This time, it is for real. Long awaited to enhance the diversification of investment instruments and facilitate effective risk management for institutional investors, the futures market project is nearing completion. Nezha Hayat, the president of the Moroccan Capital Market Authority (AMMC), announced its “imminent” launch last spring. Since then, significant advancements have been made, with extensive testing currently taking place.
The futures market aims to address the shortcomings in the Moroccan capital market, particularly concerning risk hedging instruments. It will enable investors to safeguard themselves against price fluctuations for raw materials, currencies, and other financial assets. Additionally, this market will contribute to strengthening governance and protecting stakeholders. According to the operators, the initial products offered will include index futures contracts, followed by interest rate instruments.
A fully mobilized ecosystem
The Moroccan futures market will be overseen by various regulators, including the AMMC and Bank Al-Maghrib, with the Casablanca Stock Exchange acting as a central player.
Since its demutualization in 2016, the Casablanca Stock Exchange has been tasked with creating, developing, and managing two new essential market infrastructures: the futures market and the clearing house.
Alongside its clearing responsibilities, the Casablanca Stock Exchange developed a trading platform dedicated to this market two years ago, which has undergone rigorous testing to ensure its integrity and integration within the Stock Exchange’s overall information system. This platform is currently undergoing extensive tests with potential futures market operators. Support for future participants (banks and brokerage firms) and clearing firms interested in these new activities is also in progress.
Professionals involved in this project emphasize its technological, organizational, and operational significance. “This is, without a doubt, the launch of an entirely new market, developed from the ground up. All stakeholders, whether regulatory bodies or market participants, must establish new procedures and risk management mechanisms,” states an industry expert.
The crucial role of the Clearing House
The Clearing House serves a vital role in risk management within the futures market. It ensures the accurate execution of transactions, acting as a central counterparty and monitoring the positions held by clearing members. These members are required to maintain margin deposits, recalculated daily, to cover their obligations. In case of a default by a clearing member, the House can intervene by liquidating uncovered positions or demanding additional margin calls.
One of the significant innovations within this market is the introduction of trading members. These intermediaries, whether from existing brokerage firms or banking trading rooms, will be instrumental in the functioning of the futures market.
A promising market for Morocco
Market participants are optimistic about the future of this market, anticipating an increase in liquidity, greater standardization of products, and improved awareness among investors regarding the benefits and risks of derivative instruments. Prudent and informed management of these tools could enable the Moroccan capital market to grow in depth and sophistication.
Awareness-raising initiatives aimed at investors and the general public are being prepared to coincide with the imminent launch of this innovative market.
Risks to anticipate
While futures markets present significant opportunities for investors, they also introduce new risks that Moroccan players must learn to manage. Leverage, high volatility, and liquidity risk are among the main concerns. Unlike the spot market, transactions in the futures market are executed after a delay, adding an additional layer of risk. Participants need to exercise caution, as the situation of counterparties can change and market events can lead to substantial price fluctuations.
Investing in futures markets requires active and meticulous management. Lack of experience or poor strategy can result in swift losses. Investors must continuously monitor their positions and adjust margins accordingly. This educational effort will be crucial at the outset to ensure that all participants are well-informed about the risks and properly trained.
What remains to be done
The futures market could be launched in the coming weeks, potentially before the end of the year. The regulations, which are nearly finalized, need to be completed, while the documentary framework is progressing well, and technical solutions adapted to the Moroccan context are being extensively tested, with at least one passing the connection and communication checks with both the futures market and the clearing house. The rollout of futures products will begin with the introduction of an index future, facilitating the initial launch and allowing for the testing of the clearing house’s functionality.
Futures Market: Key Messages to Remember
1. Imminent launch.
2. The first products to be launched will be index futures.
3. The clearing house and trading platform dedicated to this market were created, developed, and are managed by the Casablanca Stock Exchange.
4. Initial large-scale tests have been conducted, with at least one successfully passing the connection and communication checks with the futures market and the clearing house.
► INTERVIEW
The processing chain for the futures market and the clearing house validated
Adel Elaroussi, Director of Investor Services at CDG Capital, shares his insights on the benefits of the futures market, the progress of preparations, and the challenges that remain before its official launch. Read
Morocco’s Imminent Futures Market: A Game-Changer for Institutional Investors
This time, it’s for real. Long awaited to promote increased diversification of investment instruments and enable effective risk management for institutional investors, the futures market project is in the final stages of implementation. The president of the Moroccan Capital Market Authority (AMMC), Nezha Hayat, announced its “imminent” launch last spring. Since then, significant progress has been made, with full-scale tests currently underway.
