The Dubai Gold and Commodities Exchange (DGCX) has launched three new contracts to further diversity its product suite.

It includes the India Gold Quanto Futures, Indian Rupee Quanto Futures and Mini Dubai Polypropylene Futures, said a statement.

The exchange also plans to upsize its existing Plastics Futures.

The new contracts will go live on June 5, it said.

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.

Gaurang Desai, interim chief executive officer of DGCX, said: “We are excited to introduce a new set of contracts developed to meet the ever-growing needs of our member community. Quanto products are very unique not just in this market but worldwide.

“Our Indian Quanto contracts will offer great benefits to DGCX market participants, primarily by offering them immunity from exchange rate fluctuations apart from providing significant arbitrage opportunities. The new Quanto contracts expand the value proposition of our Indian product suite and take us to the next level in terms of hybrid gold capabilities. ”

DGCX India Gold Quanto Futures contract will provide price discovery and gold trading opportunities for offshore traders to access Indian markets, one of the biggest gold consuming countries in the world.

The new contract will trade before and after the closure of the Indian markets, which offers traders increased trading opportunities.  It will be cash settled, denominated in US dollars, and sized at 1 index point.

The addition of the Indian Rupee Quanto contract will help DGCX further enhance its market share in the global Indian Rupee futures market. It will enable traders to mimic Indian Rupee returns on the USD/INR contract in US dollars, which helps amplify their potential returns.

“While DGCX’s current Indian Rupee product suite is essentially used by arbitrageurs and hedgers, the new DGCX INR Quanto contract is designed for traders who take a directional call on the Indian Rupee. The contract will supplement the Exchange’s existing Indian suite of products by providing traders with an outright quote on the USD/INR foreign exchange rate and inter- arbitrage opportunities,” Gaurang added.

The DGCX INR Quanto contract will be cash settled with a multiplier of 100 to the value of  $1 in Indian rupee terms. The value of the Quanto contract is likely to stay between $6,000 and $7,000 – making it twice the size of DGCX‘s mini Indian Rupee contract and five times smaller than the main Indian Rupee contract.  

DGCX will expand its hydrocarbon portfolio with the introduction of a Mini Dubai Polypropylene Futures sized at five metric tonnes. The contract will be cash settled to enable market participants to maximise its financial use.

The exchange will also amend its existing Plastics Futures contract by upsizing it from 5 metric tonnes to 25 metric tonnes to align it with the size of a container load, making physical delivery more convenient for market players.

“The two Dubai Polypropylene contracts have been structured differently to cater to participants across the plastics supply chain as well as to the financial participants, so that all parties are able to effectively hedge their polymer risks,” Gaurang said.

The new contracts will be cleared by the Dubai Commodities Clearing Corporation (DCCC), a wholly owned subsidiary of DGCX, he added. - TradeArabia News Service