Derivatives
Derivative Security is a financial security whose value is derived from the value of another security (underlying asset) such as equity or debt instrument. It can derive directly from an underlying asset or from the underlying asset’s derivatives. Derivative can also be defined as a contract or agreement, which value depends on the performance of an underlying asset.
In a more specific definition, derivative is a traded financial contract between two or more parties to buy or sold an asset/commodity on an agreed time and price. The future value of the derivative is highly influenced by its underlying asset in the Spot Market.
Financial Derivatives
Derivatives listed in the Exchange are financial derivatives, which derived from financial instruments such as stock, bond, stock index, bond index, currency, interest rate and other financial instruments. Financial derivatives are often used by Investors and Issuers to perform hedging on their portfolios.
Jurisdiction
- Capital Market Law of the Republic of Indonesia No. 8 year 1995 concerning the Capital Market
- The Government Regulation of the Republic of Indonesia No. 45 year 1995 concerning the Capital Market Organization
- The Decision of the Chairman of Bapepam No. Kep.07/PM/2003 dated February 20, 2003 concerning Futures Contract on Security Index as Security
- The Bapepam Rules No. III. E. 1 dated October 31, 2003 concerning Futures Contract and Option on Securities or on Securities Index
- Circular Letter from the Chairman of Bapepam No. SE-01/PM/2002 dated February 25, 2002 concerning Futures Contracts Index in the Net Adjusted Working capital Report of Securities Company
- Approval Letter of Bapepam No. S-356/PM/2004 dated February 18, 2004 concerning the Agreement of Foreign Futures Contracts (DJIA & DJ Japan Titans 100)
Several Derivative products traded at IDX:
IDX LQ45 Futures
Futures is a contracts to buy or sell an underlying (can be index, stock, bond, etc.) in the future. Index Futures are futures contracts that use stock indices as their underlying. IDX LQ45 Futures is an agreement requiring parties to buy or sell a certain amount of Underlying at a price and within a certain period of time in the future. LQ45 Futures uses the LQ45 index, a well known index that serves as the benchmark of stocks in Indonesian Capital Market, as its underlying. In the fast growing capital market in Indonesia, LQ45 index can be the most effective way in tracking the stocks market of Indonesia in general. Specifications of LQ45 Futures :
| Criteria | Specification |
|---|---|
| Underlying | LQ-45 index |
| Multiplier | IDR 500.000 |
| Tick Size | 0,05 (1bp) |
| Contract Months | 1 Month, 2 Months, 3 Months |
| Min. Initial Margin | 4% X index point X Number of Contract X Multiplier |
| Auto Rejection | 10% |
| Trading Hours |
Session I
Monday – Thursyda : 09.00 – 12.00 Friday : 09.00 – 11.30 Session II
For the month of the contract due at the end of the trading day will expire at 16.00 JATS time.Monday – Thursyda : 13.30 – 16.15 Friday : 14.00 – 16.15 |
| Settlement | Cash, T + 1 |
The Benefits of IDX LQ45 Futures
The Benefits of IDX LQ45 Futures are :
Indonesia Government Bond Futures
Indonesia Government Bond Futures (IGBF) contract is an agreement that requiring parties to buy or sell a number of Indonesia Government Bond at a price and within a certain period of time in the future As of January 2017, based on Report Stated in DJPPR report, Total Government Bond in Indonesia Rp1.554,92 Trillion. Outstanding of SUN Seri Benchmark Rp.167,87 Trillion, where 62% dominated by SUN Seri Benchmark 5 and 10 years. With huge amount of outstanding, Indonesia significantly need hedging instruments for Government Bond Market. This include Issuers as well as Investors / Primary Dealers.
The specification of IGBF :
| IGBF | ||
|---|---|---|
| Product | 5-Year Benchmark Indonesia Government Bond Futures | 10-Year Benchmark Indonesia Government Bond Futures |
| Instrument Code | BM05H6 | BM10H6 |
| Contract Size | IDR 1,000,000,000 | IDR 1,000,000,000 |
| Quotation | Price | Price |
| Tick Size | 0.01 (1 bp) | 0.01 (1 bp) |
| Tick Value | IDR 100,000 | IDR 100,000 |
| Auto Rejection | 300bp from reff price | 300bp from reff price |
| Initial Margin | 1% X Contract Size X Number of Contract X Futures Price | 2% X Contract Size X Number of Contract X Futures Price |
| Trading Hours |
Monday to Thursday:
Morning Session : 09.00 – 12.00 Afternoon Seesion : 13.30 – 16.15 Friday:
Morning Session : 09:00 - 11:30 Afternoon Seesion : 14.00 – 16.15 |
Monday to Thursday:
Morning Session : 09.00 – 12.00 Afternoon Seesion : 13.30 – 16.15 Friday:
Morning Session : 09:00 - 11:30 Afternoon Seesion : 14.00 – 16.15 |
| Contract Month | 3 months in the March quarterly cycle (March, June, September and/or December) | 3 months in the March quarterly cycle (March, June, September and/or December) |
| Settlement | Cash Settlement (T + 1) | Cash Settlement (T + 1) |
| Liquidity Provider | Yes | Yes |
| Spread LP | 55 bp (±0.55%) | 70 bp (±0.70%) |
| Min Quantity | 10 contracts | 10 contracts |
Why do we need IGBF?
