Twenty years of evolution and innovation for JSE's Commodity Derivatives Market
Johannesburg, 24 June 2015: The Johannesburg Stock Exchange is celebrating the 20th anniversary of its Commodity Derivatives Market.
Chris Sturgess, head of this market comments: “This is a tremendous milestone for the JSE. Over the past twenty years we have been steadily focused on launching derivative products, both local and international, that help participants manage price risk and volatility in the agricultural, metals and energy markets.”
In its early days, the Commodity Derivatives Market was an agri-focussed product house, and a member of the South African Futures Exchange (SAFEX). It launched trading on Monday 31 July 1995 with a chilled beef carcass contract and grain and oilseed forward contracts. A cash-settled potato contract was added shortly thereafter.
Sturgess reflects that it was the introduction of white and yellow maize contracts in 1996 that truly established the credibility of this specialist market. “The white and yellow maize contracts remain flagship products among our deliverable grain contracts, and we now have bread milling wheat and soya bean contracts which are also actively traded.”
In 2001, SAFEX was bought by the JSE, and today is a fully integrated and critical part of the diversified business of the Johannesburg Stock Exchange.
In 2009 the JSE entered into an agreement with CME Group to licence CME’s benchmark cash-settled corn futures. Over time this agreement has been significantly extended to include various derivatives on both soft and hard commodities, including instruments in the energy market.
In 2014, in partnership with the Lusaka Stock Exchange (LuSE) and Zambian Agricultural Commodity Exchange (ZAMACE), the Commodity Derivatives Market extended its range of instruments to include Zambian deliverable white maize, wheat and soya, all traded and settled in USD. These are expected to be implemented this year.
Earlier in 2015 the exchange signed a licensing agreement with Euronext, kicking off with the flagship cash-settled milling wheat contract, which gives JSE market participants easy access to the European wheat market.
The latest development is a commodity index that will offer investors exposure to a basket of precious metals including gold and platinum.
In its 20th anniversary year, the Commodity Derivatives Market continues to set new records, with February 2015 reporting a record month for number of trades, at 396,012 contracts; and a record month for trade value of R75 billion.
After 20 years, there are now seven deliverable grain contracts, and in the cash-settled commodity contracts segment, there are three energy contracts, five metals products and six soft commodity products. Furthermore there are 14 global commodity products available as Quanto Futures, a product that simplifies trading the specific commodity as any cross currency influences are removed.
Looking ahead, Sturgess says: “The exchange would like to continue strengthening participation from underlying hedgers in the commodity sector - for example, participants which are exposed to fluctuating diesel prices but have traditionally not had access to exchange traded products in order to manage their price risk management strategy.”
Sturgess comments: “As markets evolve and regulation changes, so we must adapt to the underlying market conditions to present the most efficient hedging platform around. Our objective remains clear – to partner with our stakeholders in order to be the premier commodity derivatives platform in the region in terms of commodity products and price discovery.”
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) and Association of Futures Markets (AFM). 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
Director: Commodities & Key Client Management
+27 11 520 7299