Statistics Update (November 2009) Total number of Contracts: 12,8 - - PowerPoint PPT Presentation

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Johannesburg Stock Exchange

Equity Derivatives Equity Market Bonds

• Trading spot bonds
• Primary listings
• Secondary listings
• Carries

Interest Rate Derivatives

• Bond Futures
• Bond Options
• Index futures and
• ptions
• Rods
• Swaps
• Notes
• FRAs

Currencies

• Futures
• Options

Yield-X Commodity Derivatives Yield-X

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Budget Speech 21 February 2007 Minister of finance Trevor Manuel: ‘Further developing South Africa’s financial markets and increasing liquidity in the currency market by permitting the JSE to establish a Rand futures market’ Budget Speech 20 February 2008 Minister of finance Trevor Manuel: ‘The JSE Rand Futures market will be opened up’ What does this mean All corporate entities: trusts; close corporations; partnerships; hedge funds and banks can trade the currency futures with no limits, i.e. no upper limit

• n the value traded.

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X What are Futures

• A futures contract is a legally binding agreement that gives you the right to

buy or sell an underlying asset at a fixed price on a future date

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X What are Currency Futures?

• Contracts that allow investors to trade an exchange rate for some

time into the future

• Currency Future’s are agreements between two parties, where one commits

to buy (long) a currency and another to sell (short) a currency on a specified future date

• Long Currency Future holder buys the Dollar and sells the Rand’s, i.e.

You want the Dollar to appreciate in value or the Rand to depreciate in value, example: $/R to move from R7:00 to R7:50

• Short Currency Future holder sells the Dollar and buys the Rand, i.e. You

want the Dollar to depreciate in value or the Rand to appreciate in value, example: $/R to move from R8:00 to R7:00

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Currency Futures Advantages

• Effective and transparent hedge against currency risk
• Diversify Internationally from South Africa
• Take a view on the underlying currency movement

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Currency Futures listed on Yield-X

• Dollar / Rand
• Euro / Rand
• Pound / Rand
• Australian Dollar / Rand

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Exchange rate, Ratio of Exchange between Two Currencies

USD 1 = ZAR 7.7050 Euro 1 = ZAR 11.9372 Pound 1 = ZAR 15.1008

Base currency Quoted currency

AUD$ 1 = ZAR 7.3714

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X How are Currency Futures quoted on Yield-X?

• Yield-X quotes all currency future prices in the same way as the underlying

spot exchange rate

• This is represented as the number of Rand’s per foreign currency quoted to

four decimal places, e.g. R7.7050 to 1$

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Currency Futures Product Specifications

• Underlying Instrument
• Rate of exchange between one US Dollar and SA Rand
• Standardized contracts
• Fixed expiries in March, June, September and December
• Rand Denominated
• Contracts quoted in SA Rand per one underlying foreign currency

(e.g. US Dollar) to four decimal places

• Cash Settled
• No physical delivery of foreign currency
• Contract sizes
• 1000 foreign underlying currency e.g. $ 1000, £ 1000, € 1000 and

ZAAD 1000

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Margining

• Each trade is matched daily by Yield-X, i.e. the exchange ensures that

there is a buyer and a seller to each contract traded

• The JSE’s clearinghouse Safcom becomes the counterparty to each

trade once each transaction has been matched and confirmed

• The clearinghouse therefore ensures settlement takes place on each

trade

• To protect itself from non-performance, Safcom employs a process

known as margining. This mechanism is two-fold:

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Initial Margin

• When a position is opened (either long or short), the investor is

required to pay an initial margin in cash (known as a good faith deposit) with the broker who subsequently deposits it with the clearinghouse

• This amount remains on deposit as long as the investor has an open

position

• The initial margin attracts a market related interest rate which is

refunded to the investor once the position is closed out, or if the contract expires

• The initial margin requirement varies between the different currency

futures offered

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Initial Margin

Plus Specials on Demand

Contract Code Expiry Date Initial Margin Requirement Spread Margin Requirement Dollar/Rand ($/R) 14 September 2009 R 380.00 R 30.00 Dollar/Rand ($/R) 14 December 2009 R 385.00 R 30.00 Dollar/Rand ($/R) 15 March 2010 R 390.00 R 30.00 Dollar/Rand ($/R) 14 June 2010 R 400.00 R 30.00 Contract Code Expiry Date Initial Margin Requirement Spread Margin Requirement Euro/Rand (€/R) 14 September 2009 R 495.00 R 40.00 Euro/Rand (€/R) 14 December 2009 R 500.00 R 40.00 Euro/Rand (€/R) 15 March 2010 R 510.00 R 40.00 Euro/Rand (€/R) 14 June 2010 R 520.00 R 40.00 Contract Code Expiry Date Initial Margin Requirement Spread Margin Requirement Australian Dollar / Rand (ZAAD/R) 14 September 2009 R 265.00 R 20.00 Australian Dollar / Rand (ZAAD/R) 14 December 2009 R 270.00 R 20.00 Australian Dollar / Rand (ZAAD/R) 15 March 2010 R 275.00 R 20.00 Australian Dollar / Rand (ZAAD/R) 14 June 2010 R 280.00 R 20.00 Contract Code Expiry Date Initial Margin Requirement Spread Margin Requirement Sterling / Rand (£/R) 14 September 2009 R 585.00 R 45.00 Sterling / Rand (£/R) 14 December 2009 R 595.00 R 45.00 Sterling / Rand (£/R) 15 March 2010 R 615.00 R 50.00 Sterling / Rand (£/R) 14 June 2010 R 605.00 R 45.00