-
High interest rates may threaten the sustainability of fiscal policy: IGBF could be seen as equilibrium interest rates for DMO to do fiscal activity
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Broadening Investor Base
-
IGBF will attract new investor base due to hedging purpose / necessity to have physical bond
-
Broader investor base will reduce reliance on a captive market
-
Improve liquidity due to additional quantity of investor with diverse risk profiles
-
- Cash and Futures markets are closely related.
Secondary Market
Enhancing Liquidity
-
Increase hedging activity and promote risk management practice
-
Cash and Futures market are closely linked
IDX30 Futures
Futures is a contracts to buy or sell an underlying (can be index, stock, bond, etc.) at a certain price in the future. Index Futures are futures contracts that use stock indices as their underlying.
IDX30 Futures is an agreement requiring parties to buy or sell a certain number of Underlying in the form of Index at a certain price in certain period of time. IDX30 Futures use IDX30 index as their underlying. The IDX30 index is an index of 30 stocks that have been selected from the LQ45 index. Thus, IDX30 are the index consist the most 30 liquid stock in IDX. The following are specifications of IDX30 Futures;
| Criteria | Specification |
|---|---|
| Contract Code | IDX30MY |
| Underlying | IDX30 Index |
| Multiplier | IDR 100.000 |
| Tick Size | 0,1 Point Index |
| Contract Months | 1 Month, 2 Months dan 3 Months |
| Initial Margin | 4% x Index point x Number of contract x Multiplier |
| Post-Order Initial Margin | Stadardized Portfolio Analysis of Risk (SPAN) ® |
| Auto Rejection | 10% |
| Trading Hours |
Session I Monday – Thursday : 09.00 – 12.00 Friday : 09.00 – 11.30
Session II Monday – Thursday : 13.30 – 16.15 Friday : 14.00 – 16.15
|
| Settlement | Cash, T+1 |
IDX30 Futures Code
Code:IDX30MY
M : Month of Expiry
Y : Year of Expiry (last number)
Contract Months Code| Month | Month Code |
|---|---|
| January | F |
| February | G |
| March | H |
| April | J |
| May | K |
| June | M |
| July | N |
| August | Q |
| September | U |
| October | V |
| November | X |
| December | Z |
IDX30G0
IDX30 Futures expiry in February 2020
Watch video of IDX30 Futrues
Basket Bond Futures
Basket Bond Futures (BBF) is an agreement between parties to buy or sell a set of Government Bond at a certain price and within a certain time in the future.
Considering the current development of the debt securities market in Indonesia and the large outstanding value, particularly in government bond securities, a hedging instrument is needed for its Market. This includes Investors or Primary Dealers.
BBF business specifications:
| Criteria | Basket Bond Future |
|
|---|---|---|
| 5 Years | 10 Years | |
| Underlying | Government Bond with maturities of 4 to less than 7 years | Government Bond with maturities of 7 to less than 11 years |
| Code | GB05MY | GB10MY |
| Multiplier | Rp1.000.000.000,- | |
| Tick Size | 1 bp (0,01%) | |
| Auto Rejection | 600 bp | |
| Contract Month | March, June, September, or December | |
| Pre-Order Intial Margin | 1% * IGBF Price * Number of Contract * Multiplier | 2% * IGBF Price * Number of Contract * Multiplier |
| Fee | ||
| BEI | Rp10.000/contract | |
| KPEI | Rp6.000/contract (60% dari IDX fee) | |
| Guarantee Fund | 0,0003% of Transaction Value | |
Why do we need BBF?
- Hedging instrument for Government Bond Portfolio
- Can be used for profit management in bullish and bearish market
- Broadening Investor Base
- BBF will attract new investor base due to hedging purpose
- Improve liquidity due to additional quantity of investor with diverse risk profiles
