Finance: Sliding Scale Fees Introduced for Currency Futures
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GAUTENG, In a bid to lure larger currency future contracts on to the exchange and following significant growth in the currency futures market, the JSE has introduced a sliding scale fee system for currency futures and a cap on fees for high volume contracts.
The new fee structure decreases fees across contracts larger than 1000 – ranging from a 15% reduction for contracts over 1000 to a significant 50% reduction for contracts of 15 000 and above. Each contract is worth 1000 units of foreign underlying currency.
The new pricing structure is designed to:
- Incentivize large volume contract deals;
- Grow volumes traded on the JSE’s currency futures market;
- Encourage new participants and traders;
- Target corporates, who were not until March 2008 allowed to use the JSE’s currency future market due to exchange control regulations; and
- Compete against the traditional over the counter (OTC) and Forward Exchange Contracts (FEC’s).
The JSE’s Currency Futures have experienced significant volume growth in the short time since the exchange started a market in these instruments in June 2007. While the bulk of activity in the forward currency market still takes place off the exchange, currency futures have grown from a zero base into a market worth over R17 billion in a mere 14 months.
“The fee reduction should further boost the market and allow the banks to aggressively target larger contract deals especially from corporate. The larger volumes traded should substantially boost the growth in the currency futures market,” comments Warren Geers, General Manager of Trading at the JSE. “The demand for currency futures in South Africa is pushing this market towards higher-volumes and lower costs. We will also be launching currency options, which enable buyers to participate in the upside but not the downside, later this month which will further boost trading volumes in currency futures. These options will allow participants to hedge their financial exposure with any losses being limited to the premium paid upfront for the option.”
“Internationally, the Currency Futures market is growing at a phenomenal rate. If the international picture is anything to go by then our currency futures market is just a fraction of what it could be,” concludes Geers.
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