Johannesburg — THE JSE intends to list cash- settled futures contracts for platinum, gold and crude oil on its commodities derivatives market next month.

JSE commodity derivatives market head Rod Gravelet-Blondin said the futures contracts would bring a great deal of accessibility to the South African investor and allow him to hedge using these commodities without having to gain Reserve Bank approval, and be able to trade in rands and in much smaller volumes than what was required on bigger markets such as in New York.

For instance, a crude oil contract could be obtained for only 100 barrels, while in New York the contract minimum was 1000 barrels. The same applied to the metal futures contracts.

An existing licensing agreement with CME Group, the world's largest derivatives marketplace, had been renewed and expanded to allow the ability to trade rand- denominated platinum, gold and crude oil futures contracts.

The JSE had signed an agreement with CME in January to enable investors to use its benchmark maize futures settlement prices for a local maize future. The new futures contracts had initially arisen out of a need to offer smaller investors such as farmers an opportunity to hedge their input costs.

The agreement enables the JSE to offer trade in futures contracts referencing benchmark gold settlement prices from CME's Comex division, and platinum and crude oil prices from its Nymex division.

"SA is the world's largest platinum producer and third-largest gold producer and so it made sense to offer investors related futures products which they can use either to gain exposure or hedge their exposure to a listed equity stock involved in the two commodities," said Gravelet-Blondin

The Reserve Bank granted the JSE approval to trade future and option contracts on foreign referenced commodities in June last year, subject to certain conditions.

"Following the success of the JSE's corn futures contract based on our CBOT (Chicago Board of Trade) settlement prices, we are pleased at the opportunity to extend our relationship with the JSE in the form of these new commodity-linked products," CME MD of products and services, Rick Redding, said.

"CME Group continues to explore innovative ways of facilitating effective risk management for suppliers and investors globally. By referencing our global benchmark prices, the JSE is enabling its users to access new tools to further their hedging needs," he said.