Productive first quarter for JSE Commodity Derivatives

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The Commodity Derivatives Market of the Johannesburg Stock Exchange (JSE) reported a productive first quarter for 2021. Globally, commodity prices have been well supported and South Africa is no exception, with the overall value traded up by 21% compared with the same period last year. The total contracts traded remained over 800 000 for the quarter, but they did reflect a small decline of 3,8% compared with the same period last year. 

The JSE also published an update to the Detailed Agricultural Contract Specifications after extensive conversations with industry role-players over the course of last year. The enhancements particularly focus on the requirements that the JSE set for each of its approved storage operators and provide clarity regarding access to products represented by JSE silo receipts.

The JSE has been able to propose additions and amendments to the requirements for JSE-approved storage operators because of detailed input from all market participants. This includes the constructive submissions received from storage operators that play a crucial role in guaranteeing the quality and quantity of products, as represented by the JSE silo receipt.

It was also encouraging to note an increase in overall physical deliveries by 13%, or just over a total of 285 000 tons of grain for the main hedging month of March 2021. This reaffirms the confidence in the JSE’s physical delivery process where physical delivery in completion of a futures contract, supports price convergence with the underlying spot market.

To ensure robust verification and transparent audit processes, the JSE has stepped up random inspections at registered storage facilities. To this end, 28 storage sites have been independently audited during quarter one to verify physical stock as well as operations at each of the sites.

These independent audit reports have all confirmed the quality and quantity of stock held to be in order as per the storage operator’s commitments to the JSE. It has also recently commenced publishing a list of all storage sites inspected on its webpage for the market to easily reference.

The integrity of the JSE silo receipt and physical delivery process in completion of a futures contract has always remained a priority for the JSE in providing a premier price risk management platform for the South African grain market.

The exchange acknowledges that operating a commodity derivatives platform presents its own set of challenges from time to time, however, the JSE remains committed to continually improve the efficiency of the price risk management platform that was established over 26 years ago. – Press release, JSE