Archive for the 'Derivatives' Category
August 2nd, 2010 by Tom Minney
Angola will have a securities exchange covering equities and other securities – including derivatives – in 2011, according to a report on the Angolan Press Agency. The report cites remarks by Finance Minister, Carlos Alberto Lopes who was speaking on 28 July in Luanda at a seminar on Insurance and Pension Funds.
The market will be called the Bolsa de Valores e Derivativos de Angola (BVDA).
Sr António Cruz Lima, Chairman of the Capital Market Installing Commission, said arrangements to set up the BVDA are far advanced. Next step being prepared is a shareholders’ general assembly to name the top structures of the exchange. The strategic plan for implementing the bourse is to be announced in September 2010, as will the launch date.
Sr. Cruz Lima said that legislation and other preparations, including human resource development and building technical and technological capacity are now far advanced. He added, according to the report: “There is little left for the BVDA to start, including legislation on investment funds and adjustments of the Capital Market Commission Decree to the new constitutional reality of the country. But I believe now it can be implemented.”
The market has been frequently flagged since 2006 and its launch has been delayed a few times. The story was covered in March, when we interviewed the former Finance Minister, José Pedro de Morais, Jr.
In April and May Imara Securities Angola’s chief executive, Anthony Lopes Pinto, started investment research and is distributing detailed reports to Imara clients and potential investors in the USA, UK and Western Europe.
June 23rd, 2010 by Tom Minney
South Africa’s full service securities exchange, the JSE Ltd (www.jse.co.za), on 17 May recorded 205,748 trades valued at more than R20 billion (US$2.6 billion). This coincided with the JSE’s equity futures “close out” when trades in derivatives called futures contracts had to be settled.
It is the first time in its 123-year history that more than 200,000 trades have been done in a day. On 7 May 2010 the previous record number of trades was 189,253.
According to a press release, Leanne Parsons, Head of Equities Trading at the JSE, explained: “This increased activity occurred on yesterday’s futures close-out as traders closed out their derivatives positions and purchased the underlying shares.”
Close-outs happen 4 times a year in March, June, September and December and usually bring a spike in trading activity.
A general rise in average daily trade numbers in 2010 also contributed to the record. According to the latest JSE monthly trading statistics published for May 2010, the number of equity trades is up by 24% year-on-year, from a total of 8.2 million trades in the first 5 months of 2009 to 10.1 million in the same period of 2010. There has been an average of 99,128 trades each day in the first 5 months of 2010, compared to average daily trade numbers of 46,216 (in 2007), 69,295 (2008) and 84,018 (in 2009).
On the JSE’s equity derivatives market, volumes of futures contracts traded rose nearly 7% during the first five months of 2010 on the previous period (2010: 51.3 million; 2009: 48.1 million). The number of futures contracts traded in May alone was 6.8 million. Allan Thomson, Head of Derivatives Trading, said in a press release: “This year-on-year growth is pleasing.” Trade in index futures increased 101% year-on-year off a low base.
The number of commodity futures contracts traded on the JSE’s commodity derivatives market increased by more than 8% in the first five months of 2010, compared with the same period in 2009 (2010: 662,000; 2009: 610,000). In the same period, volumes traded in commodity options have grown 27% year-on-year.
In the JSE’s interest rate market, cash bond volumes remain stable with volumes reported to the exchange in the month of May slightly below R1.4 trillion compared to R1.1 trillion in April. Year-to-date volumes also remain in the same range as 2009 with the 2010 reported trade number at R5.85 trillion compared to R5.83 trillion in 2009.
“Given the stable interest rate outlook and the continued issuance by National Treasury and state-owned enterprises there is no reason to anticipate any major market volatility with regard to price or volume movements. June and July will present some volume pressure due to the soccer world cup; however volumes should return to normal after the event,” commented Graham Smale, Director: Interest Rate Products.
Positive growth continues in the market for listed interest rate derivatives. Contracts traded during the 3 months ended May grew nearly 45% year-on-year, off a low base. “We will continue to focus on building a successful exchange-traded interest rate derivatives market,” added Smale.
The JSE connects buyers and sellers in 4 different financial markets: equities, equity derivatives, commodities derivatives and interest rate instruments. The JSE Ltd says it offers the investor a first-world trading environment, with world-class technology, surveillance and settlement in an emerging market context. It is amongst the world’s top 20 largest equities exchanges in terms of market capitalisation.
The JSE’s equity market has been particularly volatile recently in line with turbulent global markets. This volatility is represented in numeric form by the JSE’s South African Volatility Index (SAVI) which rose from a low of 18% in April to a high of 33% in May before subsiding to 26% by close of trade yesterday.
The JSE’s introduced a new billing model on 1 March 2010, which aims to incentivise increased trade and to recognise retail and algorithmic investors, both important target markets for the JSE.
Trading statistics for the 17/06/10
Volume 394,839,938
Value R20,839, 256K
Number of trades 205,748
Trading statistics for previous record number of trades 7/05/2010
Volume 1,018,433,885
Value R30,613,372K
Number of trades 189,253
March 16th, 2010 by Tom Minney
Sunil Benimadhu, Chief Executive Officer of the Stock Exchange of Mauritius:
The Mauritius market lost 50% in, as investors worried about the fallout of the global financial crisis, but then they realized our companies were not so badly affected, from March to December we had one of the best rebounds in 20 years, with an 80% gain. We have come back with a vengeance. Our economy was helped by swift reactions from our authorities including easing policies. We have had a volatile time, but it has also meant a shift to much more trading on the SEM.
Our exchange is trying to develop the “3 Ps” of exchanges – products, players and participants. We anticipate the players into African markets will only increase, as they realize that expected returns in the US and Europe are only 1% or 2% and need to get positive alpha. Beyond equity, we are trying to develop an active second market in debt instruments, and we are trying to move up the value chain and introduce derivatives, including an index derivative of the 7 most liquid stocks.
In the past Mauritius has been a base for funds investing into India and China, and we have traditionally been a business gateway between Africa and the East, whether for foreign direct investment or others. We are now changing our listing rules to allow more funds to list, including the global business sector,
We have already changed our rules to allow shorting on the Stock Exchange, including rules for stock borrowing. Institutions are realizing they can make money from their stocks and we are seeing more liquidity as people are able to trade more.
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.