In Ukraine, for the first time, trading in futures contracts on grain was launched
August 2, 2017. Kyiv/Mykolayiv – The
Ukrainian Exchange, in cooperation with the State Agency of Reserve of Ukraine,
launched trading in deliverable grain futures contracts.
This news was announced during the
press conference by Oleg Tkachenko,
Chief Executive Officer of the Ukrainian Exchange.
offered new instruments – futures contracts with the delivery of underlying
assets – to the market. The first trade that ended in the delivery of grain
under the contract was performed today. Until that time, all futures contracts
traded in Ukraine had been exclusively non-deliverable –
which means without the delivery of an underlying asset. Contracts that started
trading on the Ukrainian exchange are different, because they lead to a real
change of the owner of agricultural produce," stressed Oleg Tkachenko.
A standard delivery contract for the
exchange was developed with input from experts of the USAID Financial Sector Transformation Project; specifications of
futures contracts and the revised Trading Rules were fully approved by the
National Securities and Stock Exchange Commission.
Futures contract with the delivery of an underlying asset is a contract under which the seller
assumes the obligation to deliver an underlying asset and the buyer assumes the
obligation to pay and accept the underlying asset at an agreed price and at a
time stipulated when entering into a contract. In our case, the delivery is
made by changing the registration of the ownership title to wheat stored in a
market needs this instrument that creates real benefits for all its
participants – producers, traders, financial intermediaries – with the most
important one being the possibility to hedge risks. Undoubtedly, a lot should
still be done to make this touchstone a sustainable instrument – it is
necessary to change the legal framework, create a transparent market with
transparent price discovery. I hope that our cooperation in this area will
continue," commented NSSMC
Chairman Timur Khromayev.
Futures contracts on wheat are
globally popular among producers who use them to hedge against price volatility
or negative trends in the agrarian market. There is also demand for futures
contracts from traders who make money on price volatility in the short and
After all technological processes of
trading in deliverable futures contracts on wheat are mastered, the Ukrainian
Exchange is willing to launch trading in one more crop – corn.
To implement the grain futures trading
project, the Ukrainian Exchange signed the memorandum of interaction with the
State Agency of Reserve of Ukraine (State Reserve). Its silos are used to store
grain that is a deliverable under agreements made in pursuance of futures
According to State Reserve Chairman Vadym
Mosiychuk, participation in the project will allow silos to increase
capacity utilization. "State silos
included in the State Reserve system are full market participants. Even now,
they confirm the availability of the necessary volume of grain to execute trades
and stand ready to ship it within 24 hours to any place in the country. Therefore,
we increase the profitability and value of the company. The winner is, first of
all, the State, because it’s not so much about profit as it is about trust in
the new instrument in general," emphasized Mr. Mosiychuk.
According to Vadym Mosiychuk, silos of
the Mykolayiv, Dnipropetrovsk and Kirovograd regions will be engaged at the
first stage of the Ukrainian Exchange’s project. The first trade was performed
with the delivery of wheat at the Bread Base 76 State Enterprise of the State
Agency of Reserve of Ukraine in the Mylkolayiv Region.
Trading in deliverable agricultural
futures will contribute to the more effective and fair discovery of prices for
agricultural produce and prevent the monopolization of the grain market in individual
regions. The creation of new markets will provide new opportunities primarily
to small and medium-sized farmers who do not have their own silos.
Ukrainian Exchange’s top priority is a high quality dialogue with market
participants rather than the quick creation of liquidity. This is still an
absolutely new exchange instrument for Ukraine that should be "mastered" before
it is offered on a mass scale to all agrarian market participants: large silos,
traders, agricultural producers. It is essential to understand their needs,
capabilities and limitations. Currently, it is also important for the exchange
to test special features of record keeping rather than exchange trading itself,
master electronic document flow between the ultimate buyer and seller, build a
legal and technological working model," – summarizes Ukrainian Exchange Board Member Olexiy