The JSE Commodity Derivatives Market provides a platform for price discovery and efficient price risk management for the grains market in South and Southern Africa. Through a licensing agreement with the CME Group, the market also offers a range of foreign-referenced Derivatives on both Soft and Hard Commodities.
The use of Derivative Instruments through Futures and Options Contracts provides market participants with the ability to manage their price risk in the underlying physical market. You could find it useful if, for instance, you are a maize producer or wish to mitigate against a rise in the diesel price.
Clearing and Settlement
By trading on a formal exchange which connects buyers and sellers, not only is price discovery achieved in a transparent fashion, but all transactions are guaranteed through the derivatives clearing structure.
The physically settled Commodities rely on warehouse receipts to facilitate the delivery process. The warehouse receipts are utilised by financial institutions which offer financing to clients who own the receipts. Derivative Contracts also enable institutions to fund input costs to producers who hedge their price risk and in so doing encourage sustainable production.
The cash settled Commodities, like gold and crude oil, reference highly liquid international markets for the final cash settlement value, thereby providing all participants with the assurance that the local settlement price is not open to any abuse.