Published On: Wed, May 7th, 2014

SGX Enhances Its Commodities Product Offering

Magnus Bocker CEO of SGX

Magnus Bocker CEO of SGX

SGX is building up its bulk commodity product offerings with 9 more derivative contracts over the next 2 months, subject to regulatory approval. These new contracts will further boost and complement the existing AsiaClear products to provide customers with access to more effective, efficient, and comprehensive risk management.

Taking into account the evolving regulatory requirements, SGX aims to introduce options-on-futures for Iron Ore and Freight by June 2014. In addition, SGX intends to enhance its flagship Iron Ore and Steel complex with Coking Coal derivatives based on key export and import price indices in July 2014. Furthermore, SGX will bolster its existing suite of Asian thermal coal derivatives with API 4 and API 5 to capture seaborne coal prices exported from South Africa and Australia respectively in July 2014. These new thermal coal indices along with the existing API 8 and IHS McCloskey Indonesian Sub-Bituminous Coal, will cover all the key thermal coal price benchmarks with Asian centricity.

The new contracts are designed to reflect major physical commodity flows so as to cater to the needs of producers as well as consumers in the Asian bulk commodities market. With the bulk commodities value chain available for hedging and trading on a single platform in the Asian time zone, SGX offers significant margin savings and operational efficiencies.

Options-on-Futures

Amidst rapidly evolving risk management and regulatory requirements, SGX understands the urgency and importance in responding to the needs of our customers by offering products in the form of fungible swaps and futures. This enables customers to decide on the instrument that best suits their needs. In addition to the existing range of futures, SGX will introduce options-on-futures for iron ore and freight. These options on futures will be fully fungible with their corresponding options-on-swaps.

Contract Specifications

Iron Ore

Options on Futures*

FFA Freight

Options on Futures*

Contract Iron Ore CFR China (62% Fe Fines) Options on Futures 1.     Capesize Time Charter Average Options on Futures2.     Panamax Time Charter Average Options on Futures

3.     Supramax Time Charter Average Options on Futures

4.     Handysize Time Charter Average Options on Futures

Contract Size 100 metric tonnes 1 day
Strike Interval US$0.01 US$1
Minimum Price  Fluctuation US$0.01 per metric ton neValue per tick = US$1.00 US$0.01 per dayValue per tick = US$0.01
Daily Price Limit No price limit.
Contract Months Up to 36 consecutive months starting with current month. Upon expiry of Dec contract another 12 months will be listed.
NLT threshold 5 lots 5 lots
Trading Hours (Singapore Time) T-session: 8.00 am to 8.00 pmT+1 session: 9.00 pm  to 2.00 am

Last trading day: 8.00 am to 8.00 pm

Last Trading Day Last publication day of The Steel Index (TSI) iron ore reference prices in the contract month Last publication day of Baltic Time Charter Average reference prices in the contract month
Final Settlement Price Call Option: Final settlement price of the underlying SGX Iron Ore Futures minus the strike price, multiplied by the contract size.Put Option: Strike price minus final settlement price of the underlying SGX Iron Ore Futures, multiplied by the contract size. Call Option: Final settlement price of the underlying FFA minus the strike price, multiplied by the contract size.Put Option: Strike price minus final settlement price of the underlying FFA, multiplied by the contract size.

* Subject to regulatory approval.
 
Coking Coal Derivatives

Coking coal is the other key raw material in the production of steel. Representing approximately one-third of the variable cost in steel production, fluctuations in coking coal prices can significantly influence the profitability of steel mills. SGX will be launching Coking Coal Swaps and Futures to complement the existing Iron Ore derivatives and HRC Steel derivatives contracts. Similar to the Iron Ore Derivatives, the Coking Coal derivatives will be based on The Steel Index (TSI) indices.

