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ASX Grain Futures and Options can assist grain traders by providing greater efficiency and improved credit control. As the grain industry faces further change and possibly greater competition the importance of a comprehensive risk management facility cannot be underestimated. The following list highlights key issues for grain traders. It also lists whether there is a capability to manage the issues by using ASX Grain Futures and Options. Importantly, ASX is more than just a price risk management facility.

 

   Capability to Manage

Trading Issue ASX Grain Futures ASX Grain Options
Payment Security Yes Yes
Efficient Delivery Process Yes Not Applicable
Market Anonymity Yes Yes
Spread Capabilities Yes Yes
Price Transparency Yes Yes

Payment Security

Trading successfully is of little value if payment security is not managed and protected. The Australian Grain Industry has a chequered past when it comes to counterparty credit risk. To maintain the financial integrity of the market all positions on the ASX are managed by the Australian Clearing House (ACH). Since the inception of ASX Grain Futures there has been in excess of five corporate failures in the grain industry. Many of these cases have affected trade positions in the over the counter physical 'track' market. There has been no default in the ASX market. The settlement terms against deliveries made and taken is T+1.

Efficient Delivery Process

ASX Grain Futures are deliverable and delivery is based on the underlying NACMA track contract principles. The Delivery Period for ASX contracts is clearly defined and transfer of title only occurs if the funds have been lodged by the buyer. The payment interests of the seller are managed by the Australian Clearing House (ACH). The ASX contract offering currently covers port zones in Queensland, New South Wales, Victoria and South Australia. It is up to the seller where and when (during the Delivery Period) delivery is instigated. The buyer is allocated stock on a random basis. Because the ACH is the counterparty to all trades there is no 'circle trade' paper chase and associated delays in the transfer process are avoided. The ASX delivery process is facilitated through the ACH account with the accredited Bulk Handler and as such market anonymity is maintained throughout.

Market Anonymity

Many participants within the trade and the end user community prefer to keep their activities anonymous so that issues such as front running orders are avoided. Given the ACH manages counterparty credit risk there is no need for the trade counterparty to be disclosed as may be the case in the over the counter physical market. This ensures that you are free to trade the market as you choose and can do so safe in the knowledge that the market does not know which direction you may be coming from. This assists in creating a level playing field for all.

Spread Capabilities

The volume traded on ASX has developed considerably in the past 12 months and has been consistent across Milling Wheat, Feed Barley and Sorghum. This is providing improved spread trading opportunities for both the intra commodity spreads (time or calendar spreads e.g. March Sorghum versus May Sorghum ) and inter commodity spreads (grade spreads e.g. Milling Wheat versus Feed Barley). ASX is working to improve the spread trading capabilities of the market which will further advance the price discovery process performed by the market.

Price Transparency

The price traded for ASX futures contracts is a 'track' price. All prices that trade on the ASX are available to you. Market prices can be accessed in real time via vendor services, via this website on a 20 minute delay or you can receive the Daily Activity Report by email. The Daily Activity Report is issued in the morning following a trading day and details the values of all trades that occurred in both the futures and the options markets during that trading session.

It's time to learn more

Some industry participants mistakingly think derivatives are difficult to understand and deliver few tangible benefits. To the contrary, the benefits listed on this page are real. As the market develops and the industry learns more about how they can be used you will realise that it is not as dull or as difficult as you may have first thought. An important aim of this website is to provide a thorough education resource. If there is something you would like further clarification on please contact ASX.

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