TFEX introduces futures for forex market

The Thailand Futures Exchange (TFEX) is planning to launch two new foreign exchange futures (FX Futures) at the end of this month to capture high demand, amid a significant increase in the volatility of foreign currencies in recent years.

TFEX managing director Rinjai Chakornpipat said the new products — EUR/US$ Futures and US$/JYP Futures — are quoted and traded in foreign-denominated currencies, but settled in the local currency. The initial margin is required in baht.

EUR/US$ Futures is a cash-settled futures contract based on the exchange rate of the euro versus the US dollar, while US$/JYP Futures is based on the exchange rate of the dollar to yen. The former has a multiplier of 30,000 baht, while the latter has a multiplier of 300 baht.

Ms Rinjai says traders and investors need to have better knowledge and understanding about futures products.

The FX Futures products are available for trade on weekdays from 9.15am to 11.55pm.

“The volatility of the global currency market has intensified over the past 1-2 years, affecting business operators, especially exporters, who are dealing with many currencies,” Ms Rinjai said.

To better manage currency fluctuations, exporters can hedge against volatility by purchasing hedging products from banks or buying currency futures contracts from the futures market, she said.

For example, TFEX launched the US$/baht product in 2012, which had trading turnover of about 1,000-2,000 contracts per day in the first year. But with market volatility the past year, the US$/baht futures trading turnover on TFEX increased sharply to 14,000 contracts a day. In the first nine months of 2022, trading turnover jumped to 35,000 contracts per day.

Ms Rinjai did caution that traders and investors need to have better knowledge and understanding about futures products. As a result, TFEX will continue to provide training for member brokers and investors about the new products until the end of the year. In addition, TFEX has arranged for many member brokers to be market makers to manage liquidity trading of the new products.

According to the Futures Industry Association, currency futures products expanded globally by around 30% in the first nine months of this year.

TFEX had 564,000 contracts per day traded in the first three quarters, compared with 560,000 contracts per day for the whole of 2021. The top three active futures in terms of value are single stock futures, SET50 index futures, and gold online futures.

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