The Johannesburg Stock Exchange will list interest-rate swap futures denominated in South African rand following a deal to use Eris Exchange LLC’s methodology for creating the products.
The agreement also allows the JSE the potential to list cross-currency swap futures and credit default swap futures, the bourse said in an e-mailed statement on Wednesday.
New international rules are pushing more derivatives onto exchanges as regulators seek to reduce the risk resulting from a trading firm defaulting on its obligation in a transaction. Unlike OTC products, those traded on exchanges are usually standardized and cleared by an organization that guarantees the contract will settle. Derivatives exchanges in the U.S., Europe and Canada have already created futures that mimic how swap contracts make payments and settle over the life of the trade.
The interest-rate instruments will be based on the Johannesburg Interbank Agreed Rate and will follow standard South African swap-market conventions, while using the methodology of Chicago-based Eris that allows the contracts to replicate cash flows of over-the-counter products, the JSE said.
The Johannesburg Stock Exchange did not specify a start date for trading in swap futures.