Latin American Capital Markets

382 A. M. CORCORAN, R. B. HOBSON, G. J. KUSERK, K. K. WUERTZ, AND D. WESTBox 11-2 IInfrastructure for Derivatives MarketsThe U.S. Commodity Futures Trading Commission provides specific forms for three types of contracts:physical delivery futures, cash-settled futures, and options on futures. The types of informationlisted below would be needed for physical delivery futures.Commodity characteristics (grade, quality, weight class, growth, issuer, source, and rating):• Quality differentials for non-par deliveries or lack thereof• Delivery points by region• Location differences for non-par deliveries• Delivery facilities (type, number; capacity, and ownership)• Contract size and/or trading unit• Delivery instrument (warehouse, receipt, or shipping certificate)• Transportation terms (free on board or other)• Delivery procedures• Delivery months• Delivery period/last trading day• Verification of delivery eligibility (inspection and certification)• Minimum price change (relationship to cash mark)• Daily price limit (relationship to cash price movements).Method for estimating deliverables/supplies.Speculative limits:• Spot month• Non-spot month• Reporting level• Aggregation rule.Other relevant information for hedging or basing prices.Source: http://www.cftc.gov/dea/analysis/deabackground_guide I .htm.In considering how best to accommodate the legislative and administrativeinfrastructure of a jurisdiction to the aforesaid preconditions, policymakers should alsoconsider the optimal balance between private and public rules and between regulationand self-regulation.The details of this chapter are intended to give some guidanceto development experts on the considerations essential to achieve these preconditionsand determine the requisite balance.To date, the principal success in Latin America has been the market in Brazil,in which all of the essential elements set forth in this chapter were in place. Even thatCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub