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Currency reference warrants: Standard Bank makes opportunistic move

Last week, the London Stock Exchange trumpeted that it was listing currency-based exchange traded funds. This week, it’s the turn of the Johannesburg Stock Exchange to jump on the FX bandwagon. In what is a first for South Africa, Standard Bank has launched currency reference warrants in what it says is a “response to the growing popularity of currency trading in South Africa.”

I can’t help but feel both moves are opportunistic and I really don’t see what value the products will bring. Brett Duncan, director, equity derivatives at Standard Bank, says: “CRWs, which are listed on the Johannesburg Stock Exchange, enable investors to trade currency as an asset class to protect themselves or take advantage of movements of the South African rand.”

That may be so, but I have never seen a warrant that was priced as competitively as a comparable option: CRWs tend to be far more expensive on issue and cheaper near expiry.

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