8.7.4-FUTURES MARKETS-CLEARING SERVICES, TURNOVER AND LIQUIDITY
Clearing services, turnover and liquidity
are provided by the exchange’s clearing members, who are liable for the settlement of all transactions. Clearing members must maintain the minimum net working capital set by the exchange’s clearing division and must post collateral to finance the clearing fund. They are also subject to limits in respect of the trading positions for which they accept liability.
Commodity brokers and local traders are in turn bonded to the clearing members for all transactions they execute, from registration to final settlement. Thus, as in Japan, there is no clearing house to take the role of counterpart in all transactions as is the case in New York and London.
Turnover - arabica futures and options
In 2004 the total arabica futures turnover was 620,997 contracts (against 478,544 in 2003) or some 62 million bags. Turnover in arabica options was about 5 million bags in 2004. Arabica futures turnover for 2005 was 485,902 contracts, equivalent to about 48.6 million bags.Options turnover was about 2 million bags only.
In 2006 the turnover in arabica futures rose again to 528,462 contracts, equivalent to about 52.8 million bags. Options turnover came in at 30,602 contracts (equivalent to about 3 million bags). Of these only 2,390 options or just less than 8% were actually exercised.
The strong growth in arabica futures continued in 2007 with 808,286 contracts traded, equivalent to just over 80 million bags. Trade in options also expanded quite considerably to 83,967 contracts (equivalent to some 8.4 million bags) but only about 4% were actually exercised.
In calendar year 2008 arabica futures traded were 838,090 contracts or almost 84 million bags but the open interest at year-end was just 15,066 contracts. 2008 trade in options fell back to 54,853 contracts with the year-end open interest standing at 5,831 contracts.
In 2009 596,435 futures contracts were traded but again the year-end open interest was low at 18,538 contracts. Trade in options was just 5,155 contracts.
In 2010 640,754 futures contracts were traded and the year-end open interest was 14,108 contracts. Trade in options was 17,453 contracts.
Turnover - robusta futures and options
Robusta futures turnover was minimal in 2003 at just 405 contracts or 40,000 bags, with nil open interest at year-end, and no trade in options at all. In 2004 only 20 contracts were traded whereas in 2005, 2006, 2007 and 2008 no trade in either robusta futures or options was recorded. This is probably due to increasing demand from domestic roasters for Conillon robustas – after all, Brazil is the world’s second largest consumer of coffee, surpassed only by the United Sates of America. In any event the contract has been discontinued due to the obvious lack of liquidity – interestingly, the same occurred in the early 1990’s.
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