DGCX single stock futures contract part of plan to grow product range

The Dubai Gold and Commodities Exchange (DGCX) said its single stock futures contract trading US and Indian blue chips is part of the derivatives bourse’s plans to expand its product range.

The single stock futures, launched on January 15, will enable local and regional investors to trade five US and 10 Indian stocks, taking advantage of hedging opportunities in a time of global equity turmoil.

The US stocks are: JP Morgan; Google; Microsoft; Facebook; and Apple. Indian stocks include Tata Motors and Reliance.

The list could be expanded by the end of this year to 100 stocks that may include blue chips from other stock exchanges, depending on customer feedback.

“Due to the fluctuations and volatility in equity markets, those [single stock futures contracts] would provide them [investors] with an alternative to hedge those risks,” said Gaurang Desai, the chief executive of the exchange. “Hedging and price risk management has become an extremely important aspect for doing business. People tend to lose more money if they don’t hedge, or not hedge properly.”

Global equities have fluctuated this month as a slowdown in China, the world’s second-biggest economy, has led to an equity market rout that has shaved 22.3 per cent of the Shanghai Composite Index to date this year.

DGCX, the only derivatives exchange in the Middle East, launched 11 contracts last year, including a yuan futures contract and a spot gold contract. This year the exchange is bidding to launch agricultural contracts such as black pepper, cotton and pulses.

“We have lots of producers and suppliers here who are using Dubai as transshipment hub [for agricultural products],” said Mr Desai. “Agricultural products would depend on warehousing and other facilities. We need a community to gather around the product in order for it to succeed.”

Agricultural commodities would be a new asset class for DGCX, which currently trades currencies, equities, energy products, precious metals and base metals.

The exchange would also like to expand its energy and currency products.

“What is most important for the region right now is energy products,” said Mr Desai. “We will try to enhance them further by launching some products in the energy segment as well.”

More than 14.5 million contracts valued at US$379 billion were traded on the DGCX last year, an increase of 23 per cent from a year earlier. The exchange is hoping to emulate the success of the past decade, where traded volume rose at a compound annual growth rate of 43 per cent.

The DGCX’s most successful contract so far has been the Indian rupee contract, with average daily volumes of $1.5bn.


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