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

Yield-X Johannesburg Yield-X Stock Exchange CURRENCY FUTURES By Candice Quinn Equity  Bringing Offshore Trading Back Home Commodity Yield-X Equity Market Derivatives Derivatives  Developing the SA Financial Market  Enhancing the JSE’s Innovative Product Range  Bringing Offshore Trading Back Home Bonds  Developing the SA Financial Market Interest Rate Derivatives Currencies -Trading spot bonds - Bond Futures - Futures  Enhancing the JSE’s Innovative Product Range - Primary listings - Bond Options - Options  Bringing Offshore Trading Back Home - Secondary listings - Index futures and  Developing the SA Financial Market - Carries options  Enhancing the JSE’s Innovative Product Range - Rods - Swaps - Notes - FRAs

Yield-X Yield-X Budget Speech 21 February 2007 CURRENCY FUTURES Minister of finance Trevor Manuel: By Candice Quinn ‘Further developing South Africa’s financial markets and increasing liquidity  Bringing Offshore Trading Back Home in the currency market by permitting the JSE to establish a Rand futures  Developing the SA Financial Market market’  Enhancing the JSE’s Innovative Product Range Budget Speech 20 February 2008  Bringing Offshore Trading Back Home Minister of finance Trevor Manuel:  Developing the SA Financial Market  Enhancing the JSE’s Innovative Product Range ‘The JSE Rand Futures market will be opened up’  Bringing Offshore Trading Back Home What does this mean  Developing the SA Financial Market All corporate entities: trusts; close corporations; partnerships; hedge funds  Enhancing the JSE’s Innovative Product Range and banks can trade the currency futures with no limits, i.e. no upper limit on the value traded.

Yield-X Yield-X CURRENCY FUTURES By Candice Quinn What are Futures  Bringing Offshore Trading Back Home  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  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 Yield-X What are Currency Futures? CURRENCY FUTURES By Candice Quinn  Contracts that allow investors to trade an exchange rate for some time into the future  Bringing Offshore Trading Back Home  Developing the SA Financial Market  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  Enhancing the JSE’s Innovative Product Range specified future date  Bringing Offshore Trading Back Home  Developing the SA Financial Market  Long Currency Future holder buys the Dollar and sells the Rand’s, i.e.  Enhancing the JSE’s Innovative Product Range 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  Bringing Offshore Trading Back Home  Developing the SA Financial Market  Short Currency Future holder sells the Dollar and buys the Rand, i.e. You  Enhancing the JSE’s Innovative Product Range want the Dollar to depreciate in value or the Rand to appreciate in value, example: $/R to move from R8:00 to R7:00

Yield-X Yield-X CURRENCY FUTURES By Candice Quinn  Bringing Offshore Trading Back Home Currency Futures Advantages  Developing the SA Financial Market  Effective and transparent hedge against currency risk  Enhancing the JSE’s Innovative Product Range  Bringing Offshore Trading Back Home  Diversify Internationally from South Africa  Developing the SA Financial Market  Take a view on the underlying currency movement  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 Yield-X CURRENCY FUTURES Currency Futures listed on Yield-X By Candice Quinn  Dollar / Rand  Bringing Offshore Trading Back Home  Developing the SA Financial Market  Euro / Rand  Enhancing the JSE’s Innovative Product Range  Bringing Offshore Trading Back Home  Pound / Rand  Developing the SA Financial Market  Australian Dollar / Rand  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 Yield-X Exchange rate, Ratio of Exchange between Two Currencies CURRENCY FUTURES By Candice Quinn USD 1 = ZAR 7.7050  Bringing Offshore Trading Back Home Euro 1 = ZAR 11.9372  Developing the SA Financial Market  Enhancing the JSE’s Innovative Product Range  Bringing Offshore Trading Back Home Pound 1 = ZAR 15.1008  Developing the SA Financial Market  Enhancing the JSE’s Innovative Product Range AUD$ 1 = ZAR 7.3714  Bringing Offshore Trading Back Home  Developing the SA Financial Market  Enhancing the JSE’s Innovative Product Range Base currency Quoted currency

Yield-X Yield-X CURRENCY FUTURES How are Currency Futures quoted on Yield-X? By Candice Quinn  Yield-X quotes all currency future prices in the same way as the underlying  Bringing Offshore Trading Back Home spot exchange rate  Developing the SA Financial Market  Enhancing the JSE’s Innovative Product Range  This is represented as the number of Rand’s per foreign currency quoted to  Bringing Offshore Trading Back Home four decimal places, e.g. R7.7050 to 1$  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 Yield-X Currency Futures Product Specifications CURRENCY FUTURES By Candice Quinn  Underlying Instrument  Rate of exchange between one US Dollar and SA Rand  Bringing Offshore Trading Back Home  Standardized contracts  Developing the SA Financial Market  Fixed expiries in March, June, September and December  Enhancing the JSE’s Innovative Product Range  Bringing Offshore Trading Back Home  Rand Denominated  Developing the SA Financial Market  Contracts quoted in SA Rand per one underlying foreign currency  Enhancing the JSE’s Innovative Product Range (e.g. US Dollar) to four decimal places  Bringing Offshore Trading Back Home  Cash Settled  Developing the SA Financial Market  No physical delivery of foreign currency  Enhancing the JSE’s Innovative Product Range  Contract sizes  1000 foreign underlying currency e.g. $ 1000, £ 1000, € 1000 and ZAAD 1000

Yield-X Yield-X Margining CURRENCY FUTURES By Candice Quinn  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  Bringing Offshore Trading Back Home  Developing the SA Financial Market  The JSE’s clearinghouse Safcom becomes the counterparty to each  Enhancing the JSE’s Innovative Product Range trade once each transaction has been matched and confirmed  Bringing Offshore Trading Back Home  The clearinghouse therefore ensures settlement takes place on each  Developing the SA Financial Market trade  Enhancing the JSE’s Innovative Product Range  Bringing Offshore Trading Back Home  To protect itself from non-performance, Safcom employs a process  Developing the SA Financial Market known as margining. This mechanism is two-fold:  Enhancing the JSE’s Innovative Product Range

Yield-X Yield-X CURRENCY FUTURES Initial Margin By Candice Quinn  When a position is opened (either long or short), the investor is  Bringing Offshore Trading Back Home required to pay an initial margin in cash (known as a good faith deposit) with the broker who subsequently deposits it with the  Developing the SA Financial Market clearinghouse  Enhancing the JSE’s Innovative Product Range  Bringing Offshore Trading Back Home  This amount remains on deposit as long as the investor has an open  Developing the SA Financial Market position  Enhancing the JSE’s Innovative Product Range  The initial margin attracts a market related interest rate which is  Bringing Offshore Trading Back Home refunded to the investor once the position is closed out, or if the  Developing the SA Financial Market contract expires  Enhancing the JSE’s Innovative Product Range  The initial margin requirement varies between the different currency futures offered