The Johannesburg Stock Exchange (JSE) on Monday launched a new range of African currency futures which track the exchange rates in ed countries.
The initiative involves the South African Rand, Zambian Kwacha, Kenyan Shilling and Nigerian Naira. This is meant to help investors, importers and exporters to protect themselves against currency fluctuations in foreign countries.
"The JSE is very excited about this new groundbreaking initiative as we have been working on this strategy for two years, " said Warren Geers, General Manager for Capital Markets at the JSE. "With Africa being a global investment destination it makes sense for the JSE as a major exchange player in Africa to be involved in providing appropriate products to mitigate currency risk and exposure when dealing in Africa," he said.
According to the South African Revenue Service (SARS), trade between South Africa and Nigeria amounted to 34.4 billion rand (about 3.2 billion U.S. dollars) between January and July this year. Trade between South Africa and Kenya were 4.6 billion rand (about 425 million dollars), while trade between South Africa and Zambia stood at about 18 billion rand (about 1.66 billion dollars) in the same period.
The JSE partners Barclays Africa and specialist brokers, Tradition Futures, to bring this new offering to market.
"Our involvement with the listing of the African currency futures on the JSE further deepens Barclays Africa's commitment to growing Markets participation in Africa. As part of our vision to be the 'Go-To' bank, we strive to give our clients superior execution and access to the continent through world-class and leading innovation," said Lourens Harmse of Barclays Africa, who looks after sub-Saharan Africa Trading at the Corporate and Investment Banking division.
The new futures contracts will provide the market participants with the ability to get exposure on the JSE to the exchange rate between the US dollar and the Zambian, Kenyan and Nigerian currencies through trading synthetic cross currencies. To promote cross-currency trading, the JSE will charge trading fees on only one of the foreign trade logs and not both.
"It is a groundbreaking development to have a transparent, independent, well regulated platform to mitigate or assume FX (foreign exchange) Risk in these African countries, against any other currency of their choice - that does not prejudice anyone, irrespective of size, domicile or nationality," said Andrew Gillespie of Tradition Futures.
"The ability to transact anonymously, through specialist brokers such as Tradition Futures, and to have access to full and fair, timeous price discovery is an international benchmark requirement for a developed market," said Gillespie.
Gillespie said the initiative would allow "a level and fair playing field, where the best price is available to all, without bias or favor, which is a significant facet and feature of this market in African FX on the JSE."
The JSE has been in existence for 125 years. It connects buyers and sellers in equity, derivative and debt markets./.