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Variation Margin

• Known as the daily settlement of profits and losses
• The Currency Future price is determined from the underlying markets spot

price to which forward points are added to deliver the final price used in the daily MTM process

• The Exchange re-values each position daily at the close of each business

day, and this process is known as Mark-to-Market (MTM)

• Any difference from the previous day’s MTM price is either paid to the

investors, or paid by the investors to the clearinghouse, in cash and Rand denominated

• This payment is called variation margin and is simply the profit or loss on

each position

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Profit & Loss / Variation Margin - Example

Profit Trades Loss Trades Buy low - Sell high Buy high - Sell low Sell high - Buy low Sell low - Buy high

• Profit /Loss is calculated off end of day closing price (fair value)
• Position holders of profitable trades receive Variation Margin
• Position holders of loss trades pay in Variation Margin

Margin Received Long Position Margin Payable

Price Price

Margin Payable Short Position Margin Received

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X How to Trade/Close a Position

• If an investor has a view on which direction the currency is going to move,

the investor needs to contact their broker to transact on their behalf

• To close out the contract, the investor needs to contact the relevant broker

and they enter into an equal but opposite transaction

• For example, if an investor had bought a currency future contract, the

investor would close out the trade by selling the contract

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X How to Roll Over a Position

• All investors who wish to hold their positions beyond the expiry date will be

required to roll their positions over into the next expiry date

• Investors will need to close out their positions and subsequently enter into

the next contract expiry. This is usually done automatically on the investors behalf by the broker

• Example - investors holding a June contract will need to roll their

position into the September contract. If an investor had bought a June contract, the investor would have to sell the June contract and subsequently buy a September contract

• The benefit to the investor is that the same exposure is maintained. The

Exchange offers discounted trade fees for all positions that are rolled over

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Practical Examples Currency Future’s are used Primarily to:

• Speculate - No interest in purchasing/selling the underlying currency

and hope to make profit on short-term price movements in belief that the currency rates will change

• Hedge – Seek to reduce risk by protecting underlying shares. It

removes the risk of existing or expected currency exposure

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Speculating Speculator expects Rand to weaken (Dollar strengthen)

• Buy 10 Contracts at R8.2000 – an exposure of R82,000
• Deposit R3,100 only for the initial margin (10 x R310)
• Sell contracts at R8.5500 in the future
• Profit = R3,500

[10 x $1,000 x (R8.55 – R8.20) = R3,500

• Initial margin of R3,100 is returned
• The R3,100 initial capital outlay has returned a profit of R3,500
• A return of 13% during a period in which the Rand only

weakened by 4%

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X

Day 1 (trade day) Day 2 Day 3 Day 4 (trade) Initial margin per contract (R3,100) R0 R0 R3,100 CF price R8.20 R0 R0 R8.55 MTM price R8.25 R8.42 R8.40 Irrelevant Profit / (Loss) for the day R500 (8.25- 8.20x10x1000) R1700 (8.42- 8.25x10x1000) (R200) (8.40- 8.42x10x1000) R1,500 (8.55- 8.40x10x1000) Net cash flow for the day (R2,600) (-3100+500) R1700 (R200) R4,600 (3100+1500)

Daily Cash Flows – Speculative Example

Summary of cash flows Initial Margin R0 (-3100 + 3100) Variation margin R3,500 (+500 + 1700 – 200 + 1500)

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Hedging Example: Company ABC importing goods worth $1 Million

• Buy (Long) 1,000 contracts at R7.7375 ($1 Million)
• An exposure of R7,737,500
• Deposit R310,000 as the initial margin (R310 x 1,000 contracts).
• When goods arrive, need to pay physical dollars on delivery. Company

ABC now sells the dollar future contracts which are now trading at R7.9000

• Initial margin of R310,000 is returned
• Profit on currency future = R162,500 [1,000 contracts x $1,000 x (R7.90 –

R7.7375)]

• Pay for goods at R7.90 cost R7,900,000
• Net Cost R7,737,500 (Position was hedged) – still only paying for the

goods what they would have been three months earlier. I.e. Costs/profits are locked in

• If the price had gone down Company ABC will loose on the futures, but pay

less for the physical spot

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Example of a Zero-sum game: For every winner there is an equal loser

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Why Trade Currency Futures?

