28 March 2006
Dubai: The Dubai Gold and Commodities Exchange (DGCX) announced yesterday it had received approval from the Emirates Securities and Commodities Authority (ESCA) to launch currency futures trading and expected to introduce it in three months.
The derivatives exchange said in a statement it will initially trade futures contracts in three currencies euro-dollar, yen-dollar and sterling-dollar with contracts maturing in March, June, September and December each year.
These will be deliverable contracts and will establish DGCX as the first exchange trading currencies in the Middle East.
"This is a big leap forward for our young exchange which has been in business for just four months. Dubai is fast emerging as a financial hub in the Middle East and the region and has a huge potential for currencies trading," said David Rutledge, a DGCX director.
Membership category
"At DGCX, we believe that a diversified range of products should be available for trading. Currencies will add to the existing product basket of precious metals along with contracts on steel, agricultural and energy products which will be traded on DGCX in the near future."
DGCX chief executive Framroze Pochara told Gulf News the exchange expected to introduce currency futures trading in two to three months.
This development positions DGCX among the handful of exchanges globally that offer trading on commodities and currencies under one umbrella and comes on the day when DGCX is launching futures trading in silver.
Average daily international foreign exchange trading volume stood at $1.9 trillion in April 2004, according to a Bank for International Settlements (BIS) study.
Futures Industry Association data show total volumes in exchange-traded foreign currency derivatives rose by over 57 per cent from 55.34 million in 2004 to 165.51 million contracts in 2005, DGCX said.
Currency derivatives products are very useful for all those who engage in international commodity trade for hedging the risk arising out of currency movements.
In fact most corporates having transnational operations use currency derivatives to hedge against adverse movements in exchange rates. Currency de-rivatives also form a large part of treasury operations for banks, hedge funds and investment houses.
DGCX said it would shortly announce the detailed contracts specifications and procedures for the existing or new members to participate in these markets.
This will include a category of membership to be known as Forex Trade Membership for those entities wishing to trade on DGCX currencies markets as principal.
National Bank of Dubai and HSBC have agreed to act as delivery banks for the purpose of settlement of DGCX currency futures contracts.
Currency futures trading is expected to generate interest among corporate treasuries, importers and exporters, professional and inter-bank proprietary traders, and retail participants in the region, who have been confined to banks and other large financial institutions for their foreign exchange market requirements.
By Staff Reporter
Gulf News 2006. All rights reserved.
