Johannesburg bourse to track exchange rate between rand, shilling

Kenya: Johannesburg Stock Exchange has launched new range of African currency futures which track the exchange rate between the rand and select African currencies.

JSE listed three new currency futures contracts which track the exchange rate between the rand and the Zambian kwacha, Kenyan shilling and Nigerian naira.

According to Warren Geers, General Manager in charge of Capital Markets at the JSE, the currency futures would allow investors as well as importers and exporters to protect themselves against the currency movement in the foreign country

"JSE is very excited about this new groundbreaking initiative as we have been working on this strategy for two years. With Africa being a global investment destination it makes sense for the JSE as a major exchange player in Africa to be involved in providing appropriate products to mitigate currency risk and exposure when dealing in Africa," he said.

The latest trade statistics from the South African Revenue Service (SARS) show trade flow between South Africa and Kenya amounted to R4.6 billion in the months of January to July this year. In the same period, trade between South Africa and Nigeria amounted to R34.4 billion and trade between South Africa and Zambia was valued at just less than R18 billion.

JSE has partnered with Barclays Africa and specialist brokers, Tradition Futures, to bring this new offering to market.

Cross currencies

The new futures contracts would provide the market participants with the ability to get exposure on JSE to the exchange rate between the US dollar and the Zambian, Kenyan and Nigerian currencies through trading synthetic cross currencies.

For example, investors can get exposure to the exchange rate between the US dollar and the Kenyan shilling by trading both against the rand. To promote cross-currency trading the JSE will charge trading fees on only one of the foreign trade logs and not both.

Lourens Harmse of Barclays Africa, who looks after sub-Saharan Africa Trading at the Corporate and Investment Banking division, said involvement with the listing of the African currency futures on JSE further deepens the bank's commitment to growing markets participation in Africa.

"As part of our vision to be the 'Go-To' bank, we strive to give our clients superior execution and access to the continent through world-class and leading innovation."

Andrew Gillespie of Tradition Futures said the launch is a groundbreaking development which would "enable transparent, independent, well regulated platform to mitigate or assume FX Risk in these African countries, against any other currency of their choice - that does not prejudice anyone, irrespective of size, domicile or nationality."