The Thailand Futures Exchange (TFEX) is to launch US dollar futures on 5 June, allowing local investors to manage Thai baht exposures through the derivatives market.
TFEX and its 31 member companies received approval last week from the Thai Ministry of Finance to conduct currency-related transactions. The launch is intended to help market participants manage foreign exchange rate risk.
US dollar futures listed on TFEX will have four maturities, which are three nearest consecutive months plus the next quarterly month. One US dollar futures contract is worth US$1,000. The contract is cash-settled, so there is no need for physical delivery of US dollars on the expiration date.
Initially, investors must be Thai nationality or resident in Thailand. Thai residents will need to open trading accounts with one of the exchange’s member brokers or use their existing TFEX trading account if they already have one. Initial margin is less than 2% of contract value.
“This is the first time that Thai nationality and residents are able to trade currency futures without FX underlying thanks to the approval of the Finance Ministry, Bank of Thailand and Securities and Exchange Commission,” said Kesara Manchusree, managing director, TFEX. “It is also an opportunity for investors and business operators to use this financial tool to manage foreign exchanges more freely which will be useful in preparing the country for liberalisation of the financial and real sectors.”