The Dubai Gold & Commodities Exchange (DGCX) on Monday announced the launch of its Pakistani rupee (PKR) futures contract and said it is now available for trading.
As the first-of-its-kind on any regulated exchange in the world, the contract will provide members and their clients with the ability to hedge exposure to the Pakistani rupee. It will also provide trading opportunities against the wide range of existing foreign exchange currency products that DGCX makes available for trading.
“We are pleased to finally launch the highly anticipated PKR futures contract, which complements our suite of existing products, and enables DGCX market participants to tap further into the Asian markets,” Les Male, CEO of DGCX, said in a statement to Khaleej Times on Monday.
“As we move into the second quarter of 2021, we continue to see interest in more currency products — and are exploring opportunities to launch similar initiatives soon,” he said.
The contract size is Rs2,000,000 of base currently and will be traded and cash settled in US dollars based on publicly available reference prices displayed on the last trading day. Trading hours will be from 07:00 to 23:55, Gulf Standard Time.
The contract will allow regional market participants with the ability to hedge exposure to the Pakistani rupee, on a globally recognised, regulated and secure platform. Additionally, the Dubai Commodities Clearing Corporation (DCCC) will provide margin offsets for calendar spreads in PKR Futures, which will result in greater capital efficiency for DGCX members.
Rising interest in currency derivatives
Yogesh Khairajani, global market strategist at Century Financial, said DGCX has launched PKR futures contract with 12-month expiry. Each contract is based on Rs2 million which will be cash settled against the US dollar. The new product launch comes as DGCX is seeing rising interest in its other currency derivatives products.
“For PKR, this will be the first-of-its-kind on any regulated exchange outside its home country. Pakistani nationals and businessmen form a considerable chunk of the UAE population and share a major contribution to the economy,” he said.
Good for exporters, importers
For Pakistani nationals and companies, Khairajani said the contract will provide hedging exposure through the availability of the new contract. For instance, an importer of goods worried against spike in the dollar rates against the rupee, can go long on the currency pair in order to offset his underlying losses in a PKR depreciation scenario. Similarly, an exporter of goods worried about any rise in the rupee value against the dollar can look to lock in the gains by selling the currency pair at the current rate.
“The hedging would also provide the exporter/importer with better realisation in their balance sheet items since the forex uncertainty is reduced to considerable extent,” he said.
Another major positive is DCCC providing margin offsets in case of calendar spreads in the PKR futures contract, he said.
“Under calendar spread strategy, the participant goes long and short on same underlying instrument across multiple expiries. Currently, the PKR April expiry contract (28/04) and May expiry contract (27/05) have OI build up of 10 lots and three lots, respectively. The volumes are expected to rise as more and more participants enter the contract,” Khairajani said.
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