JSE expands commodity futures

24 August 2009

The JSE has extended its existing licensing agreement with US-based CME Group, the world’s largest and most diverse derivatives marketplace, to enable South Africans to trade rand-denominated platinum, gold and crude oil futures contracts.

As a result, the JSE will list cash-settled futures contracts for platinum, gold and crude oil on the JSE’s Commodities Derivatives Market in September 2009.

“Expanding the existing relationship with CME Group to incorporate these additional products is an achievement for the South African derivatives market,” the JSE’s Rod Gravelet-Blondin said in a statement this week.

“South Africa is the world’s largest platinum producer and third-largest gold producer, and so it made sense that we needed to offer South African investors related futures products which they could use either to gain exposure or hedge their exposure to a listed equity stock involved in the two commodities.”

New investment opportunities

The gold and platinum settlement prices from NYMEX and COMEX, two highly liquid exchanges forming part of CME Group, will ensure that locally listed contracts reference an international benchmark for final settlement.

According to Gravelet-Blondin, this will bring much comfort to investors, who will be able to access the international market via these rand-denominated contracts.

The JSE was particularly excited about the opportunities a crude oil contract gave to investors seeking exposure to the international oil market or to organisations wanting to hedge their energy usage against the benchmark.

Gravelet-Blondin explained that the opportunity to work with CME Group had increased the products the JSE could offer market participants and complemented the exchange’s growth strategy.

“Following the success of the JSE’s corn futures contract based on our [Chicago Board of Trade] settlement prices, we are pleased at the opportunity to extend our relationship with the JSE in the form of these new commodity-linked products,” said CME Group’s Rick Redding.

“CME Group continues to explore new and innovative ways of facilitating effective risk management for suppliers and investors globally,” Redding said. “By referencing our global benchmark prices, the JSE is enabling its users to access new tools to further their hedging needs.”

SAinfo reporter

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