Contract Specifications

Australia Coking Coal

Futures/ Swaps*

China Coking Coal

Futures/ Swaps*

Contract SGX TSI Australia Premium Coking Coal Futures and Swaps SGX TSI China Premium Coking Coal Futures and Swaps
Contract Size Swaps: 500 metric ton ne sFutures: 100 metric ton ne s Swaps: 500 metric ton ne sFutures: 100 metric ton ne s
Minimum Price  Fluctuation US$0.01 per metric tonneSwaps: US$5 per tick

Futures: US$1 per tick

US$0.01 per metric tonneSwaps: US$5 per tick

Futures: US$1 per tick

Contract Months Up to 24 consecutive months starting with current month. Upon expiry of Dec contract another 12 months will be listed.
NLT threshold Futures: 5 lots Futures: 5 lots
Trading Hours (Singapore Time) SwapsT -session: 8.00 am to 8.00 pm

T+1 session: 8.00.01 pm  to 4.00 am

Last trading day: 8.00 am to 8.00 pm

Futures

T-session: 8.00 am to 8.00 pm

T+1 session: 9.00 pm  to 2.00 am

Last trading day: 8.00 am to 8.00 pm

Last Trading Day Last publication day of Premium coking coal (Australian Exports, FOB East Coast Australian port) index prices in the contract month Last publication day of Premium JM25 coking coal (Chinese Imports, CFR Jingtang port) index prices in the contract month
Final Settlement Price Cash settlement using the arithmetic average of all Premium coking coal (Australian Exports, FOB East Coast Australian port) index prices in the expiring month, rounded to 2 decimal places Cash settlement using the arithmetic average of all Premium JM25 coking coal (Chinese Imports, CFR Jingtang port) index prices in the expiring month, rounded to 2 decimal places

* Subject to regulatory approval.
 
Thermal Coal Derivatives

Asia is both a key producer and key consumer of thermal coal. In particular, China is a key importer followed by India and South-East Asian nations while Indonesia and Australia are key exporting nations of the commodity in the continent.

To serve the needs of the Asian thermal coal market, SGX will expand its current thermal coal product offerings from the existing API 8 and IHS McCloskey Indonesian Sub-Bituminous Coal derivatives, SGX will be listing derivatives based on the API 4 and API 5 indices. The API 4 is the price benchmark for thermal coal exported FOB (free-on-board) from Richards Bay in South Africa; while the API 5 is that exported from Newcastle in Australia.

Contract Specifications

API 4 Thermal Coal

Futures/ Swaps*

API 5 Thermal Coal

Futures/ Swaps*

Contract SGX API 4 FOB Richards Bay Coal Futures and Swaps SGX API 5 FOB NewCastle Coal Futures and Swaps
Contract Size Swaps: 1,000 metric tonnesFutures: 100 metric tonnes Swaps: 1,000 metric tonnesFutures: 100 metric tonnes
Minimum Price  Fluctuation US$0.01 per metric tonneSwaps: US$10 per tick

Futures: US$1 per tick

US$0.01 per metric tonneSwaps: US$10 per tick

Futures: US$1 per tick

Contract Months Up to 60 consecutive months starting with current month. Upon expiry of Dec contract another 12 months will be listed. Up to 24 consecutive months starting with current month. Upon expiry of Dec contract another 12 months will be listed.
NLT threshold Futures: 10 lots Futures: 10 lots
Trading Hours (Singapore Time) SwapsT-session: 8.00 am to 8.00 pm

T+1 session: 8.00.01 pm  to 4.00 am

Last trading day: 8.00 am to 8.00 pm

Futures

T-session: 8.00 am to 8.00 pm

T+1 session: 9.00 pm  to 2.00 am

Last trading day: 8.00 am to 8.00 pm

Last Trading Day Last publication day of the API4 marker in the contract month. If the last trading day is a holiday, the preceding business day will be the last trading day. Last publication day of the API5 marker in the contract month. If the last trading day is a holiday, the preceding business day will be the last trading day.
Final Settlement Price Cash settlement using the arithmetic average of all publications of the API 4 index published in the Argus/ McCloskey Coal Price Index Report in the expiring month, rounded to 2 decimal places Cash settlement using the arithmetic average of all publications of the API 5 index published in the Argus/ McCloskey Coal Price Index Report in the expiring month, rounded to 2 decimal places

* Subject to regulatory approval.

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