MN: Bourse Africa to launch commodity operations in six months
The pan-Africa multi-asset exchange, Bourse Africa, plans to start operations with trade in five commodity futures within six-seven months, Adam Gross, Head-Strategies, said. "We anticipate the launch of (commodity) spot and derivatives operations to take place in the first half of 2010," Gross said, adding, "On futures side, the bourse will launch commodity contracts having pan-Africa importance such as cocoa, coffee, cotton, maize, gold, and crude oil." Some of the contracts will be deliverable, and some would be cash-settled, he said, but did not give further details.
The crude oil contract will only trade African grade oil. "At a later stage, we would also be interested in launching base metals contracts such as copper and cobalt, because Africa as a continent is one of the leading producers of base metals in the world," he said.
On whether the exchange would launch diamond futures -- if launched, they would be the first in the world -- Gross said, "We are having discussions with miners, but don't have any specific plan at the moment."
On the exchange exploring tie-ups with other global exchanges for cross listing or settlement prices for contracts, Gross said, "It is possible, but that's not the part of our current plan."
BENEFITS OF FTIL-LINK
Financial Technologies (India), which picked up 60% stake in Bourse Africa in December, is the major promoter of the spot and derivatives exchange, headquartered in Botswana. The exchange has already received approval from the government financial services regulator Botswana International Financial Services Centre, and a trade license from Non-Bank Financial Institutions Regulatory Authority, Gross said. "Besides FTIL, other large African institutions are among the existing shareholders in the exchange," he said.
He said the exchange will start its membership drive in early 2010. "I expect a very large synergy (in trade time zones) with other exchanges under FTIL fold. At present, we do not have any specific time for linkage, but over a period of time, we anticipate to show interest with all the liquidity pools," he said.
Financial Technologies holds stake in India's MCX, Dubai Gold & Commodities Exchange, and soon-to-be launched bourses like Singapore Mercantile Exchange, and Global Board of Trade in Mauritius. Members of other bourses connected with FTIL, have already shown interest in joining the exchange, Gross said. .
HUB & SPOKE MODEL
The bourse will have a hub-and-spoke model with initial investment around USD 100 million, and will be centred in Botswana, Gross said. "The model is designed to build liquidity from across Africa's fragmented markets. It enables Bourse Africa to, at once, reap synergies across the countries in the continent, and liquidity whilst maintaining a rigorous focus on the individual country," he explained.
The exchange will not find it difficult to attract volumes as it has a presence in both spot and futures markets, he said. Gross said there is also a plan to start national-scale exchanges in all the 53 countries in the continent, depending on the success of Bourse Africa. There is very large growth potential for Bourse Africa as the continent exports commodities worth nearly $320 bln every year as compared with USD 70 billion and USD 120 billion from India, and China, respectively, Gross said.
