62 / 84
Junie 2015
60
The long position holder can therefore expect notice of deliv-
ery any day following last trading day within a five business day
period. Since a long position is required in the deliverable grain
futures contract e.g. WMAZ to process the delivery, if this is
not available a corresponding long and short futures position
will be created to accommodate the physical delivery – this is
similar to the process in the Spot Basis contract.
Settlement invoicing and processing transfer of payment of the
Basis Futures contract is thus done in a similar manner to the cur-
rent invoicing process except there will be no inclusion of the lo-
cation differential where applicable. The final Basis Futures mtm
will be referenced as at last trading day against the deliverable
futures mtm on the notice day of delivery in order to calculate
the final invoice value.
The requirements to introduce registered delivery points as a
Basis Future will be as follows:
We appreciate the JSE currently has over 250 registered
delivery points, and while we had considered consolidating
delivery points to link to a specific Basis Future, our ultimate
proposal to allow for the most efficient pricing is to allow for
each registered delivery point to trade at its own basis pre-
mium or discount.
The introduction of a specific delivery point will be subject to
the firm commitment to either bid or offer 50 futures contracts
(this then translates into either 5 000 tons or 2 500 tons de-
pending on the underlying product). The idea behind this is
to ensure focus around specific delivery points where there is
increased demand for the contract. Once there is open inter-
est, the initial requirement to bid or offer a total of 50 contracts
per registered delivery point will no longer be required and
clients can transact in single contracts. Should quantities
match with the bid or offer of 50 contracts be in smaller vol-
umes, the client who originally requested the Basis Future is
required to continue quoting with the intention that a mini-
mum 50 contracts ultimately form part of the open interest.
The introduction of the Basis Future on an existing registered
delivery point remains subject to the storage operator’s ap-
proval should the expiry month requested for trading go fur-
ther out than six months, otherwise the JSE will include the
registered delivery point as soon as we receive confirmation
of the demand. For any additional Basis Futures contract to
be added, the JSE must be informed before 14:00 on the day;
the contract will then be loaded onto the JSE systems and
be available for trading the next business day between 09:00
and 12:00. The JSE may extend this trading period if there is
a demand for this.
The existing storage operator commitments will remain, en-
suring that once a JSE silo receipt is issued; all commitments
are honoured by the registered operator. Short position hold-
ers will be required to negotiate directly with storage opera-
tors to secure storage capacity in order to meet any of their
Basis Futures delivery obligations.
To manage the risk of a seller not able to make delivery at
the specific point where the Basis Future premium was se-
cured, it is envisaged the contract will allow for an alternative
delivery at a point within a 50 km radius of the Basis Future,
provided the seller is responsible to compensate the buyer
for his or her logistical costs back to the reference point.
Alternatively the contract will be cash settled, with the seller
responsible to compensate the buyer the full difference in
basis value including the location differential component e.g.
on a final Basis Premium mtm of -R50. Assuming the loca-
tion differential for the delivery point was R350, the seller will
have to pay the buyer R300/ton cash penalty as final settle-
ment. This still has to be agreed with the market participants
and may still change.
This evolution of the basis trading platform to provide Basis Fu-
tures contracts is expected to improve transparency in the market
place and at the same time provide more alternatives to sellers and
buyers of grain wanting to hedge their basis premiums in advance.
The JSE is in the process of securing the necessary Clearing
Member and Risk committees support and also testing its cur-
rent trading and clearing platform with the aim to start trialling the
Basis Futures contract in the very near future. Once the go live date
is secure, the JSE will provide trading sessions for interested clients
to help them better understand the process.
Should you be interested in this, please email the Commodities
Team at the JSE at
commodities@jse.co.za .We look forward to
the next 20 years of providing price risk management tools to the
Commodity Sector.
An opportunity to discover basis premiums on a transparent
and JSE guaranteed platform
SA Grain/
Sasol Chemicals (Fertiliser) photo competition
ON FARM LEVEL
Money matters