(MENAFN-Khaleej Times) Dubai exchange and China bourse plan four contracts in emerging currencies and spot gold
The Dubai Gold and Commodities Exchange, or DGCX, and Dalian Commodity Exchange of China, announced on Wednesday that they would begin trading plastics futures this week to enable buyers and sellers of the commodity to hedge against price swings.
The plastic futures, the first of several new contracts the Dubai-based bourse plans to launch this year, is also expected to give a new impetus to the GCC’s thriving plastic manufacturing industry by creating a liquidity pool, said Gary Anderson, CEO of DGCX.
This year, the derivatives exchange plans to launch futures contracts in four emerging currencies, spot gold and MSCI Indian index.
The trading in renminbi, ruble, won and rand futures, which will be launched in six months, will help investors hedge their financial risk in China, Russia, South Korea and South Africa, said Anderson.
In July 2013, DGCX launched Sensex Futures, the first ever-Indian equity index futures contract to be listed on an exchange in the Middle East and North Africa region.
Speaking to Khaleej Times on the sidelines of the Middle East Plastics seminar, Anderson said the concurrent launch of DGCX and Dalian polypropylene contracts is designed to raise substantial liquidity for global trading of the products. The contracts will go live on Friday.
He said the polypropylene futures, the first ever in the region, would also help create a transparent market and new pricing benchmark.
The contract is sized at five metric tonnes, with the contract price quoted in US dollars per MT. Physical delivery, which is to be made available in Dubai for the DGCX-listed contract and in China for the Dalian-traded security, will ensure price convergence between the futures market and the physical market.
DGCX has approved leading warehouses in Jebel Ali and Dubai World Central Free Zones for the delivery of the product.
The GCC region produces more than 50 million tonnes of plastics a year with a significant percentage being exported to the Far East. The industry in the region is on track to double plastics production in five years given its annual growth of 16-17 per cent, said Anderson.
“Market participants currently do not have a means for effectively hedging against price fluctuations. The listing of our polypropylene futures contract will fill this gap. We believe this contract will be a key risk management tool for all participants in the plastics supply chain, including producers, traders, convertors and end-users,” said Anderson.
“We have timed our contract launch with that of DCE to maximise liquidity and provide trading opportunities between the two contracts. There are a large number of plastics producers in this region while China, the largest consumer of plastics in the world, accounts for 44 per cent of exports from the GCC,” added Anderson.
He said DGCX daily turnover is expected to rebound to last year’s level of $3.5 billion by the second quarter. In 2013, the bourse recorded 46 per cent surge in trading volume and 36 per cent jump in turnover that reached $435 billion.
Li Zhengqiang, CEO of Dalian Commodity Exchange, said the synergies between the two contracts would bring substantial benefits to the plastics market.
“Though China is the largest importer of polypropylene, participants in the market have been exposed to significant price risk for several decades. We have been working with DGCX to structure a similar plastics contract that helps the plastics industry to hedge their exposure effectively. We strongly believe that listing both our contracts on the same day will create significant liquidity and trading opportunities for plastics traders across the world,” said Zhengqiang.
—
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.