January 8th, 2010 by Tom Minney
An exchange that will be able to trade a basket of commodity and currencies derivatives for trading on its platform and could later add trading in debt and equity products is to start trading in Mauritius in March, according to an interview on Reuters.
The Global Board Of Trade Ltd. exchange (www.gbot.mu) was due to open this month, but is still waiting to build critical mass of brokers, aiming for 25-30.
In an interview, Joseph Bosco, the COO of GBOT, told Reuters that the regulators in Mauritius are processing four broker licences and anticipate another 12 in the pipeline. Trading is electronic and members can be anywhere in the globe, according to the website.
The main promoter is Financial Technologies (www.ftindia.com) company from India, listed on the National and Bombay Stock Exchanges.
Bosco says the market will help African firms and companies investing across Africa to hedge their risks in a continent which has experienced volatility. He says it will be a “multi-asset exchange that will be a gateway for Africa to the rest of the world”> According to the GBOT website, it is “strategically located at the crossroads of Africa and Asia” and “offers an ideal platform for global investors to access many of the world’s fastest growing economies… GBOT endeavours to introduce modern market mechanisms into Africa’s financial market ecosystem and to serve as a platform of choice for the global investing community.”
GBOT is licensed by the Financial Services Commission (FSC), the Regulator for non-bank financial services sector in Mauritius, for derivatives trading in commodities and currencies.
Bosco reportedly told Reuters that they intended to start with six dollar-based currency pairs – including Mauritius rupee, euro, yen and sterling – and are now adding the Kenyan and Ugandan shillings. The report says the exchange will trade in 14 commodities, including precious metals, base metals and agricultural commodities.
It expects to trade futures contracts in zinc, copper, aluminium, nickel, gold, silver, platinum, coffee, sugar and maize as well as crude oil and carbon credits. It looks to add options contracts in future.
Kenya was an example of price volatility in its currency and stock prices, including after disputed elections in 2007. Bosco said: “We are giving them risk containment mechanisms; we are helping them to hedge themselves against uncertainty or unforeseen circumstances”.
December 17th, 2009 by Tom Minney
South African investors can trade two of the best-known IT names through the listing of single stock futures (SSFs) on Microsoft (www.microsoft.com) and Google (www.google.com) on the JSE Limited (www.jse.co.za) on 11 December.
“The listing of SSFs on these two IT stocks, as well as the present SSF listing on Apple, will allow South African investors to further diversify their portfolios,” says Allan Thomson, Director of Derivatives Trading at the JSE.
Other International Derivatives (IDX) products trading on the JSE include “blue-chip companies” such as Berkshire Hathaway, Bank of America, Nokia, LVMH Moet Hennessy Louis Vuitton, BP, Vodafone and GlaxoSmithKline. Contracts are priced and settled in South African rand.
IDX listed on the JSE can be purchased through any JSE-registered broker in the same way as local derivatives products. This offers investors international exposure cost-effectively on a trusted trading platform with none of the counterparty risk associated with over-the-counter trading. Retail South African investors can trade in these 2 US companies without using their ZAR2 million foreign allowance but institutional investors have to comply with foreign portfolio regulations.
Microsoft Corporation is the world’s leading computer technology provider and largest manufacturer of software products. Its most profitable products are the Windows operating system and the Microsoft Office suite, according to the JSE press release. The company is headquartered in Redmond, Washington and is listed on NASDAQ.
Launched in 1996, Google Inc is a recent arrival but has taken the lead as the world’s most popular Internet search tool. The company derives the major portion of its revenue from advertising related to its Internet search, email, online mapping and social media services. Google has its headquarters in Mountain View, California and is listed on both NASDAQ and the London Stock Exchange.
October 12th, 2009 by Tom Minney
South Africa’s securities exchange, the JSE Ltd (www.jse.co.za), is offering trading in gold, platinum and sweet crude oil futures contracts on its commodities derivatives market, according to an official announcement on 12 October. Previously, only agricultural commodities were traded.
The JSE recently signed an agreement with the world’s largest derivatives marketplace, CME Group (www.cmegroup.com). This builds on the heritage of the Chicago Board of Trade, Chicago Mercantile Exchange and Nymex (www.nymex.com) and offers the world’s biggest platform to hedge risks, with trading floors in New York and Chicago and the CME GLOBEX electronic trading platform.
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. The underlying instrument is a contract traded on NYMEX or COMEX, giving extra liquidity.
Ashley Erasmus, Senior Commodities Trader at Nedbank Capital (www.nedbank.co.za), says: “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.”
Rod Gravelet-Blondin, Head of the Commodities Division at the JSE, adds: “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.” In February 2009, the JSE listed a Chicago corn contract. It plans to list more cash-settled commodities in 2010.
The JSE makes the contracts accessible to individuals by trading smaller lot sizes than those traded in the US. The minimum contract size for crude oil 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. Each gold and platinum contract size equates to 10 troy ounces and the minimum price movement is set at 100 South African cents per ounce. The gold contract expiry months are April, June, August and December and a minimum of two expiries are always available for trading. The contract for platinum expires in January, April, July and October with a minimum of two expiries always available for trade.
Gravelet-Blondin says: “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,” adds.
Nedbank, Standard Bank and Rand Merchant Bank will quote live rand prices for investors. Previously investors wishing to trade these derivatives or hedge exposures had to trade on foreign markets and were subject to exchange controls and limits. The futures contracts still count as overseas assets in terms of limits for pension funds and long-term insurance companies (20% foreign allocation limits) and asset managers and registered collective investment schemes (30%), according to the announcement.
The listing comes at a time when metals prices, including gold, are soaring. Many investors seek gold and other refuges in times of global economic crisis, including the weak dollar.
The JSE connects buyers and sellers in four financial markets: equities, equity derivatives, agricultural derivatives and interest rate instruments (Yield-X). It is in the world top 20 exchanges in terms of market capitalization.