JSE launches new range of African currency futures

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donnaOn 3 October 2014 the JSE launched the first currency futures which track the exchange rate between the Rand and another African currency.

The JSE listed three new currency futures contracts which track the exchange rate between the Rand and the Zambian Kwacha, Kenyan Shilling and Nigerian Naira. Currency futures allow investors as well as importers and exporters to protect themselves against the movement in the exchange rate through an agreement to buy or sell currency at a specified exchange rate at a specified date in the future.

“Nearly 30% of South African exports are destined for the rest of the continent and many companies listed on the JSE have expanded into other African markets over the past few years. The JSE believes this new range of currency pairs will help to strengthen these ties by providing South Africans with a means to mitigate their currency risk when trading with Zambia, Kenya and Nigeria,” says Donna Oosthuyse, Director: Capital Markets at the JSE.

The latest trade statistics from the South African Revenue Service (SARS) show trade flow between South Africa and Nigeria amounted to R34,4 billion between January and July this year. In the same period trade between South Africa and Kenya amounted to R4,6 billion and trade between South Africa and Zambia was valued at just less than R18 billion.

The new pairs will also give traders on the JSE the ability to get exposure to the exchange rate between the US Dollar and the Zambian, Kenyan and Nigerian currencies through trading synthetic cross currency pairs. For example, investors can get exposure to the exchange rate between the US Dollar and the Kenyan Shilling by trading both the currency future that tracks the exchange rate between the Kenyan Shilling and the Rand as well as the future that tracks the exchange between the US Dollar and the Rand. To promote cross-currency trading the JSE will only charge trading fees on the larger of these two trades.

About JSE

The Johannesburg Stock Exchange is based in South Africa where it has operated as a market place for the trading of financial products for 125 years. It connects buyers and sellers in equity, derivative and debt markets. The JSE is one of the top 20 exchanges in the world in terms of market capitalisation and is a member of the World Federation of Exchanges (WFE). The JSE offers a fully electronic, efficient, secure market with world class regulation, trading and clearing systems, settlement assurance and risk management. www.jse.co.za

About currency futures

A Currency Futures (CFs) Contract is an obligation to buy or sell an underlying currency at a fixed exchange rate at a specified date in the future. For example, a futures contract can give an investor the right to buy dollars at R10 per dollar at the end of December. One party to the agreement is obligated to buy (longs) the currency at a specified exchange rate and the other agrees to sell (shorts) it at the expiry date.

The underlying instrument of a currency future contract is the rate of exchange between one unit of foreign currency and the South African Rand. This means that the value of the futures contract moves up and down with this exchange rate – the level of the exchange rate determines the value of the futures contract. Currency futures contracts therefore allow participants to take a view on the movement of the exchange rate as well as hedge against currency risk. Currency futures are used as a trading, speculating and hedging tool by all interested participants.

Issued by:

Mari Blumenthal
H+K Strategies South Africa
Tel: +27 11 463 2198
Email: mari.blumenthal@hkstrategies.co.za

JSE contact:

Donna Oosthuyse
Director: Capital Markets
JSE Limited

JANUARY TO JULY 2014 (INCLUDING BLNS)
World Region Exports Imports
Africa R 167 895 520 712 R 80 742 161 799
Europe R 126 614 850 497 R 179 494 773 733
America R 51 694 278 028 R 61 692 221 889
Asia R 176 457 932 757 R 284 606 799 281
Oceania R 5 061 392 583 R 8 009 816 917
Other Unclassified R 32 056 444 797 R 1 490 906 472
Ship/Aircraft R 769 042 045
Total R 560 549 461 419 R 616 036 680 091
African Exports Divided by Total Exports 30%

 

