Currency Trading Opportunities at DGCX

Transcription

1 Currency Trading Opportunities at DGCX

2 About DGCX Region s 1 st and largest derivatives exchange Commenced trading in November 2005 Since launch over 6.8 million contracts traded with a value in excess of US $323 billion 48% year-on-year growth (2006/07); 26% year-on-year growth (2007/08); 32% yearon-year growth (2008/09); 28% year-on-year growth (2009/10), 41% YTD Operates the region s sole commodity derivatives clearing house, Dubai Commodities Clearing Corporation (DCCC) 230 members and 86 clearing members. Regulated by the Emirates Securities & Commodities Authority (ESCA)

3 The DGCX Advantage Key economic indicators all available on one single Exchange in the Middle East (Metals, currencies and energy.) Business transacted and cleared in the UAE and so funds remain in the region offering the benefits of local taxation and regulation Low transaction fee structure - one fee for all participants, whether or not members All participants pay the same margin, whether commercial or non-commercial

4 Product Portfolio Metals: Gold Futures Gold Options on Futures Silver Futures Steel Rebar Futures FX: INR/USD Futures EUR/USD Futures GBP/USD Futures JPY/USD Futures AUD/USD Futures CAD/USD Futures CHF/USD Futures Energy: WTI Crude Oil Futures Brent Crude Oil Futures Fujairah Fuel Oil Futures

5 Year on Year Volume Growth Contracts 2,500,000 $104,183 Value ($) 105,000 2,000,000 1,500,000 $34,678 $57,429 $78,715 1,503,905 1,925,463 85,000 65,000 45,000 1,000,000 $15, ,439 1,142,493 25, , ,541 5, No of Contracts Value in Million $ -15,000

6 The Global FX Market The global FX market has grown significantly in recent years to reach an estimated daily turnover of US $4 trillion, a 20% growth on 2007 volumes Growth is driven by greater activity of more sophisticated traders (algorithmic, HFT), and expansion of private investor participation The growth in FX trading, coupled with the need to manage counterparty and operational risk, offers vast opportunities for DGCX, its members and the FX trading community Volatility has encouraged market participants to use futures contracts for both investment and to manage price risk DGCX has seen 50% growth in currency futures volume year to date. Growth has taken place principally in Indian Rupee,1757% YTD

7 Aug Aug-10 9-Sep Sep Oct-10 9-Nov-10 1-Dec Dec Jan Jan Feb Mar Mar-11 Volume (Contracts) Value (USD Million) Indian Rupee Futures a particular success story New daily record: 12,499 contracts, US $ mn A Rupee Volume Rupee Value

8 The DGCX Indian Rupee / US Dollar Futures Contract World s first Indian Rupee futures contract Only Indian Rupee Futures Contract Outside of India Cash Settled in USD based on RBI Reference Rate Extended Trading Hours: 8.30am 11.30pm Dubai time (EST -1.5) Large Contract Size (2 Million Rupee) = easier fungibility with NDF Market Tight Bid & Offer Spreads. Simple Fee & Competitive Margin Structure

9 DGCX v Non-Deliverable Forward (NDF) market Counterparty Risk Contract Size US $1 million notional value Trading Example Spread DGCX Indian Rupee Futures Reduced Counterparty Risk. DCCC offers settlement guarantee fund and zero defaults One DGCX contract (DINR): R 2 million (approx. US $45k) US $1 million = 23 lots (contracts) on US $45k notional value per contract Typical spread on DINR after 5pm IST: 3 DGCX pips which is equivalent to 3/4 paisa For notional value US $1 million (23 contracts), the total entry and exit costs are: US $460 Margin On DGCX, the margin is c. 2% Trading DGCX Indian Rupee Futures are available to trade electronically Non Deliverable Forward Trades are transacted bi-laterally with higher default risk Minimum contract size: US $100k US $1 million notional value Typical spread in NDF market after 5pm IST: 4 to 6 paisa mark up and mark down which equates to total 8 paisa For notional value US $1 million, the approx. total entry and exit costs are: US $1,739 In the NDF market, the margin is c. 5% The NDF market is predominantly traded over the phone via a broker

10 DGCX Indian Rupee Futures 12 Months Comparison 180,000 $8, ,000 Volume Volume $7, ,000 Value Value $6,000 Volume 120, ,000 80,000 60,000 $5,000 $4,000 $3,000 Value (USD Mln) 40,000 $2,000 20,000 $1,000 0 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar $0

11 Market Participation on DGCX 80% of our volumes originate from members based within the region 20% of our volumes originate from Europe, the US and East Asia A range of market players participate in DGCX markets: o o o o o o Commercial institutions Funds and asset managers Arbitrageurs High New Worth Individuals Proprietary Traders Private investors

12 Market Access and Clearing Access to DGCX markets for trading: Via a Broker Member (orders can be placed over phone via member or onscreen via a Trader Workstation) Direct access as a member using DGCX own front end Direct access as a member using own or vendor software on FIX Protocol Access to DGCX Prices: Via a work station; a member; a quote vendor or the DGCX website (15 minute delayed) Clearing (DCCC): Real-time position monitoring Well funded Settlement Guarantee Fund (SGF) Zero defaults since inception Capital efficient margin levels

13 Membership Structure DGCX membership is open to corporations or partnerships Members typically located in the UAE; can be located outside from some jurisdicstions Broker Membership: Broker Members are entitled to trade on all the products listed by DGCX either on a proprietary basis or on behalf of clients Trade Membership: Trade Members are entitled to trade on a proprietary basis only for all products listed on DGCX Introducing Broker Membership: An Introducing Broker Membership entitles the applicant (Introducing Broker) to introduce clients to Broker Members for transacting business on DGCX Please note that an Introducing Broker is not permitted to handle Client s funds/securities

14 Benefits of Trading DGCX Currency Futures Contracts Ideal location and trading hours which cross over between time zones of Europe & Asia Unique Indian Rupee Futures (INR) contract, with distinct trading opportunities Liquid markets and tight spreads provided by market makers throughout trading day on the INR Essential mechanism for managing price risk i.e. Hedging, for example to FX rate exposure or to protect gold inventories Arbitrage trading opportunities with other international markets DGCX futures contracts are cleared via Dubai Commodity Clearing Corporation (DCCC), removing counterparty credit risk and providing guaranteed settlement to each transaction

15 Summary DGCX is well established with a strong membership base and growing volumes Wholly owned Clearing House and regulated by the UAE regulator Robust product portfolio and strong product pipeline Distinct competitor advantages and trading opportunities Well placed to capture growing demand for currencies and Indian Rupee exposure and risk management