The Johannesburg Stock Exchange (JSE) has received international recognition for its efforts to bring global maize markets closer to local maize growers. The stock exchange – in partnership with the CME Group in Chicago – has won ‘Best innovation by an exchange in the field of product design at the prestigious Futures & Options (FOW) Awards held in London.
The FOW awards, which are judged by an independent industry panel, recognised the innovation that the new cash settled contract provided local participants. In essence South African participants are able to access the international corn market in local currency without impacting the foreign exchange allowances. The co-operation between the two exchanges in order to achieve this was also acknowledged.
“We are pleased with the FOW accolade which we share with our partners, the CME Group, the world’s largest derivative exchange. The CBOT (Chicago Board of Trade which is part of the CME Group) benchmark corn prices are the world standard and access to these prices represents a further step toward globalizing South Africa’s financial markets,” says Rod Gravelet-Blondin, Senior General Manager: Commodities at the JSE.
The Chicago corn contract, which is priced and settled in Rands, has been well received by local participants, from both a hedging as well as speculative field. It will also assist South African growers to recognise cyclical price patterns, gain insight into future demand and price movements and hedge against market volatility. The contract has also made it that much simpler for participants to trade arbitrage and spread opportunities between American corn and South African maize. Gravelet-Blondin comments on the market’s appetite for the product “The market responded very well to the contracts from the first day of trade, by the end of September a total of 12,490 contracts had been traded, representing 1.2 million tonnes of corn – over a 10th of South Africa’s annual production. The cash settled commodity contract which is accessed through the JSE’s trading platform, complements the existing South African wheat, maize, sunflower seed and soybean deliverable contracts.”
In addition to the Chicago Corn contract, the JSE Commodity Derivatives Division recently introduced futures on gold, platinum and crude oil, relying on the markets within the CME Group to cash settle these new products.