Emerging commodity exchanges

 
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1. History
2. Derivatives Contracts
3. Contracts specifications
4. Membership requirements
5. Clearing

6. Prospective developments

7. Regulator
8. Statistics

History

The South African Futures Exchange grew out of an informal market that was started in South Africa by a local merchant bank, Rand Merchant Bank, in April 1987. At that time it was only a financial market. Significant milestones in the development of the market include the introduction of option contracts in October 1992 and the introduction of a fully automated trading system in May 1996.
Under pressures for deregulating the agricultural market, a research as to feasibility of agricultural commodity derivatives market was undertaken, and in early 1995 the Agricultural Markets Division (AMD) was established as a separate independent division of Safex. A limited number of 84 trading seats were issued, raising a start up capital of R4,2 million. The seats were taken up by Safex financial members, being financial institutions and financial brokers and by agricultural commodity trading houses. As a separate membership association, although trading under the Safex license and being a division of Safex, the AMD functions largely as a separate exchange and through its elected Management Committee decides on the details and the operation of the contracts traded on the market.
Today the AMD trades an average of 100 000 tons of product daily and is widely recognised as the price discovery mechanism for maize in the Southern African region and as an efficient and effective price risk management facility for the grain industry.

Derivatives contracts

Futures contracts Futures are available on agricultural commodities and are settled with physical delivery of Safex silo receipts giving title to product in bulk storage at approved silos. Quotation in Rands per ton
Options contracts American type, puts and calls. Contract months are March, May, July, September and December. Underlying assets are futures contract. Quotation in whole Rand per contract.

 

Futures
Options
White Maize White Maize
Yellow Maize Yellow Maize

Wheat

Wheat
Sunflower Seed Sunflower Seed
Spot White Maize  
Spot Yellow Maize  

 

Contracts specifications

Futures
White Maize White maize of African origin grade WM1, 100 metric tons, March, May, July, September, December,
Yellow Maize Yellow maize of African origin grade YM1, 100 metric tons, last trading day is eighth last business day of March, May, July, September, December
Wheat Bread Milling Wheat meeting protein, specific weight, moisture and falling number criteria with fall back positions for protein and specific weight (specified origin), 50 metric tons (100 metric tons for MAY & JUL Contracts), last trading day is eighth last business day of March, May, July, September, December
Sunflower Seed FH South African Origin high oil content sunflower seeds meeting specified criteria, 50 metric tons, last trading day is eighth last business day of March, May, July, September, December
Spot White Maize White maize of African origin grade WM1, 100 metric tons, last trading day is eighth last business day of January, February, April, June, August, October and November
Spot Yellow Maize Yellow maize of African origin grade YM1, 100 metric tons, last trading day is eight last business day of January, February, April, June, August, October and November

 

Membership Requirements

A member of Safex shall be registered in one of two classes, namely, as a clearing or non-clearing member, and in one of two categories, namely as a broking or non-broking member.
Clearing members are required to deposit financial collateral with the clearing house before they start any trading or clearing activity. Non-clearing members shall enter into a clearing agreement with one clearing member at a time.
A broking member may be a clearing member or a non-clearing member; and shall be in adequacy with capital requirements by the exchange.
Membership is granted by the Executive Commitee of Safex.

There are currently 59 members of the Agricultural Makets Division of Safex.

Clearing

The Safex Clearing Company (Pty) Limited (Safcom) was formed in September 1988 in order to ensure widespread trust in the independence of the exchange and clearing house. Safcom took over the management of the informal futures market in April 1990 and Safex was granted an official license from the Financial Services Board in terms of the Financial Markets Control Act on 10 August 1990.

 

Prospective developments

Safex AMD will continue to look to providing the deregulated agricultural market in South Africa with an efficient price discovery mechanism and an effective price risk management facility. Where and when possible, these facilities will be extended to the Southern African region. If the market so desires and a suitable platform can be established to add value to the market, Safex AMD will lend its expertise and integrity to the establishment of an electronic physical market for agricultural products in South Africa.

 

Regulator

The Ministry of Finance of South Africa is acting as a regulatory body.

The law currently into force is the Financial Markets Control Act, 1989.

Statistics

 

 

Last update: 09.01.2001

 

 
 
Under development