To provide a rich mix of products for the market participants, the Exchange over the years has introduced 28 different commodities, both cash-settled and physically deliverable, with 43 contracts of different denominations. While the cash-settled commodities are benchmarked globally, the physically deliverable commodities are largely locally produced and priced based on local factors.
The basic purpose of listing internationally benchmarked commodity contracts is to provide an opportunity for market participants eg, manufacturers, traders, refineries, oil marketing companies, airlines, cable manufacturers, jewelers/ goldsmiths, etc. to hedge price risk of their raw materials. For example, airlines may use the Exchange's Crude Oil Futures Contracts to hedge the price of Jet Fuel Oil, their main expense head, which has over a 95% correlation with Crude Oil. Since airlines are not in the business of storing oil therefore by trading in Crude Oil Futures at the Exchange, the airline may lock in a single price every month and roll over such hedge positions as required.
Moreover, in the recent years, PMEX has conducted various pilot projects of agricultural commodities such as Red Chilli, Paddy Rice and Wheat by collaborating with value chain partners such as logistic companies, warehouse operators, assayers, etc. The aim of these pilots is to link the Exchange with the real economy by providing an efficient and transparent trading platform of local agricultural produce with timely guaranteed payments and pass on the benefits to the grass root level.
For an overall picture of the offered products by the Exchange, a brief summary of commodities is given below:
GOLD
There is an old adage "Gold never loses its glitter". Since centuries, it has been a preferred choice of masses when it comes to investment and savings. It is a globally accepted currency and therefore considered to be the safest investment by many. Investors choose the yellow metal to hedge different types of risks and diversify their investment portfolio.
Pakistan has the world's 10th largest market for gold. While annual global demand for gold is estimated more than 2,500 tons, its consumption in Pakistan averages more than 100 tons per annum.
PMEX offers five different denominations of Gold ie 100, 10 & 1 ounces and Milli Tola (0.0001 Tola) & Tola Gold.
SILVER
Silver is the whitest, most malleable and conductive metal available. It has enjoyed a variety of uses throughout history, most notably as a form of money & jewelry and industrial consumption.
In modern times, the precious metal is used as a vehicle for investment and is actively traded at almost all the commodity exchanges around the world. Silver has also played a significant role in affecting global currencies and has consistently moved in tandem with gold prices.
PMEX provides a platform for investors, traders and hedgers to participate in the silver futures market. The Exchange has listed cash settled futures contracts of silver in 10, 100, 500 and 5,000 ounces.
PLATINUM
Platinum is one of the least reactive metals and has a number of useful properties, which explains its application in a wide-range of industries. It has remarkable resistance to corrosion, even at high temperatures, and is therefore considered a noble metal.
The dense, stable and rare metal is widely used in jewelry fabrication, automobile, medical, and electronic industry. Besides, it is also used as physical investment. The demand for the metal has caused platinum's price to be quite volatile. This volatility attracts traders and creates opportunities for trading.
At PMEX, the Contracts are being offered in 5 and 50 troy ounces denominations.
COPPER
Copper ranks as the third-most-consumed industrial metal in the world, after iron and aluminum. In Pakistan, copper is used in industrial manufacturing, cable, electronic and home appliances. Its consumption centers are located in Karachi, Lahore, Gujrat, Gujranwala, Rawalpindi, Islamabad, Peshawar, Kasur and Kotri. Pakistan is deficient in indigenous production of copper, therefore bulk of the requirement has to be met through import, exposing the consumers to price volatility risk.
To provide a hedging tool for copper, price mitigation, global price discovery and opportunities for portfolio diversification to a range of market participants, PMEX launched Copper Futures Contract with two different denominations 25,000 and 1,000 pounds.
CRUDE OIL
Crude oil is one of the most heavily traded commodities in the world. There are different kinds of crude oil, and are usually classified based on the qualities and geographical locations. Light Sweet Crude WTI & Brent Crude are the two most actively traded grades and are considered as the global pricing benchmarks.
Pakistan reliance on crude oil for its energy consumption is over 30%. Around 50% of the oil consumption is by the transport sector and 40% by the power generation segment. The remaining 10 % is consumed by other sectors in the economy.
PMEX has listed cash settled futures contracts of WTI and Brent in the denomination 10, 100 and 1,000 Barrels. The contracts provide an excellent opportunity for market participants such as refineries, oil marketing companies, airlines, etc. to hedge their price risk.
