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Posts Tagged ‘Futures’

If you ask me – Kenya is ripe for a formal Futures and Commodities Market/Exchange.

It was reported (and I paraphrase), that we have had a 561% increase in milk production since 2003 – exponential growth! The milk handling agencies are hard pressed as to what to do with all this milk ( Duh – seriously!!!!!) There is talk of an expected bumper harvest in Eastern Kenya (note that this is an area that is usually drought- stricken, but thanks to donor seed provision programs, people are actually talking about bumper harvests), prices of food are falling due to surplus in markets and farmers are complaining of losses……

Flip- side: People are dying of hunger in some areas in Kenya.

Where is the balance? Isn’t it about time we had a Commodities market in Kenya? I believe so….

For those that know I am out of Financial Markets for a minute working on something that is near and dear to my heart. For those that do not know – this post here will help shed light on that….

I have put Margin Analysis, trading account structuring, Month End Close Cycles, Reconciliation and what not on hold for the minute I am “away” from financial markets – for now! I know I will work in Financial Markets sometime soon or in the future in some capacity, because after all, I have a flair for (I am just saying lol! :D), but my attention right now is focussed elsewhere and I intend to give that 110%, heart and soul.

Nway – that being said – I find it entirely difficult to dis-engage myself from what is going on in markets, or my friends make it difficult for me to do so hahaha! Someone ( I will not mention names :-)), told me I have 2 options concerning my “relationship” with markets – either get a restraining order or get married to them…..I chose neither and instead decided I will have an “affair” with markets ( NYSE, Futures, Commodities and Derivatives et al) and hope “my guy” ( what I am currently immersed in) , doesn’t get jealous.

If you are a proactive mind out there that believes we can get to getting to a commodities market – please begin the “Think- Tanking” Process and holla at me to join you. Seriously! I know for a fact that I do have something significant I can contribute towards that end….

There is not a good reason for having such losses and food asymmetry in the country when we can manage our resources, potentially very effectively with a commodities market.

Please take a minute to read my blog post on Futures Markets in Africa and subsequent comments and I think a lot of us think its about time – now for some action!

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I know South Africa, through the Johannesburg Stock Exchange (JSE), and SAFEX (South African Futures Exchange) has a listing for Exchange – traded currency Futures and for Agricultural Futures respectively – and that’s about all I know about Futures Markets in Africa ( because maybe that’s all there is to know?)

I strongly believe that Africa can have a very robust and all that Futures Market if we are willing to work towards putting the mechanisms in place. I mean, we have the “items” that should warrant an active and thriving Futures Market. Take your pick from the following: Crude Oil, Gold, Silver, Cocoa, and Corn etc… We have them all! right? Right!

I have had some experience (both good and bad) concerning Futures Markets, commodities trading etc that make me believe, it is quite “easy” to get a Futures Market going in a lot of countries in Africa.

My most memorable experience concerns the Initial Margining process. Here we go:

So the Chicago Mercantile Exchange (CME) and the Intercontinental Exchange (ICE), and I think all the other Futures Exchange Markets use the SPAN model in the initial margining process.

A while back, I was challenged at work to “try” replicating the model for our own purposes. So I began the process and quickly realized, yah, ok, this is going to be a long one!

Between figuring out how our commodities offset in terms of spread credits, to figuring out all the other factors in the model, risk arrays and scanning losses, outright margins, inter-commodity credits etc, my work was cut out!

A few months later, after: spending enough time on the New York Mercantile Exchange (NYMEX), ICE and Chicago Board of trade (CBOT) websites, creating a good number of spreadsheets, having continuous and incessant conversations with contacts I knew that had more knowledge on the workings of SPAN model than I did (that I was sure to thank later), I finally had IT – Yeeeeehhh!!

Then now, I had to translate that into something that means something for our business – a whole totally different story altogether. I was tried and tested, but I grew tonnes from the experience.

What is stopping us from getting on the learning curve to developing Futures markets in Africa? We already have Stock exchanges that are doing ok – how about getting the Regulatory machinations going so that some time in the future, we can have a Commodities Market going? We can learn the basics from the other World Futures Exchanges and build our own! I, for one, would just TOTALLY, love being on such a “band – wagon” 😉

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