Argentina Clearing Sets New Limits on Onshore Currency Futures

  • Moves follows days after country raised collateral requirement
  • Restrictions may help cut costs of central bank intervention

The organization that clears Argentine onshore currency forwards acted to limit the amount of contracts investors can hold, days after the government increased collateral requirements in a move that may allow the central bank to spend less on propping up the peso.

Argentina Clearing, a clearing and settlement organization that specializes in futures contracts, published a resolution Tuesday stating that clients making new purchases may not hold more than 5,000 dollar future contracts per maturity, or 10,000 contracts in total effective immediately. The regulation also notes that clients holding dollar futures bought or sold before Nov. 2 may not hold more than 100,000 contracts.

On Monday, the securities regulator raised the collateral needed to invest in new futures contracts to 20 percent from 12 percent. The restrictions come as concerns mount that the central bank’s daily contract sales on the local futures market are creating a growing liability for the government before the country’s next administration takes office next month. 

"I think they’re limiting the market going forward," Rafael di Giorno, a director at Proficio Investment SA, said in an e-mail. "They restricted demand by asking for 20 percent of collateral in cash. As if that wasn’t enough, now they’re adding a new limitation to the number of contracts."

The new regulations don’t apply to the central bank.

Trading volume on the onshore futures market, known as 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 onshore and offshore markets. Prices in the onshore market currently suggest the peso will trade at 10.2 per dollar in the next three months, compared with 15 pesos per dollar in the offshore market.

While the central bank doesn’t 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 first-round presidential elections last month.

The central bank is intervening to quell expectations of a peso devaluation, according to di Giorno, 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.

"What’s striking about all these changes is that they’re coming just days after the filing of the complaint against the president of the central bank," di Giorno said. "Otherwise, things would have likely remained as they were."

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