SGX launches high-grade iron ore derivatives

SGX launches high-grade iron ore derivatives

Michelle Zhu
03/12/18, 03:52 pm

SINGAPORE (Dec 3): Singapore Exchange (SGX) today launched SGX MB Iron Ore CFR China swaps and futures to complement the bourse’s bellweather 62% Fe Brazilian derivatives.

The new contracts reference the 65% Fe Brazilian fines index, CFR Qingdao, provided by Fastmarkets MB.

In a Monday announcement, SGX says the SGX MB Iron Ore CFR China swaps and futures have been designed in close consultation with market participants, and come with the aim of meeting demand for new risk-management tools amid a structural shift in China's environmental policy.

This is in view of China’s pursuit of environmentally-friendly growth, which is turn spurring increased used of premium iron ore for steelmaking in the country, adds the bourse.

Further, SGX believes SGX MB Iron Ore CFR China swaps and futures, being the world’s first high-grade iron ore derivatives, will “add vibrancy to the highly liquid and sophisticated global iron ore market that is attracting a growing pool of institutional investors”.

It also views the contracts as an opportunity for participants to trade grade differentials and manage widening basis risks.

 “Iron ore has become Asia’s first truly global commodity, increasingly following in the footsteps of the oil complex in terms of size and economic importance. With the high-grade contracts, we are delivering access tools to bridge domestic pricing in China – iron ore’s most important market – to an international benchmark,” says SGX’s head of derivatives, Michael Syn.

SGX has close to 100% market share in international cleared iron ore and coking coal derivatives. The bourse pioneered the world’s first iron ore swaps in 2009.

As at 3:47pm, shares in SGX are trading 5 cents higher at $7.37.

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