Dubai: Further diversifying its product suite, the Dubai Gold and Commodities Exchange (DGCX) said on Wednesday it will launch three new contracts — India Gold Quanto Futures, Indian Rupee Quanto Futures and Mini Dubai Polypropylene Futures.
The new contracts will go live on June 5, it said in an emailed statement.
A quanto is a type of derivative in which the underlying is denominated in one currency, but the instrument itself is settled in another currency at some fixed rate. The launch of the quanto products is aimed at enabling investors to gain exposure to the Indian gold and rupee market without being exposed to movements in the USD-INR exchange rate.
“It allows them to avoid the foreign exchange risk, which they otherwise take, so its kind of two in one benefit and essentially it is kind of safety net for the exchange rate risk. Both these products allows native prices for the global audience and more especially for the middle east and the regional investors here. So its bringing Indian products more closely to global audience,” Gaurang Desai, Interim chief executive officer at DGCX said.
Indian traders typically resort taking arbitrage opportunities between the COMEX and MCX price, so they have take extra hedge for USD-INR exposure.
“We want to provide more and more cross selling opportunities for our existing investors,” Desai said.
The rupee quanto is aimed at jobbers, however.
“It’s (the Indian rupee quanto) an interest rate play as well because in India there is one price and there is a converted price here. It is aimed at jobbers market, and not on arbitrage market as such,” Desai added.
Jobbers essentially take advantage of price distortions and bring in efficiency in the market.
“It’s an additional layer to the richness of market participation, and give more and more opportunities for investors,” he added.
