The Johannesburg Stock Exchange (JSE) says it is making its currency derivatives market more attractive and competitive by providing incentives for larger currency deals and greater trading flexibility for investors.
Since the JSE’s inception in 2007, 20 million contracts worth R175 billion have traded on the exchange. Between 2007 and March 2011, currency spreads have narrowed from an eight cent spread to less than a quarter of a cent, the exchange says.
“We believe that there is still huge potential for growth in our market, especially now given the considerable discussion regarding derivatives reform and proposals to move more trade on exchange,” says Warren Geers, general manager for derivative trading at the JSE.
He adds that the next step in the market’s evolution is to position South Africa as an attractive trading hub for international and local wholesale investors.
The JSE has introduced a new fee structure that reduces costs by 33% for deals over 7,500 contracts and more than 50% for deals greater than 10,000 contracts, down from the previous limit of 15,000 contracts. Fees are capped at R35,000 per deal for larger deals. Fees for trades of 5,000 contracts or more remain the same, while fees on deals of fewer than 5,000 contracts will increase slightly.
“While investors will benefit from these measures, many of them are designed to reward investors that bring significant volumes to the table,” says Geers.
The JSE has also made changes to the fee structure for currency options. The fees will also be capped at R35,000 a deal to entice bigger deals and the sliding scale will give larger participants rebates of 75% more than the previous billing model. For cross-currency trading, the JSE has pledged to only charge on one side of the transaction.
To encourage same day trading activity, the JSE has committed to a zero fee for the second leg of all intraday trades. “We would like to see more day traders participating in our market. At present this type of investor is not very active,” says Geers.