The Learn About Futures Insider: Swiss Franc

June 10, 2011

This official currency of Switzerland and Liechtenstein is the only remaining European currency bearing the name franc or frank. It is often represented by the abbreviation or currency symbol CHF. The Swiss Franc has its roots in the Helvetic Republic of the late eighteenth century. The following contract specifications will refer to the Swiss Franc/US Dollar contract from the foreign exchange futures listings from the CME Group.

Contract Size: 125,000 Swiss Francs

Tick Size: $.0001 per Swiss Franc increments ($12.50/contract). $.00005 per Swiss Franc increments ($6.25/contract) for CHF/USD futures intra-currency spreads executed on the trading floor and electronically, and for AON transactions.

Contract Months: March, June, September, December

Trading Specs: Open outcry is 7:20 a.m.-2:00 p.m. and Globex hours are Sundays: 5:00 p.m. - 4:00 p.m. Central Time (CT) next day. Monday - Friday: 5:00 p.m. - 4:00 p.m. CT the next day, except on Friday - closes at 4:00 p.m. and reopens Sunday at 5:00 p.m. CT.

Daily Price Limit: Consult exchange

Trading Symbols: SF, 6S on Globex

Past performance is not indicative of future results.

***chart courtesy of Gecko Software

Swiss Franc Facts

In the world of investment, Switzerland is often thought of as a kind of haven for investors and as such developed an economy which is deeply dependant on foreign investment. This relatively small nation also relies on specialty industry and trade for individual livelihood. Marked by low unemployment rates and a low budget deficit, the Swiss economy has also been perceived as one of the world's most stable. Zurich and Geneva have been ranked by Mercer Consulting as having among the highest quality of life in the world.

The main industries of Switzerland include:

* Machinery

* Chemicals

* Watches

* Textiles

* Precision Instruments

As the destination for over 20 percent of exports and the source of over 30 percent of imports, Germany is by far the main trade partner for the Swiss. The US, Italy, France, the UK, Austria, Spain, and the Netherlands are the other trading partners.

Domestic food production supplies approximately 60 percent of the food consumed in Switzerland. High import tariffs and domestic subsidies protect the agricultural industry. Power generation is mostly from hydroelectricity (56%) and nuclear power (39%).

Since the early twentieth century, Swiss banknotes have been issued by the Swiss National Bank. This central bank is also responsible for the monetary policy of Switzerland. The bank also manages the approximately 1145 tons of official gold reserves of Switzerland. Their governing board is composed of three members. Information for the bank - as well as monetary policy details - can be found on their official website.

Key terms for this market include:

CHF - the ISO representation for Swiss Franc currency.

Landwirtshaft - agriculture, the sector of the eonomy considered the primary sector which employs less than 10% of the population. Industrie - industry, the secondary sector which employs around 40% of the population.

Dienstleistungen - services, the tertiary sector which employs nearly half the population.

Key Uses

Besides the obvious implications and uses for currency, the Swiss Franc has investing applications as well. As a financial instrument, Swiss Franc futures are often used as a means to hedge currency exchange risk.

Key Concerns

Several factors within a nation can have a significant effect on the currency exchange rates and the relative importance of each is the subject of debate, however, it is important to be aware of some of the key fundamentals. In addition to these concerns, Swiss Franc's specific image as it relates to foreign investment may also falter if the perceived degree of banking secrecy is altered under external political pressures.

Inflation: It is generally believed that countries with consistently lower inflation exhibit a rising currency value while countries with higher inflation may see currency depreciation.

Interest Rates: High interest rates may attract foreign investors and that can lead to an exchange rate increase while the opposite scenario is possible in a country with low interest rates.

Overall Economic Conditions: Everything from a country's balance of trade to the size of their deficit or surplus can serve as a barometer of the condition of the country and the likelihood of default. Investors look for countries with stronger economic foundations and the better the economic foundation of one country versus another may increase the value of the country's currency. Sovereign credit ratings from places like Moody's or Standard & Poor's can impact the perception of a nation's growth and stability.

Perception: The so called "flight to quality" exists within foreign currencies as investors will often seek what they perceive as "safe haven" currencies during times of political or economical instability.

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