JSE expands foreign-referenced commodities range with introduction of Quanto

July 24, 2012

Johannesburg, 23 July 2012: The Johannesburg Stock Exchange (JSE) has further expanded its foreign referenced commodities product range with the introduction of Quanto Futures, which enable investors to gain exposure to price fluctuations in the foreign commodity while shielding them from movements in the ZARand:USDollar exchange rate.

The exchange has partnered with Rand Merchant Bank (RMB), as the initial market maker, with Brent crude, gold and copper being the initial commodities to be referenced as part of the JSE’s existing licensing agreement with the CME Group. Quanto Futures will open for trading on 25 July 2012.

A Quanto Future is a rand denominated commodity investment product that delivers the same payoff as a pure dollar denominated commodity investment, allowing investors immunity from exchange rate fluctuations between the rand and dollar.

Currently, South African investors often don’t receive the full benefit of commodity price movements due to the influence of the exchange rate on the dollar denominated product. It is possible through the use currency futures to remove this influence however with the introduction of Quanto Futures things are made simpler for the investor since through a single trade the payoff, although still in rand, will track the international commodity market.

Chris Sturgess, Director of the Commodities Division at the JSE says, “The JSE is excited to offer derivative market participants this additional choice of energy and metal products in the form of Quanto Futures, yet another innovative product offered by the JSE making it that much simpler for local investors to gain access to the international commodities markets. ”

A Quanto product can be understood as follows: if the price of a commodity, say Brent Crude, increases by 20% in Dollar terms, then the value of the investor’s Rand position in Brent Crude (via the Quanto product) will also increase by 20%. The movement of the Rand relative to the Dollar plays no part in determining the investor’s return.

Head of Metals and Energy Trading at RMB’s Global Markets Division, Ettienne van Wyk, says “The introduction of Quanto Futures as an asset class on the JSE represents an invaluable addition to the commodity investors’ arsenal. RMB is proud to have played a pioneering role in bringing this ground-breaking product to the market.”
JSE Limited
As South Africa’s only full service securities exchange, the JSE connects buyers and sellers in four different financial markets, namely equities, equity derivatives, commodities derivatives and interest rate instruments. The JSE Ltd offers the investor a first world trading environment, with world class technology, surveillance and settlement in an emerging market context. It is amongst the top 20 largest equities exchanges in terms of market capitalisation in the world.

For further information, please visit www.jse.co.za/quantofutures  

Roz Thomas/ Pheliswa Mayekiso
Corporate Communications Consultants
Tel: + 27 11 463 2198
Email: rozt@corpcom.co.za  / pheliswa@corpcom.co.za  

Chris Sturgess
Director of the Commodities Division
JSE Limited
Tel: + 27 11 520 7299

Ettienne van Wyk
Head of Metals and Energy Trading, Global Markets division
Rand Merchant Bank
Tel: +27 11 296 9995

RMB Global Markets

RMB Global Markets is one of the biggest market makers in the South African financial market. The Global Markets team is made up of highly skilled specialists and dealers who advise, structure and create new products and treasury risk management solutions for clients seeking yield or wanting to mitigate financial market risk.

We partner with our institutional, corporate, wealth, retail and public sector clients to create long-term, reliable and sustainable execution, asset servicing, prime broking and clearing solutions. We also offer clients alternative and enhanced fund solutions in various asset classes in South Africa, Africa, the UK and India.

We offer a range of innovative, customised, financial risk management and hedging solutions to protect our clients against the full suite of interest rate, currency, liquidity, commodity, equity and credit risks.