The Johannesburg Stock Exchange (JSE) has launched any-day expiry foreign exchange contracts on its derivatives market, allowing institutions to hedge their currency risk more accurately.
Using any-day expiry contracts, investors that trade a minimum of one million units (i.e. Â£1 million or US$1 million) of an underlying currency can pick the expiry date of their FX derivatives. Other contract specifications and fees will remain the same as existing currency derivatives products.
“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.
Geers added that the introduction of any-day expiry contracts will bring some of the benefits associated with the over-the-counter (OTC) derivatives market under a safer, exchange-traded environment.
“Many investors prefer using 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,” he added. “Products like the any-day expiry currency derivative demonstrates that the JSE is cognisant of the investor's needs for both flexibility and sound risk management. In line with international trends, the JSE is seeing a greater demand for customised derivatives products that are traded on-exchange.”
The JSE has reported that 20 million contracts worth 165 billion rand have been traded on its platform since 2008. Dollar-rand contracts currently account for more than 80% of total FX trading activity.
Meanwhile, multi-asset brokerage Newedge, has expanded its FIX connectivity network to include the JSE's derivatives markets. Newedge clients now have immediate access to contracts including FTSE/JSE Top 40 futures and a variety of agricultural futures.
“With the launch of the JSE gateway, Newedge now offers seamless FIX connectivity across listed-derivative exchanges on six continents and adds an important and liquid market to its global offer,” said Josef Jongkind, global head of advanced trading services origination, Newedge. “We are helping clients to certify their proprietary or third-party FIX-based platform for JSE connectivity.”