Argentina Cuts Access to Futures Market After Record Trading

  • Onshore futures market Rofex halts trading until Nov. 4
  • Move may allow the central bank to slow currency intervention

Argentina is making it harder to buy dollars in the onshore futures market in a move that may allow the central bank to spend less on propping up the peso.

The nation’s securities regulator published a resolution in the official gazette on Monday, raising the collateral needed to invest in futures trading to 20 percent from 12 percent. The local futures exchange market, known as Rofex, halted trading until Nov. 4.

Trading volume on the Rofex more than doubled from a year earlier to the highest on record last month as investors sought to profit from the growing breach between prices in the onshore and offshore markets. The difference is a result of the central bank’s daily contract sales on the Rofex market in an effort to quell expectations of a peso devaluation.

"There’s now a greater opportunity cost by having to make the collateral in pesos, so it will partially reduce demand for Rofex contracts," said Alejo Costa, the head of research at Puente. The resolution will limit investors’ access to the Rofex futures market, allowing the central bank to decrease its intervention, he said.

The resolution, which applies to new contracts, also stated that collateral must be in Argentine pesos. Previously investors could pledge pesos, dollars or bonds as collateral for their investments.

Prices in the onshore market currently suggest the peso will trade at 9.9 per dollar in the next three months, compared with 16 pesos per dollar in the offshore market. The black-market peso trades at 15.7 pesos per dollar compared with the official rate of 9.5.

Bank of America Corp. currency strategist Ezequiel Aguirre recommends buying future dollar contracts onshore and selling them offshore to gain the difference between the two.

The new resolution makes Rofex contracts more expensive,“but since the difference between offshore contracts and Rofex is so high, the trade is very attractive even after this change,” he said.

While the central bank does not publish data on futures contracts it has sold, they may total as much as $10 billion, according to consulting firm Elypsis, the only company to correctly predict the outcome of Argentina’s presidential elections last month.

The central bank is intervening even as its foreign-currency reserves hover near a nine-year low. Members of the country’s opposition party lodged a complaint against the central bank on Oct. 30 for "defrauding the public administration" by selling dollar futures at an artificially low rate.

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