SOUTH AFRICAN EXPORTS FOR JANUARY TO JULY 2014 (INCLUDING BLNS)
AFRICA
Section Section Description Kenya Nigeria Zambia
1 Live animals R 2 742 018 R 37 914 031 R 125 607 152
2 Vegetables R 117 964 679 R 360 639 461 R 262 556 314
3 Animal or vegetable fats R 948 042 R 1 638 291 R 197 151 636
4 Prepared foodstuffs R 215 159 184 R 417 900 638 R 896 199 992
5 Mineral Products R 258 451 434 R 68 154 677 R 1 313 199 453
6 Chemicals R 519 262 382 R 442 330 886 R 1 917 604 375
7 Plastics & Rubber R 210 131 717 R 1 031 194 472 R 1 221 939 634
8 Raw hides & leather R 2 033 211 R 1 628 784 R 16 521 311
9 Wood Products R 41 448 706 R 13 005 077 R 69 116 947
10 Wood pulp & paper R 132 656 897 R 208 967 317 R 293 633 634
11 Textiles R 71 461 900 R 48 610 175 R 281 544 233
12 Footwear R 7 885 284 R 5 667 041 R 75 430 696
13 Stone & Glass R 24 777 043 R 28 580 887 R 221 638 518
14 Precious Metal R 1 250 677 R 1 583 381 R 15 643 981
15 Products Iron & Steel R 1 507 939 328 R 916 827 196 R 2 394 381 620
16 Machinery R 549 923 725 R 1 207 855 525 R 4 721 544 012
17 Vehicles aircraft & vessels R 591 545 260 R 1 522 541 746 R 1 621 277 557
18 Photographic & medical equipment R 65 095 250 R 61 276 329 R 178 127 206
20 Toys & Sport apparel R 38 952 282 R 74 202 587 R 361 199 821
21 Works of art R 215 117 R 2 515 222 R 554 976
22 Other unclassified goods R 9 996 758 R 4 500 032 R 1 298 457
23 Equipment Components R 19 333
Total   R 4 369 840 894 R 6 457 533 755 R 16 186 190 858

 

SOUTH AFRICAN IMPORTS FOR JANUARY TO JULY 2014 (INCLUDING BLNS)
AFRICA
Section Section Description Kenya Nigeria Zambia
1 Live animals R 3 839 603 R 251 149 R 411 198
2 Vegetables R 61 893 540 R 13 798 571 R 202 636 655
3 Animal or vegetable fats R 15 588 R 231 511 R 541
4 Prepared foodstuffs R 1 839 640 R 6 030 120 R 129 545 228
5 Mineral Products R 9 718 350 R 27 812 402 602 R 13 020 436
6 Chemicals R 5 419 987 R 1 323 353 R 3 659 854
7 Plastics & Rubber R 7 973 523 R 19 655 917 R 2 450 660
8 Raw hides & leather R 1 780 428 R 70 000 R 13 837 655
9 Wood Products R 291 938 R 10 421 R 3 597 372
10 Wood pulp & paper R 2 719 269 R 358 909 R 217 568
11 Textiles R 1 434 483 R 1 797 091 R 178 026 363
12 Footwear R 1 857 111 R 16 482 089 R 16 171
13 Stone & Glass R 29 923 R 466 539 R 172 538
14 Precious Metal R 1 395 303 R 176 827 R 565 632
15 Products Iron & Steel R 16 109 924 R 41 154 600 R 961 200 620
16 Machinery R 96 979 113 R 10 106 152 R 324 856 190
17 Vehicles aircraft & vessels R 906 320 R 456 421 R 10 376 012
18 Photographic & medical equipment R 4 024 757 R 5 285 653 R 3 720 656
20 Toys & Sport apparel R 827 439 R 44 166 R 765 726
21 Works of art R 695 643 R 5 738 R 244 407
22 Other unclassified goods R 2 924 119 R 874 639 R 5 509 125
23 Equipment Components
Total   R 222 676 001 R 27 930 982 468 R 1 854 830 607
TOTAL IMPORTS AND EXPORTS R 4 592 516 895 R 34 388 516 223 R 18 041 021 465

 

What are currency futures?

A currency futures contract is a contract that allows market participants to trade the underlying exchange rate for a period of time in the future. Currency futures are agreements between two counterparties where one counterparty buys (longs) the underlying exchange rate and the other sells (shorts) the underlying exchange rate on a specified future date. The underlying instrument of a currency future contract is the rate of exchange between one unit of foreign currency and the South African Rand.

Currency futures are contracts that allow participants to take a view on the movement of the exchange rate as well as hedge against currency risk. Currency futures will be used as a trading, speculating and hedging tool by all interested participants.

https://www.jse.co.za/content/JSEBrochureItems/JSE%20Currency%20Futures%20-%20April%202014.pdf

 

From left to right is: The High Commissioner of Kenya, Mr Patrick Simuya Wamoto The High Commissioner of Nigeria, Mr Sonni Samuel Yusuf The High Commissioner of Zambia, Mr Muyeba Chikonde Director, Capital Markets, Johannesburg Stock Exchange, Donna Oosthyse
From left to right is: The High Commissioner of Kenya, Mr Patrick Simuya Wamoto
The High Commissioner of Nigeria, Mr Sonni Samuel Yusuf
The High Commissioner of Zambia, Mr Muyeba Chikonde
Director, Capital Markets, Johannesburg Stock Exchange, Donna Oosthyse