Gold, Platinum and Sweet Crude Oil Futures on JSE
South African investors can now take advantage of price movements of Gold, Platinum and Sweet Crude Oil futures contracts for the 1st time in ZAR on the JSE's commodities derivatives market. Up to now only agricultural commodities have been offered on the commodities exchange.
Rod Gravelet-Blondin, Head of the Commodities Division at the JSE said that "The Exchange is confident that trading will gain traction as more and more investors realise that they can trade these highly traded commodities in an easy and more affordable manner"
If investors wanted to trade in these commodities they would have to trade contracts on international markets making use of their foreign exchange allowance subject to exchange control regulations.
In future individuals and corporations will have easy access trading these commodities on the JSE which will open up this market to local investors to take advantage of the current interest in these commodities as alternative hedging or diversification instruments.
Pension funds and long-term insurance companies are however, subject to their 20% foreign allocation limits and asset managers and registered collective investment schemes are subject to their 30% foreign allocation limits when trading these commodities, the JSE said. In terms of a recent agreement signed with the world's largest derivatives marketplace, CME Group, the locally listed contracts will be cash-settled using benchmark gold settlement prices referenced from CME's COMEX division and platinum and crude oil prices from its NYMEX division. Given that the underlying instrument is a contract traded on the NYMEX or COMEX, investors have the added advantage of accessing highly liquid international markets via these Rand-denominated contracts. "The 2 metal commodities should interest local investors as South Africa is the world's largest platinum producer and the 3rd-largest gold producer. The price of the commodities is generally linked to the prices of mining stocks. The liquidity that the current market makers and any new ones will bring to the market can only be beneficial to investors," said Ashley Erasmus, Senior Commodities Trader at Nedbank Capital. Standard Bank and Rand Merchant Bank will also be quoting live Rand prices for investors. To make these contracts more attractive to individual investors, the JSE has made the contracts based on smaller lot sizes than those traded on the US markets. "We have taken accessibility into account, for instance the minimum contract size for crude oil on our market is 100 US barrels (15898.73 litres) with contracts expiring in Feb, June, August and December, while in New York the contract minimum is 1000 barrels," explained Gravelet-Blondin. For both gold and platinum, each contract size equates to 10 troy ounces with the minimum price movement set at 100 South African cents per ounce. The gold contract expiry months are April, June, August and December with a minimum of 2 expires always available for trade. The contract for platinum expires in January, April, July and October with a minimum of 2 expires always available for trade. "We are particularly excited about the opportunities that a crude oil contract offers. Oil has a knock-on effect