NATURAL GAS
Natural gas is an energy source that is piped directly from fields to the consumers. It is considered a key source for generating electricity and providing energy. It is used extensively for residence and also has important applications in commercial and industrial settings.
Once considered an ineffective by-product of oil production, natural gas is steadily finding a foothold in today's world. Being economical, environmental friendly and efficient, natural gas is considered as the cleanest-burning fossil fuel.
The Contracts are being offered in 1,000 and 10,000 mmbtu denominations.
FX PAIRS
Keeping in view the demand of the market participants, the Exchange has listed 17 futures contracts of FX pairs. At Present, PMEX offers trading in EUR/USD, AUD/USD, GBP/USD, USD/CHF, USD/CAD, USD/JPY, EUR/GBP, EUR/JPY, EUR/CHF, EUR/CAD, EUR/AUD, AUD/JPY, CHF/JPY, GBP/CHF, GBP/JPY.
INTERNATIONAL EQUITY INDICES
International Equity Index Futures are one of the highest traded derivatives around the world. These contracts are cash settled derivatives instruments that give investors exposure to price movements on an underlying Index. This facilitate the market participants to earn profit from the price movements of a basket of equities without trading the individual constituents.
To meet the increasing demands of the market participants, PMEX listed the International Equity Index Futures Contracts which include PMEX Equity 500 Futures Contract, PMEX Equity 100 Futures Contract and PMEX Equity Industrial Futures Contract.
COTTON
Cotton is a global agricultural commodity and investors have been trading cotton derivatives
since almost the inception of the modern futures trading. Intercontinental Exchange's (ICE) cotton futures contract, previously known as New York Cotton Exchange's (NYCE) cotton futures contract, is considered as the most liquid global cotton pricing benchmark contract.
The Exchange has listed two international cotton futures contract of 50,000 and 5,000 pounds denominations.
The contract provides the textile dominated industry of Pakistan an opportunity to hedge conveniently at PMEX.
SUPER BASMATI PADDY RICE
Pakistan produces one of the best varieties and grades of long, slender-grained rice, known as Basmati, which enjoys enormous domestic and international demand due to its unique aroma, nutty flavor and best nutrition value.
In line with Exchange's objective of replicating the successful model of red chilli trade for other agricultural commodities, PMEX listed Super Basmati Paddy Rice Weekly Futures Contracts.
WHEAT
Wheat is the most popular food crop of Pakistan and its products are used in a number of ways. Pakistan is the world's 7th largest wheat producer and its contribution is 3.48% of total world production. Being the staple diet of majority of people in Pakistan, it dominates all crops in acreage and production. Wheat accounts for 10 percent of the value added in agriculture and 2.0% of GDP of Pakistan. Punjab is the major wheat producing province of Pakistan and it alone contributes around 75 % of total production followed by Sindh 16% and remaining 9% from Khyber Pakhtunkhwa (KP) and Balochistan.
PMEX launched Wheat Weekly Futures Contracts in May 2017. For these contracts, the Exchange collaborated with the value chain partners of red chilli, SGS for quality certification and Pakistan Agriculture Coalition (PAC) for trade facilitation. The listed contracts are based on the district Sheikhupura/Muridke, the major wheat growing districts of Punjab.
RED CHILLI
Red Chilli is primarily grown in Sindh and its share in the total production is around 85%. On an average, Sindh produces around 80,000 metric tons (MT) of red chillies annually. In Sindh the production is mainly concentrated in District Umer Kot with production and trading Hub at Kunri, which is also at times termed as "Chilli Capital of Asia". The other cultivation hubs are Mirpur Khas, Sanghar, Badin, Tando Muhammad Khan, Khairpur, Shikarpur, and Ghotki.
In 2015 PMEX along with Pakistan Agriculture Coalition (PAC), Agility Pakistan (Pvt.) Limited and SGS Pakistan (Pvt.) Limited brought the red chilli trade on the Exchange platform.
At present, PMEX offers trading in Hybrid along with Dandicut and longer dated Futures Contracts.
In the recent years, PMEX has conducted various pilot projects of agricultural commodities such as Red Chilli, Paddy Rice and Wheat by collaborating with value chain partners such as logistic companies, warehouse operators, assayers, etc. The aim of these pilots is to link the Exchange with the real economy by providing an efficient and transparent trading platform of local agricultural produce with timely guaranteed payments and pass on the benefits to the grass root level.