SGX DRAM Futures
DRAMs (Dynamic Random Access Memory) are semiconductor memory chips that are used in a growing array of electronics products. They are necessary components in computers and computer-related equipment, and are increasingly needed in communication, entertainment and digital appliances. As DRAM prices exhibit a high level of volatility, manufacturers and users of DRAM today are faced with mounting difficulties in their production planning and pricing. With the introduction of DRAM Futures, such difficulties can be overcome efficiently and cost-effectively.
Preliminary DRAM Contract Specifications
| Contract Size | 10,000 pieces |
| Ticker Symbol | DR |
| Contract Months | 2 nearest serial months and 2 quarter (March, June, September, December) months |
| Trading Hours (Singapore Time) | 7.00 am - 8.00 am 2.00 pm - 4.00 pm 10.00 pm - 11.00 pm* *This trading session is for 'T+1' settlement |
| Trading Hours (Last Trading Day) | 7.00 am - 8.00 am 2.00 pm - 4.00 pm |
| Minimum Price Fluctuation | US$0.01 per piece (US$100) |
| Daily Price Limit | To Be Considered |
| Last Trading Day | 15th calendar day of the expiring month. If this day falls on a non-business day, the immediate preceding business day will be the last trading day. |
| Settlement Basis | Physical Delivery |
Delivery
| Description | 256Mb Double Data Rate Synchronous DRAM, 32M x 8, PC266 and above, 66 pins TSOP2, taped & reel. |
| Deliverable Grades | Samsung P/N: K4H560838B or newer die revision Micron P/N: MT46V32M8 or newer die revision Hynix P/N: HY5DU56822 or newer die revision Infineon P/N: HYB25D256800A or newer die revision |
| Delivery Day | 1st business day of the month immediately after the expiring month. |
| Method of Delivery | Sellers shall deliver any Deliverable Grade of his choice that must be purchased directly from any one of SGX-approved suppliers. Once purchased, the DRAM will subsequently be sent to a designated warehouse in Singapore. Delivery would be for ex-warehouse Singapore. |
What is a DRAM futures contract?
A futures contract is a legally binding agreement. An investor who buys or sells a DRAM futures contract is simply buying or selling a specific quantity and quality of DRAM chips (eg. 10,000 pieces of 256Mb DDR SDRAM) at an agreed price now for delivery at a future date. Having bought or sold a futures contract, the investor need not hold the contract to its maturity, but may close-out the contract with an offsetting trade. If he holds the contract to maturity, he has to take or make delivery of DRAM chips, depending on whether he has bought or sold DRAM Futures.
What Can The SGX DRAM Futures Contract Do For You?
Protect you against adverse price movements – DRAM Futures allows greater flexibility and control in protecting against volatile chip prices. Investors who buy or sell futures contracts seek to lock in future prices of the underlying commodity. With DRAM Futures, chip manufacturers and users are able to efficiently lock in future chip prices, thereby protecting them from adverse price movements.
Provide financial surety – SGX Derivatives Clearing assumes the role of counterparty to all executed trades, guaranteeing the performance of all derivatives contracts, including DRAM Futures, thereby providing financial surety to your derivatives transactions.
What are other benefits of DRAM Futures?
Price Discovery
With the convergence of all the buyers and sellers into a centralized marketplace, a futures exchange creates a transparent environment that is often absent in over-the-counter markets. Furthermore, a futures exchange brings together different groups of market participants –hedgers, speculators and arbitrageurs, each using the market for different reasons and having their own views of the market. All these attributes make the futures exchange an efficient price discovery platform, which allows market users to put on or close out their positions with ease and at competitive prices.
Optimise Capital Investment – Use The Leverage That Derivatives Gives You!
You don't have to be a millionaire to trade a million dollars! Futures are a form of margin trading. In other words, you only need to invest a fraction of the underlying contract value to experience the full trading potentials of the underlying contract value.
Reduce Transaction Costs
Transaction costs, which include both execution and clearing, are very competitive in futures trading.
Open Up Opportunities By Participating In The Derivatives Market
There are many participants in the futures market which include banks, fund managers, market-makers and professional individual investors who are constantly searching and trading for risk management and profit opportunities. This process essentially facilitates efficient and transparent operation of a liquid market. Hence, this opens up more trading opportunities when compared to solely trading the underlying market.
Regulated Exchange And Approved Brokers
The futures industry in Singapore and SGX Derivatives Market operate under the regulatory jurisdiction of the Monetary Authority of Singapore. In addition to its time-proven risk management system, SGX Derivatives Market's credibility is derived from its consistent compliance with the best international practices and standards in the futures industry. It is for this very reason that SGX Derivatives Market receives recognition from leading international regulatory bodies such as the US's Commodity Futures Trading Commission and UK's Securities & Investment Board.
All SGX Derivatives Market's broking members, which include many household and international names, are licensed by the Monetary Authority of Singapore to carry out broking activities in futures and options.
Trading Example
| Date/Activity | Profit / Loss | Margin Account Balance | Comments |
| 12 Aug Investor A opened a futures trading account with broker X and deposited $10,000 as margin. |  | $10,000 | Minimum margin requirement per DRAM Futures: Initial margin (IM): $4000 Maintenance margin (IM): $3500 |
| 13 Aug Investor A expects the price of DRAM to fall soon and therefore sells two Sep 03 DRAM futures contracts at $6.75.Sep 03 futures closes that day at $6.68. | Profit: 10,000 x (6.75-6.68) x 2 contracts = $1,400 | $10,000 + $1,400 = $11,400 | For 2 DRAM contracts: IM: $8000, MM : $7000 Additional margin in account: $2,000 Investor A's outstanding position will be carried forward to Aug 14th at the revalued price of $6.68. |
| 14 Aug 03 DRAM futures settles higher at $6.85. Investor A decides to maintain his positions. | Loss: 10,000 x (6.85-6.68) x 2 contracts = $3,400 | $11,400 – $3,400 = $8,000 | Account balance still above the MM level of US$7,000. Investor A's outstanding position will be carried forward to Aug 15th at the revalued price of US$6.85. |
| 16 Aug 03 DRAM futures trades higher at $7.05 after the receipt of strong demand data. He chooses to top up his account by $4,000. | Loss: 10,000 x (7.05-6.85) x 2 contracts = $4,000 | $8,000 – $4,000 = $4,000 $4,000 + $4,000 = $8,000 | Account balance is below the MM level of $7,000. Investor A has 2 options: (1) Top up the margin account to the IM level of $8,000 or (2) Reduce the number of outstanding contracts to 1 contract (which requires an IM of $4,000) or close out everything Investor A's outstanding position will be carried forward to Aug 19th at the revalued price of $7.05. |
| 19 Aug 03 Sep 03 DRAM futures trades and settles sharply lower at $6.55. | Profit: 10,000 x (7.05-6.55) x 2 contracts = $10,000 | $8,000 + $10,000 = $18,000 | Investor A's outstanding position will be carried forward to Aug 20th at the revalued price of $6.55. |
| 20 Aug 03 Sep 03 DRAM futures contract continues to trade lower. Investor A decides to liquidate his position by buying 2 contracts at $6.50. | Profit: 10,000 x (6.55-6.50) x 2 contracts = $1,000 | $18,000 + $1,000 = $19,000 | Investor A makes a net profit of $19,000 – [$10,000 + $4,000] = $5,000 |
Note: The above example ignores commissions, which are very competitive. All currency units are in US$.
