The JSE on Friday launched three new currency futures contracts tracking the exchange rate between the rand and the Zambian kwacha, the Kenyan shilling and the Nigerian naira.
These currency futures would allow investors, as well as importers and exporters to protect themselves against the currency movements in these African countries, the local bourse said.
The new futures would also provide market participants exposure on the JSE to the exchange rate between the US dollar and the Zambian, Kenyan and Nigerian currencies through trading synthetic cross currencies.
For example, investors could get exposure to the exchange rate between the US dollar and the Kenyan shilling by trading both against the rand. To promote cross-currency trading, the JSE would charge trading fees on only one of the foreign trade logs and not both, it explained.
“The JSE is excited about this new ground-breaking initiative as we have been working on this strategy for two years. 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,” JSE capital markets GM Warren Geers said.
The JSE had partnered with 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 market participation in Africa,” Lourens Harmse of the Barclay’s Africa corporate and investment banking division said.
Further, Tradition Futures’ Andrew Gillespie said that, to have a transparent, independent and well-regulated platform to mitigate or assume foreign exchange risk in these African countries, against any other currency, was a ground-breaking development.
“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. This allows for a level and fair playing field, where the best price is available to all, without bias or favour, which is a significant facet and feature of this market in African foreign exchange on the JSE,” Gillespie said.