SWISS DERIVATIVES. Editorial. Contents ISSUE 61 JUNE Official publication of the Swiss Futures and Options Association - SFOA

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1 SWISS DERIVATIVES ISSUE 61 JUNE 2015 Editorial Dear Members of SFOA, colleagues and friends, Contents Focus 2-3 GMEX joins SFOA 4 Event 5 Interview 6-7 Letter from America 8-11 Jacques de Watteville keynote at Bürgenstock State Secretary Jacques de Watteville has agreed to give a brief keynote speech at the opening of the Bürgenstock conference on Wednesday, 23 September Mr de Watteville leads the Swiss State Secretariat for International Financial Matters, represents Switzerland's interests in international financial and tax matters, and leads negotiations in these areas since 1 November Official publication of the Swiss Futures and Options Association - SFOA

2 Apples and Oranges Focus In 2013, the juice and nectars market stood at 38.9 billion litres worldwide. Worth about USD 140 billion, it is dominated by two flavours: apples and oranges (respectively 27% and 29% of volume). While the orange juice market has been well known to investors for decades, apple juice trading is still in its infancy. 2 China Fresh Apples Production, (in tons)

3 Focus frankieleon, Flickr Swiss financial market regulation is in the bag A few days ago, the Swiss Parliament signed off the new Financial Market Infrastructure Act (FMIA or FinFraG). FMIA is one of three financial regulations acts debated in the Swiss Parliament (see SDR 56, January 2015). The law introduces international standards for stock exchanges and other trading venues as well as for market participants. Hence, FMIA is in line with a general overhaul of financial regulations worldwide to reduce systemic risk in finance as a result of the financial crisis of FMIA s main thrust are rules for OTC trading in financial derivatives. In addition, FMIA provides for position limits for commodity derivatives. Exceptions apply for derivatives on goods that are actually traded. Most of the law has been approved unchanged. A notable exception is Article 90 which states that assets held with CCPs from clients that are indirectly connected are also segregated and therefore protected in case of insolvency. This is an important step to become equivalent to EMIR-rules. The law is expected to enter into force in early

4 GMEX joins Swiss Futures and Options Association News Global Markets Exchange Group (GMEX) is the latest member of the Swiss Futures and Options Association (SFOA). 4 About GMEX Global Markets Exchange Group Limited (GMEX) is authorised and regulated by the UK Financial Conduct Authority (FCA) to operate GMEX Exchange. GMEX is a wholly-owned subsidiary of GMEX Group. About GMEX Group GMEX Group is a group of companies that offer sustainable and innovative solutions for the new era of global financial markets, encompassing: Operation of an exchange for the trading of a Constant Maturity Future for Interest Rate Swaps Development of related new tradable market and product indices Creation and operation of low cost electronic exchanges in equities, debt, FX, derivatives and commodities in developing and, in a targeted way, developed markets Interconnectivity of exchanges to each other creating a global network of liquidity Business development to enhance liquidity in partner exchange products Consultancy on exchange strategy, product development, clearing and regulation Provision of exchange, clearing house and depository platform technology GMEX Group stakeholders include Deutsche Börse AG, Société Générale Corporate & Investment Banking and Forum Trading Solutions Limited through its investment vehicle. For more information, visit or follow us on

5 Event 5

6 Interview EEX launches agricultural futures In May 2015, the agricultural futures previously listed at Eurex Exchange were successfully migrated and trade now on the platform of the European Energy Exchange (EEX). SDR interviewed Sascha Siegel, Head of Agricultural Commodities at EEX. 6 EEX has restructured its agricultural segment in May. Can you tell us about it? So now it is a one-stop shop for the agricultural community? EEX is better known for energy trading, how does this fit with the agricultural side? Is this linked to policy changes in the EU? About EEX The European Energy Exchange (EEX) is the leading energy exchange in Europe. It develops, operates and connects secure, liquid and transparent markets for energy and commodity products. At EEX, contracts on Power, Coal and Emission Allowances as well as Freight and Agricultural Products are traded or registered for clearing. Alongside EEX, EPEX SPOT, Powernext, Cleartrade Exchange (CLTX) and Gaspoint Nordic are also part of EEX Group. Clearing and settlement of trading transactions are provided by the clearing house European Commodity Clearing (ECC). Do you think this change will open your products to new types of actors?

7 Focus 7 Sascha Siegel How long before individual farmers naturally hedge their risk on exchanges like EEX? Sascha Siegel is Head of Agricultural Commodities at EEX and joined the company in January Before, he was Vice President, Product Research & Development at Eurex in Frankfurt, where he has built up the agricultural product portfolio since 2009 and accompanied its development as a product manager. Brian Forbes, Flickr.

8 Letter from America 8 Venezuela: No Rule of Law, Bad Money Venezuela has been violating the rule of law in the monetary sphere and now pays with a fall in the value of its currency and skyrocketing inflation rates. Professor Steve H. Hanke recommends dollarization and as a success story presents the example of Ecuador. Venezuela s Foreign Exchange Reserves, The Fall in the Value of the Venezuelan Bolîvar

9 Letter from America 9 Venezuela s Annual Inflation Rates

10 Letter from America 10 Ecuadorian Misery Index,

11 Letter from America 11 Sources and notes Chart 1: Banco Central de Venezuela weekly data and calculations by Prof. Steve H. Hanke, The Johns Hopkins University. Note: Reserve data after March 2015 are provisional. Chart 2: Banco Central de Venezuela, Dollar.nu, Dolar Paralelo, International Monetary Fund (IFS ), Paralelo Venezuela. Prepared by Prof. Steve H. Hanke, The Johns Hopkins University. Note: For purposes of illustrating the decline value of the Venezuelan bolîvar, relative to the U.S. dollar, the y-axis is inverted. Chart 3: Banco Central de Venezuela, Dollar.nu, Dolar Paralelo, International Monetary Funds (IFS ) Paralelo Venezuela and calculations by Prof. Steve H. Hanke, The Johns Hopkins University. Note: These annual inflation rates are implied from the black-market VEF/USD exchange rate. Note: When the annual implied inflation rate drops below 25%, the estimate is unreliable. Chart 4: World Bank, International Monetary Fund, and calculations by Prof. Steve H. Hanke, The Johns Hopkins University Steve H. Hanke Steve H. Hanke is Professor of Applied Economics at the Johns Hopkins University in Baltimore, MD. He is also a Senior Fellow and Director of the Troubled Currencies Project at the Cato Institute in Washington, D.C. You can follow him on Swiss Derivatives Review Issue 61 - June 2015 Official Publication of SFOA - Swiss Futures and Options Association 18b rue du Gothard, P.O. Box 325 CH-1225 Chêne-Bourg Phone Publisher Weber-Thedy AG Strategic Communication Zeltweg 25, P.O. Box 1065 CH-8032 Zurich Phone Important Legal Information The views and opinions expressed in the Swiss Derivatives Review are those of the authors and do not necessarily reflect official policy or position of the SFOA. The views and opinions expressed in the Swiss Derivatives Review do not constitute investment advice. All content in the Swiss Derivatives Review has been prepared solely for informational purposes, and is never an offer to buy or sell or a solicitation of an offer to buy or sell any security, product, service or investment. All rights reserved. Official publication of the Swiss Futures and Options Association - SFOA