A Diversified Risk Management Tool
The futures market aims to fill the gaps in the Moroccan capital market, particularly in terms of risk hedging instruments. It will allow investors to protect themselves against price fluctuations, whether for raw materials, currencies, or other financial assets. At the same time, this market will help strengthen governance and the protection of stakeholders. According to the operators, the first products offered will be index futures contracts, followed by interest rate instruments.
A Fully Mobilized Ecosystem
The Moroccan futures market will be supervised by several regulators, including the AMMC and Bank Al-Maghrib, with a central role played by the Casablanca Stock Exchange. Since its demutualization in 2016, the Casablanca Stock Exchange has been mandated to create, develop, and manage two new essential market infrastructures: the futures market and the clearing house.
In addition to its clearing responsibilities, the Casablanca Stock Exchange developed a trading platform dedicated to this market 2 years ago, which has since been rigorously tested to ensure its robustness and integration into the Stock Exchange’s global information system. This platform is currently undergoing full-scale tests with future futures market operators. Support for future players (banks, brokerage firms) and clearers interested in these new activities is also underway.
Professionals involved in the project highlight its technological, organizational, and operational importance. “This is nothing more and nothing less than the launch of a completely new market, developed from scratch. All stakeholders, whether regulatory, stakeholders or regulators, must put in place new procedures and risk management mechanisms,” says an industry expert.
The Crucial Role of the Clearing House
The Clearing House plays a central role in risk management in the futures market. It ensures the correct execution of transactions, acting as a central counterparty and monitoring the positions opened by clearing members. The latter must constitute margin deposits, recalculated daily, to cover their commitments. In the event of a default by a clearing member, the House can intervene by liquidating uncovered positions or by requiring additional margin calls.
One of the major innovations of this market is the introduction of trading members. These intermediaries, whether from existing stockbroking firms or from banking trading rooms, will play a crucial role in the functioning of the futures market.
A Promising Market for Morocco
Market participants are optimistic about the prospects of this market, counting on an increase in liquidity, increased standardization of products, and better awareness among investors of the advantages and risks of derivative instruments. Prudent and informed management of these tools could allow the Moroccan capital market to gain depth and sophistication.
Awareness-raising actions aimed at investors and the general public are being prepared to accompany the imminent launch of this innovative market.
Risks to Anticipate
While futures markets offer great opportunities for investors, they also come with new risks that Moroccan players will have to learn to master. Leverage, high volatility, and liquidity risk are among the main issues. Unlike the spot market, transactions on the futures market are executed after a delay, which introduces an additional risk dimension. Players must be vigilant, as the situation of counterparties can change and market events can lead to significant price variations.
Investing in futures markets requires active and rigorous management. A lack of experience or a bad strategy can lead to rapid losses. Investors must constantly monitor their positions and adjust margins accordingly. This educational work will be crucial at the start to ensure that all players are well informed of the risks and properly trained.
What Remains to be Done
The futures market could be launched in the coming weeks, perhaps even before the end of the year. The regulations, which are almost ready, must be finalized while the documentary framework is progressing well, and the technical solutions adapted to the Moroccan context are being tested on a large scale, with at least one having passed the connection and communication checks with the futures market and the clearing house. The deployment of futures products will begin with the introduction of an index future, which will facilitate the launch and allow testing the functioning of the clearing house.
Futures Market: Key Messages to Remember
- Launch imminent.
- The first products to see the light of day will be index futures.
- The clearing house and trading platform dedicated to this market were created, developed, and are managed by the Casablanca Stock Exchange.
- Initial large-scale tests have been carried out, with at least one having passed the connection and communication checks with the futures market and the clearing house.
Interview: The Processing Chain for the Futures Market and the Clearing House Validated
Adel Elaroussi, Director of Investor Services at CDG Capital, shares with us his take on the benefits of the futures market, the progress of preparations, and the remaining challenges before its official launch. Read more
Benefits of the Futures Market in Morocco
The introduction of the futures market is expected to bring a variety of benefits to Moroccan investors:
- Enhanced Risk Management: Efficient hedging strategies will be available to mitigate risks related to price volatility.
- Improved Liquidity: Increased participation from a variety of market players is expected, enhancing overall market liquidity.
- Product Standardization: Greater uniformity in financial products will simplify trading for investors.
Practical Tips for Investors
As the futures market prepares for launch, here are some practical tips for potential investors:
- Educate yourself about futures and derivatives to understand the associated risks and benefits.
- Stay updated on market developments and regulatory changes that could impact your trading strategies.
- Consult financial advisors or industry experts to strategize your investments appropriately.
Case Studies: Global Futures Market Successes
Many countries have successfully integrated futures markets within their financial ecosystems:
| Country | Year Established | Market Benefits |
|---|---|---|
| United States | 1848 | Price stabilization, risk management |
| India | 2003 | Increased liquidity, improved investor participation |
| Japan | 1985 | Diversified investment portfolio, improved risk assessment |
