Sliding Scale Fees Introduced for Currency Futures

September 1, 2008 at 12:00 AM EDT

1 SEPTEMBER 2008.  The JSE has introduced a sliding scale fee system for currency futures and a cap on fees for high volume contracts in a bid to lure larger currency future contracts on to the exchange.

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 fee system comes against the backdrop of significant volume growth at the JSE’s currency futures market in the short time since the exchange started a market in these instruments in February 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 13 months.

The new pricing structure is designed to:

  • 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 fee reduction should allow banks to aggressively target corporates - 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.”

In the six months to 30 June 2008, the total fixed interest market (currency future and bonds) on the JSE generated revenue of only R2.7 million (six months to June 2007: R0.2 million), against total revenue of R508.8 million for the Group. However recent currency futures volume growth, published daily by the JSE, has been rapid.

“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.

For further information, please contact:

Michelle Joubert
Head of Investor Relations,
Contact number +27 11 5207080