JSE improves market accessibility and liquidity in the mini-maize commodity derivatives market
JOHANNESBURG, 08 April 2015 – The JSE announced that it has successfully switched the 10 ton yellow- and white-maize (mini-maize) contract from physical settlement to a cash settled contract. This allows participants who are interested in trading in the underlying financial instrument, rather than the physical maize product, the ability to do so more easily and is aimed at improving liquidity in the mini-maize market.
“This latest move by the JSE allows a wider range of non-farming participants increased access and added security when trading in white and yellow maize futures contracts and options. It also invites increased liquidity into the overall market for the benefit of all participants,” says Chris Sturgess, Director of Commodities at the JSE.
Fund Managers whose mandates previously did not allow them to participate in contracts which carried a risk of physical settlement for the commodity, will now have an instrument where they can freely take out exposure in the white and yellow maize market. Higher levels of active involvement from retail investors and fund managers contribute to a more liquid market.
Those participants trading in the options market who wish to hedge out their delta exposure while trading the larger 100 ton (WMAZ and YMAZ) contracts can do so more efficiently in 10 ton increments. Meanwhile those market participants who are exposed to financing or hedging odd lots of the physical commodity will also be able to more efficiently hedge their exposure in these smaller increments.
In a bid to focus the liquidity in mini-maize contracts only five main hedging months will be available namely March, May, July, September and December. Liquidity will also be enhanced through a commitment by agricultural brokering house Farmwise Grains who will act as market makers quoting telephonic bids and offers for at least one of these months. Mr Woerie de Villiers, Director at Farmwise reassured their commitment by stating “ Farmwise is a founding member of the commodities market on the JSE and we believe we can add significant value by providing the important liquidity to get this contract to work.”
The newly introduced cash settlement mini-maize contracts will continue to reference the liquid 100 tons contracts for daily mark-to-market purposes as well as for the final cash settlement purposes.
The trading code applied to the mini maize contracts has specific reference to the Xhosa language. WNCI (for white maize) and YNCI (for yellow maize) were used as “nci nci” in Xhosa means small.
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
H+K Strategies South Africa
Tel: +27 11 463 2198
On behalf of:
Director of the Commodity Derivatives
Tel: + 27 11 520 7299