Currency trading: flip a coin

Posted by Financial Mail on 15 May 2014

By Stafford Thomas
CURRENCY trading is booming in SA, driven by rand jitters and the potential of super trading profits. "Currency futures are the JSE's fastest-growing sector," says Warren Geers, GM of the JSE's bonds and financial derivatives trading division. Since the JSE added the first currency future to its YieldX board in June 2007, growth has been exceptional, cumulative trading value reaching R500bn in early 2013 and R1 trillion just 12 months later. Futures available on YieldX cover eight currencies but the US dollar/rand contract dominates at 81% of value traded in 2013.

Geers says retail investors, ranging from day traders to those hedging offshore portfolios, have played a big role in the growth of YieldX currency futures, accounting for about 80% of trades by volume and 20% by value. The rise of the retail currency trader is not unique to SA. According to the European Commission (EC), retail traders accounted for 3,5% of all currency trading globally in 2013, a huge amount in a market where the EC says daily trade is as high as US$5,3 trillion.

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