SAIFM Financial Markets Journal
The South African Financial Markets Journal
17th Edition May 2013
In this Edition . . . .
Volatility and Anomalies in the JSE Daily Returns Trans-Limpopo Arbitrage: Unlocking Value in Cross-border Differences
While the results vary across the three models, it was generally found that after allowing for risk to vary across the days of the week, anomalies exist in the JSE daily returns. More specifically, the JSE daily returns seem to exhibit significant positive returns early in the week and significantly negative returns later in the week. The relationship between risk and returns is contrary to the portfolio theory in later days of the week. . . . .read full article While the dark clouds of political anxiety threaten to eclipse the rising sun of economic opportunity in Zimbabwe, shrewd international investors have already commenced the march towards establishing footholds in the economy. The negativity surrounding the country as an investment destination has only allowed visionary entrepreneurs to bargain and thus acquire stakes on a discounted platter. . . . .read full article
JSE Exotic Can-Do Options: determining initial margins Liquidity Alliance Launched
Can-do options are bespoke option structures listed on Safex and Yield-X. The JSE is the first exchange in the world to list, trade and clear exotic options. The first exotic listed was a discrete look-back put spread with an averaging feature thrown in for spice. Since then the types of exotics traded grew in leaps and bounds with many of them being complex in nature. Can-Dos are now also listed on Yield-X with currencies as underlyers. This note will describe and explain current methodologies in pricing and determining initial margins for listed Can-Do exotic options  . . . . read full article The consequence of the Dodd-Frank Act, EMIR, CRD IV and other regulations will be to leave the financial services industry short of liquidity and collateral at a time when new capital rules make banks unwilling to lend. The Australian CSD ASX, Brazilian CSD Cetip, the ICSD and CSD Clearstream, Spanish CSD Iberclear and South African CSD Strate announced today that they have formed an association of industry peers which aims to create a sustainable international industry approach to address the global collateral crunch to be called the Liquidity Alliance . . . . read full article
Are we seeing the long anticipated structural break in oil prices? Twin Peaks
During March 2013, South African motorists paid approximately 22% more for fuel compared with a year ago. This implied an increase since March 2012 of R2.38 per litre for 95 octane (before the latest 55c reduction which became effective in April). The rand’s depreciation against the dollar is mostly to blame for this situation, but the oil price which had remained stubbornly high despite a struggling world economy (Europe is still in recession) of course also played a big role. . . . . read full article South Africa’s move to twin peaks was announced in National Treasury’s policy document A safer financial sector to serve South Africa better in February 2011. The policy document recognises that to support sustained economic growth and development, South Africa needs a safe and stable financial services sector that is accessible to all and sets out proposals to achieve this. The main proposal, which was adopted by Cabinet in July 2011, is to separate prudential and market conduct regulation and supervision i.e., to shift to the twin peaks model. . . . read full article
JSE Market Data Division expands its Indices offering Safcom achieves CPSS-IOSCO compliance
The JSE Market Data division is currently working on some key projects that will broaden the division’s service offering for example development of a structured market data roadmap. It is also looking to expand the live market data available from other JSE markets to the London point of presence – including equity, commodity, currency and fixed income derivatives. In addition, it is working with FTSE to expand its customised indices offering . . . .read full article Safcom, the clearing house for the South African exchange-traded derivatives market, became the first in the world to qualify for CPSS-IOSCO compliance. CPSS-IOSCO is a global standard for risk management aimed at any organisation enabling the part of a trade that occurs once an investor gives the “buy” command – clearing, settlement and recording of the transaction. The risk is that a party to a derivatives contract may default and fail to perform its contractual obligations, causing losses to one or more parties or a third party.. . . .read full article
The JSE currency derivatives market crosses R500 billion milestone How to invest in platinum
The Johannesburg Stock Exchange’s (JSE) currency derivatives market recently reached the R500 billion in total value traded milestone. This milestone is attributed to the division’s launch of new products to the market including the launch of Any Day Expiry contracts in 2011 in response to the wholesale market looking to hedge their currency risk with increased precision. . . .read full article While most precious stones and metals have always charmed people, not all have gained popularity as investment assets over the decades. Platinum is one that has. Platinum is considered valuable because the metal is rare and supply is restricted due to a complex extraction process. It also has many commercial applications. Only platinum's sister metal, palladium, has a similar ability. In addition, platinum jewellery’s appeal also continues to grow. There are various ways a South Africa investor can invest in platinum. . . .read full article
Consumer Financial education in South Africa Optimism bias and what it means for investors
Consumer education is also an important part of consumer protection and knowledge about the state of financial literacy among the population is essential for effective interventions. A recent baseline study on South Africa’s financial literacy brought to the surface revealing facts about South Africans’ financial knowledge and behaviour . . . . read full article Humans are hardwired to be optimistic rather than realistic. Essentially, this means that we underestimate the chance of bad things happening to us. What this optimism bias means for investments is that we are overly positive about the extent to which our investments will perform.  Strategies to overcome optimism bias are essential for a solid performance . . . . .read full article
Algorithmic Trading Orchestration
Algorithms form part of our everyday life and more importantly, when combined with a programming language, they become a powerful tool in order to get a machine to complete tasks. In terms of finance, a user will program a trading strategy and then back test it to analyse the statistical validity of the system. It will then be tested using walk forward analysis and then, once the system has been optimized, a user will test it with real money . . . .read full article The conductor of an orchestra steps in to create seamless synergy between all the individual instruments’ sounds. In the same way, a hedge fund creates different end results composed of spectrums of financial markets and instruments. The method to reach this end result is a hedge fund’s competitive advantage, which explains the secrecy involved in the methodology used . . . .read full article


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