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SAFEX inward listed commodities

SAFEX inward listed commodities

SAFEX now lists WTI, Gold and Platinum futures, allowing individual and institutional investors access to the energy and precious metals complex. Finally, you can hedge your risks, add enhanced financial engineering to your commodity stock portfolios, combine various equity and commodity positions, and participate in the price appreciation of South Africa's flagship commodities.

Important for the investor, settlement in rand means that the currency risk is removed and that the contracts will perform according to local conditions e.g. the WTI crude contract is a good proxy for the South African Basic Fuel Price. Risk is further decreased by removing the physical settlement requirement of the overseas contracts while still benefitting from the same underlying commodity exposure. The SAFEX contracts are also smaller than their overseas counterparts allowing smaller consumers to access the market. Larger consumers can trade in bigger volumes or go direct to market makers such as RMB for more tailored hedging solutions.

South African investors can now access many of the same commodity products enjoyed by investors in other countries.

WTI

The CME group extended its licence to the JSE to quote NYMEX WTI physically settled crude on 24 August 2009. SAFEX now lists a WTI ZAR priced and settled contract, which is one-tenth the size of the main NYMEX WTI contract. WTI futures (Feb, Jun, Aug and Dec) are listed on SAFEX and include the corresponding ZAR forward points, which translate into a ZAR/barrel price.

WTI (West Texas Intermediate) crude is the most actively traded energy complex commodity in the world. Brent (or more correctly, BFO) is a North Sea crude whereas WTI is from the Gulf of Mexico. WTI remains the main pricing benchmark for most other crudes.

Gold

The CME group extended its licence to the JSE to quote COMEX physically settled gold on 24 August 2009. SAFEX now lists a financially-settled ZAR priced gold contract.

Gold futures (Jan. Apr, Jul and Oct) are listed on SAFEX and include the corresponding ZAR forward points, which translate into a ZAR/ounce price. Gold is seen as an inflation hedge and safe-haven investment in volatile times. Gold delivery is made to COMEX-approved warehouses around the world but this typically involves a location price differential.

Gold is traded in the interbank market as a currency pair (XAU/USD) and exhibits a close correlation with interest rate differentials and central bank gold lease rates.

Platinum

The CME group extended its licence to the JSE to quote COMEX physically settled platinum on 24 August 2009. SAFEX now lists a financially-settled ZAR priced platinum contract. Platinum futures (Jan, Apr, Jul and Oct) are listed on SAFEX, including the corresponding ZAR forward points, which translate into a ZAR/ounce price.

Although platinum is also seen as an inflation hedge and safe-haven investment, it is more of an industrial metal than gold. Platinum delivery is made to COMEX-approved warehouses around the world. As 80% of the world's platinum production is sourced in South Africa, the contract will give you direct access to a major source of South Africa's GDP.

Forward exchange rate price determination

The number of forward points on a given exchange rate will be determined by the prevailing interest rate in each market and the time between the spot and forward rates.

For example:

  • USD/ZAR spot: 7.36
  • Expiry: 30/04/2010
  • 1-year rate USD: 1.21%
  • 1-year rate ZAR: 8.2%
  • Number of days: 204

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Contract specifications

Crude:

Bloomberg:CL Cmdty
Reuters: O#WTIO
Trading hours: 09:00 – 15:45
Contract months: February, June, August and December
One contract is 100 barrels (15898.73 litres) of WTI light sweet crude oil (NYMEX = 1,000 barrels)
Smallest price movement: 20 ZAR c/contract Settlement: Cash settled in South African rand

Final cash settlement value:

  • Crude: The NYMEX settlement value will refer to an average of 15 iterations referencing trades in the underlying derivative contract, taken every 1 minute for a period of 15 minutes ending 10h00 New York time (SA Summer: 16h46 – 17h00 and SA Winter: 15h46 – 16h00) on the penultimate trading day of the NYMEX delivery month
  • ZAR: 30 iterations, arithmetic average of the underlying spot taken every 1 minute for a period of 30minutes, ending at 10h00 New York time (SA Summer: 16h31 – 17h00, SA Winter: 15h31 – 16h00)
  • Expiry: Crude oil will cease trading at the close of business (15h45, SA time) on the fourth US business day prior to the 25th calendar day of the month preceding the expiry month

Gold: Bloomberg:

GOLDS Cmdtv
Reuters: o#GOL
Trading hours: 09:00 – 15:45
Contract months: January, April, July and October
One contract is equal to 10 troy ounces (312.50kg)
Smallest price movement: ZAR R1/contract
Settlement: Cash settled in South African rand

Final cash settlement value:

  • Gold: average of 30 iterations, referencing trades in the underlying contract, taken every 1 minute ending 10h00 a period of 30 minutes. (SA Summer: 16h31 – 17h00, SA Winter: 15h31 – 16h00)
  • ZAR: 30 iterations, arithmetic average of the underlying spot taken every 1 minute for a period of 30minutes, ending at 10h00 New York time (SA Summer: 16h31 – 17h00, SA Winter: 15h31 – 16h00)
  • Expiry: Gold futures will cease trading on the second last business day preceding the first delivery day of the COMEX contract at 15h45 SA time

Platinum:

Trading hours: 09:00 – 15:45
Contract months: April, June, August and December
One contract is equal to 10 troy ounces (312.50kg)
Smallest price movement: ZAR R1/contract
Settlement: Cash settled in South African rand

Final cash settlement value:

  • Platinum: average of 30 iterations, referencing trades in the underlying contract, taken every 1 minute ending for a period of 30 minutes. (SA Summer: 16h31 – 17h00, SA Winter: 15h31 – 16h00)
  • ZAR: 30 iterations, arithmetic average of the underlying spot taken every 1 minute for a period of 30minutes, ending at 10h00 New York time (SA Summer: 16h31 – 17h00, SA Winter: 15h31 – 16h00)
  • Expiry: Platinum futures will cease trading on the second last business day preceding the first delivery day of the NYMEX contract at 15h45 (SA time)


Contract code
Expiry date
Initial margin
Spread margin
Crude oil (WTIO)

Spot Month

R5,700/contract

R1,700/contract

Crude oil (WTIO)

Following Month

R5,800/contract

R1,700/contract

Gold (GOLD)

Spot Month

R4,300/contract

R1,300/contract

Gold (GOLD)

Following Month

R4,400/contract

R1,300/contract

Platinum (PLAT)

Spot Month

R7,600/contract

R2,300/contract

Platinum (PLAT)

Following Month

R7,800/contract

R1,300/contract

For crude the initial margin is around 10% of the contract nominal value whereas for gold and platinum the initial margin represents around 5%.

* JSE can amend requirements at their discretion.

Getting started

Current institutional investors with RMB Morgan Stanley should sign an amendment letter. RMB Morgan Stanley will then execute on the client's behalf with trades allocated to the client's account.

Contact Nadia Redelinghuys on 011 269 9981 or email nadia.redelinghuys@rmb.co.za for any queries or to open an institutional investor account.
  Ettienne van Wyk on Bloomberg or 011 269 9607 or email ettienne.vanwyk@rmb.co.za for current or prospective RMB clients who would like to participate in commodity futures.


Prime Broking clients can phone through and request commodity futures be added to their account.

Contact Frederick Kairuz on 011 282 1941 or email Frederick.Kairuz@rmb.co.za for any queries or for information on opening a new trading account with Prime Broking.
  Andrew Connellan on the RMB Commodities desk on 011 269 9820 for market information or for any further queries.