Bonds - Derivatives

Overview

Interest-rate derivatives comprise over 80 percent of global derivatives trading, an achievement that could eventually be expected of the South African interest-rate derivatives market. At R6 trillion, this is already the second largest OTC-traded market.

BESA has introduced a host of instruments, including bond futures, forward-rate agreements (FRAs), vanilla swaps and standard bond options. The flexibility in BESA's offering is significant because both the term and the instrument can be listed.

Why list derivatives on BESA?

• Issuers can tailor their instrument according to their requirements. The exact term of the derivative and the instrument can be listed on BESA
• Since these products are exchange-listed, they will fall under fund manager mandates
• Users can leverage off their balance sheets as in the OTC (over-the-counter) market, and all relationships will be governed by existing ISDA agreements or collateral
• Initial margins will be optional, depending on a client's credit standing. Variation margins will be governed by ISDA agreements or the collateral managers
• BESA evaluates derivative instruments independently of a zero swap curve - a methodology that has been accepted by the market and is of great value for users' risk management  
• BESA plans to manage the distribution of daily statistics, and the mark-to-market process independently