Singapore Mercantile Exchange (SMX), the first trans-Asian multi-product commodity and currency derivatives exchange, today announced the successful completion of its first daily settlement of the E-Gold futures based on the Indian gold price.
The contract which went live on June 1 has witnessed a jump of nearly 3 times in its volumes with $16 million traded since its launch, SMX said in a statement here.
The launch of E-Gold futures takes SMX's product offering to 14 in continuance of the exchange's endeavour to offer more Asia-centric commodity futures.
India is the largest physical market for gold accounting for around 27% of global consumer demand in 2011 totalling 933.4 tonnes valued at USD 46.37 billion. There is a strong price correlation between Indian gold futures and international gold futures. The Indian market represents the fundamentals of Asia well.
The E-Gold futures contract is an ideal product for hedging and minimising basis risk by global entities with exposure to Asian physical market as represented by Indian market.
The contract provides market participants with access to risk management based on the most liquid benchmark gold market in the East via a transparent and reliable exchange platform, the statement said.
This contract will enable physical and financial entities with high exposure in the Asian gold market as represented by Indian market to effectively hedge their price exposure by minimising basis risk. The unique accessibility of the contract and strength of the underlying market would attract global participants, it said.
The SMX E-Gold futures contract has a convenient trading unit of 1 kg. With Indian prices quoted in US dollars per 10 gm, the contract offers a finer price increment of 5 US cents.
Cash settled against the benchmark Indian gold price, the SMX E-Gold allows for access to extended trading hours across multiple time zones. The contract offers attractive trading opportunities to global players, the release said.
With the very first few days of trading seeing turnover of nearly $16 million, the contract which is cleared and settled through the Singapore Mercantile Exchange Clearing Corporation (SMXCC) is expected to see added interest with more market participants from Asia, and rest of the world connecting to the exchange over the next few months.
