Yield-X Euro/Rand and Sterling/Rand currency future contracts

October 1, 2007 at 12:00 AM EDT

JOHANNESBURG, 1 OCTOBER – Tomorrow, the 2nd October 2007, Currency futures contracts on the Euro/Rand and Sterling/Rand will start trading on Yield-X, the JSE's interest rate exchange.

This follows the successful launch of the Dollar/Rand Currency Futures in June this year.  Currency futures were developed by the JSE and two market makers, Standard Bank and Investec, in direct response to market requests for such a product to be traded on a regulated exchange. Although, Yield-X was granted the dispensation to trade the Dollar/Rand, Euro/Rand and Sterling/Rand currency future contracts, a decision was made to hold back the Euro/Rand and Sterling/Rand contracts to allow the market to become accustomed to currency future trading.

Together with the market makers, Yield-X decided to launch the Euro/Rand and Sterling/Rand contracts after the September Dollar/Rand closeout. Near, middle and far (December, March, June) expires will be listed for both of the new contracts. Specials will be listed on demand. Yield-X hopes to launch numerous other currency future contracts in the future.

Currency futures are derivative contracts which allow investors to trade the underlying exchange rate for a period of time in the future.

“Three months into its product life cycle Yield-X has seen tremendous market take up. Trades have occurred daily and volumes are increasing steadily over time. Yield-X reported the total number of contracts traded to date is 52,598 with a total nominal value of R381, 516, 227. The market is bullish that the volumes will continue to increase substantially in the near future,” says Warren Geers, Assistant General Manager, Trading Division at the JSE.

“We believe these latest additions will add significantly to both values and volumes,” added Geers.

Currency futures are directed at the retail market for two reasons, firstly the dispensation granted by the Minister of Finance permits South African individuals to trade currency futures over and above their two million foreign allocation limits; secondly the minimum contract size is a $1000 or on average R7500 thereby enabling the retail investors to access the market.

Currency futures offer numerous benefits. They allow individuals to hedge against currency risk and to take a view on the movement of the underlying exchange rate. They also allow individuals to diversify their local and foreign assets. While this is clearly advantageous to retail investors, institutional investors are also able trade these futures within certain limits. Pension funds and long term insurance companies are subject to their 15 % foreign allocation allowance and asset managers and registered Collective Investment Schemes are subject to their 25 % foreign allocation allowance. All corporate entities, trusts, close corporations though are prohibited from trading unless they have a valid exchange control approval from the South African Reserve Bank.

The JSE has worked closely with the South African Reserve Bank (SARB) and National Treasury for the dispensation of currency futures. In Trevor Manuel's budget speech earlier this year, he stated that permitting the JSE to establish a rand futures market will: “…further develop South Africa's financial markets and increase liquidity in the currency market.”

Currency futures are Rand denominated and cash settled. The contracts result in a zero sum game – for every buyer there is a seller and the profits of the winner equal the losses of the loser. The SARB has approved four market makers who have been granted dispensation to hedge their currency future trades in the relevant markets. These transactions may have an impact, although the initial impact will be reversed when currency futures and hedge transactions are closed out. Authorised dealers currently actively trade in both spot and forward markets - currency future trading will merely add volumes to the amount of hedging transactions already being carried out.

Given the direct and apparent link between currency and interest rates, it was decided to list currency futures on Yield-X.  The Yield-X system also has the ability to do pre-trade approval as opposed to post-trade checking, common to each of the other three JSE markets. Given the sensitivity of currency trading, this system capability was imperative in order to restrict the currency derivative trading to those qualified participants only. This was a requirement stipulated by National Treasury and SARB.

In order to trade currency futures, the following procedures need to be in place for all members/brokers, traders and individuals or clients:


  • Broking participants are required to become registered and approved Yield-X members
  • A membership application will need to be completed and returned to the JSE
  • The JSE secretarial services division will advise what documentation needs to be completed, as some documentation is not required if the participant is already a member of one of the existing JSE markets
  • As of June 2007, no membership fees or annual membership fees are required
  • Members are required to have a registered and sponsoring Yield-X clearing member
  • Members are not permitted to trade in their proprietary account


  • Traders are required to become registered and approved on Yield-X as a currency futures trader
  • An officer registration form must be completed and returned to the JSE
  • Traders on the equity derivative market or the JSE equity market (with RPE exams completed) will not be required to write any exams in order to trade currency futures
  • Current Yield-X traders can automatically trade in currency futures
  • All current currency traders with a long history in the market will not be required to write any exams
  • JSE approved Yield-X officers need to have the correct Yield-X software loaded on to their personal computers by a Yield-X employee
  • The Yield-X software allows for both on-screen and off-screen trading
  • Training will be provided by the Yield-X employee installing the software
  • The training provided clearly shows traders how to conduct on-screen trades and out off-screen trades
  • The Yield-X software can be integrated into members' back-office systems
  • A relevant API document can be obtained from Yield-X
  • The Yield-X system prevents traders from trading for non-qualified clients
  • The system pre-approves all traders as well as prevents allocations to non-qualified client accounts


  • Clients will need to open an account with a registered Yield-X member
  • Clients will be required to sign a client agreement with the member
  • The client agreement specifies all the client's details
  • Clients will be required to post initial margin with the member
  • Initial margin is posted with the clearing member who then filters the money to Safcom, the JSE's clearing and settlement agent
  • Initial margin eliminates any counterparty risk for every trade
  • Clients will be required to pay variation margin to the member should currency future prices move against their favour
  • Clients will receive variation margin when currency future prices move in their favour
  • Clients are advised that they can make, but also lose, money when trading currency futures

A list of registered Yield-X members can be found on the Yield-X website at www.yieldx.co.za.

For further information, please contact:

Warren Geers
(011) 520 7470
083 296 8842


Roz Thomas
Corporate Communications Consultants (Pty) Ltd
082 925 8806