this year, the JSE listed a Chicago corn contract and expects to list additional
cash-settled commodities in the coming year.
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