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JSE to Introduce Currency Options

The Johannesburg Stock Exchange (JSE) is to launch currency options trading at the exchange, according to sources within the JSE. A local media report quoted a separate source saying that currency options would go live by the end of September. It will initially be based on the ZAR/USD contract, with others being introduced over time, according to the report.

 

The move to introduce options follows the introduction of currency futures last year on JSE’s interest rate exchange Yield-X (Squawkbox, 18 June, 2007). The futures volumes at the exchange have rocketed since then. New currency pairs have been added this year and the government has relaxed controls on market participants. Yield-X started last year with USD/ZAR but has since been given approval by the South African Reserve Bank to extend the currency futures product range to include AUD/ZAR, GBP/ZAR and EUR/ZAR.

 

In February this year the JSE recorded 225,019 trades at a value of ZAR12.5 billion, 557.9% higher than September 2007 when ZAR1.9 billion was transacted in 8047 contracts. Trading now stands at approximately ZAR15.0 billion per month.

 

The futures market was initially aimed at retail investors, although other market participants had restricted access. However in February this year South African finance minister Trevor Manual announced that restrictions would be lifted regarding corporate entities including trusts, closed corporations, private companies and partnerships, enabling them to trade freely.

 

The JSE is hoping that the government allows hedge funds to trade currencies in the near future. “I would point out that the concession for corporates to trade in currency futures, although a huge step forward, is not a complete relaxation of controls by the treasury but merely the second dispensation of the three the JSE is seeking. The third is, of course, for professional fund managers,” said JSE chairman Humphrey Borkum at the time.

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