Afet changes rubber contract terms again
Source: Bangkok Post / July 26, 2007
The Agricultural Futures Exchange of Thailand (Afet) has again revamped the contract terms for ribbed rubber smoked sheet, the most active commodity on the futures market, in an effort to increase market liquidity, said Pornchai Patiparnprechavut, a senior vice-president.
The new contract for ribbed rubber smoked sheet, or RSS3, is scheduled to take effect tomorrow, Mr Pornchai said yesterday.
He pointed out that one of the critical changes dealt with rubber quality standards. It will not only meet requirements of the so-called Green Book, or International Standard of Quality and Packaging for Natural Rubber Grades, but also those of major tyre manufacturers. In addition, those trading rubber would be guaranteed by rubber sheet producers for 60 days.
''With better specifications, more international rubber traders may come to trade in the market since that would enable them to deliver real products to tyre manufacturers,'' he said.
The maximum position limit for single investors would rise to 3,000 contracts from 500 now. The limit for each hedger in every single delivery month would increase to 500 contracts from 100.
Trading contract lengths will be extended to a maximum of nine months instead of six months. That would ensure hedgers that they could deliver rubber in the physical market.
However, three out of 10 brokers said they had heard from Afet about the changes but did not know exactly when they would take effect.
They agreed that new contract terms could benefit investors and
hedgers, as well as improve liquidity.
''Based on our historical trading statistics, the market is less liquid when a delivery month is coming. Three more months would help since investors do not need to deliver rubber,'' an analyst said.
The three-year-old futures exchange still faces liquidity problems, admitted Mr Pornchai. It's also a problem that investors see the Afet as a market for trading farm products, he said. It has worked hard to bolster its image as a derivatives market.
The Afet handled an average of 100 contracts per day in its first year, with that figure jumping to 600 last year. It expects to see 800 contracts each day by the end of this year.
To promote the futures market, the Afet would hold a commodity futures event at the Stock Exchange of Thailand on August 4 to educate investors about products and opportunities. A highlight will be real-time simulations of buying and selling.