• Trade on a regulated and efficient platform
• Allow for transparent pricing
• Equalise the playing field for investors
• Allow individuals and smaller corporates to access favourable rates

usually reserved for larger corporates

• Represents a relaxation of exchange controls for

individuals and corporate entities

• Less administration for corporates – no reporting to SARB

required and no firm and ascertainable commitment required (i.e. no documentation required to hedge)

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Risks Gearing

• Post small amount but valued on full nominal value
• Can make money but can also lose money!
• Loss can be more than the initial margin posted if unfavourable

position is not closed out Trading Hours

• Global currency markets open 24 hours a day
• Local market only open Mon-Fri 9am-5pm
• Market could move against you while local market is closed and

you will have to wait until the next day’s opening of the market to trade out – some banks can put stop losses in place though

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Costs

• Exchange fees to the members are based on the following sliding scale:

The fees will be capped at R35,000 per deal to entice bigger contracts. *All the above fees exclude VAT of 14%.

• These are the fees the exchange charges the broking community however

the fees that the brokers charge the clients vary from broker to broker

Sliding Scale – Number of contracts traded Trading Fee per contract 1 – 1,000 R1,00 1,001 – 5,000 R0,90 5,001 – 7,500 R0,80 7,501 – 10,000 R0,70 10,001 – 15,000 R0,60 15,001 – or more R0,50

Statistics Update (November 2009)

• Total number of Contracts: 12,8 Million
• Total Contract Value: R109 Billion
• Ratio On Screen vs Off Screen Trades: 40:60

2E+09 4E+09 6E+09 8E+09 1E+10 1.2E+10 1.4E+10 1.6E+10 1.8E+10 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Currency Futures Value Traded

2007 2008 2009

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

QUESTIONS?? Yield-X

Questions?

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Detailed example of Cash Flows on a Long Currency Futures Position This table details the daily cash flows that will be debited or credited to the investors trading account during the life of the position.

Day 1 (trade day open position) Day 2 Day 3 Day 4 Day 5 (trade day close position) Currency future trade price R8.2925 R0 R0 R0 R8.7035 Initial Margin per contract (R3 100) R0 R0 R0 R3 100 MTM price R8.4405 R8.5515 R8.3085 R8.6055 n/a Profit/(loss) for the day R1 036 (8.4405.- 8.2925 x 7 x 1000) R777 (8.5515 – 8.4405 x 7 x 1000) (R1 701) R8.3085 – (8.5515 x 7 x 1000) R2 079 (8.6055 – 8.3085 x 7 x 1000) R686 (8.7035 – 8.6055 x 7 x 1000) Net cash in/(out) flow for the day (R2 064) (-3 100 + 1 036) R777 (R1 701) R2 079 R3 786 (3 100 + 686)

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Summary of Cash Flows: Initial margin R0 (-3 100 + 3 100) Variation Margin R2 877 (+ 1 036 + 777 – 1 701 + 2 079 + 686) Note: this example excludes any trading fees charged by the exchange, the clearing member or the currency future broker.

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X Detailed example of Cash Flows on a Short Currency Futures Position This table details the daily cash flows that will be debited or credited to the investors trading account during the life of the position.

Day 1 (trade day open position) Day 2 Day 3 Day 4 Day 5 (trade day close position) Currency future trade price R8.2245 R0 R0 R0

• R7. 8545

Initial Margin per contract (R3 100) R0 R0 R0 R2 170 MTM price

• R8. 1405

R8.1015 R7.9085 R7.9000 n/a Profit/(loss) for the day R840 (8.1405-8.2245) x -10 x 1000 R390 (8.1015 - 8.1405) x -10 x 1000 R1 930 R7.9085 – 8.1015) x -10 x 1000 R85 (7.9000 – 7.9085) x -10 x 1000 R455 (7.8545 – 7.9000) x -10 x 1000 Net cash in/(out) flow for the day (R2 260) (-3 100 + 840) R390 R1 930 R85 R3 555 (3 100 + 455)

• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range
• Bringing Offshore Trading Back Home
• Developing the SA Financial Market
• Enhancing the JSE’s Innovative Product Range

Yield-X

CURRENCY FUTURES

By Candice Quinn

Yield-X All short positions are valued using the formula: CF1 - CF0 i.e. today’s price minus yesterday’s price. Summary of Cash Flows: Initial margin R0 (-3 100 + 3 100) Variation Margin R3 700 (+ 840 + 390 + 1 930 + 85 + 455) Note: this example excludes any trading fees charged by the exchange, the clearing member or the currency future broker.