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CME offers ferrous product fee waiver

Keywords: Tags  CME, futures, swaps, iron ore, steel, scrap

LONDON — Derivatives exchange CME Group Inc. will temporarily waive fees for five ferrous derivatives contracts in a bid to attract further liquidity to the exchange.

The six-month fee waiver started Nov. 21 and will run until May 21, 2013, the Chicago-based exchange said.

Fees have been waived for the CME’s 62-percent Fe c.f.r. China iron ore futures and c.f.r. China average price options priced off the Steel Index (TSI), which is owned by Platts. Fees have also been waived for 62-percent Fe c.f.r. North China futures and c.f.r. China futures contracts priced off Platts’ iron ore index.

The CME’s Chinese steel rebar HRB400 swap futures contract, priced off China’s Mysteel, has also had its fee waived.

"We wanted to put in a fee waiver to encourage increased volumes," CME metals products director Martin Evans told AMM sister publication Steel First.

CME Group will not waive fees for its U.S. and Turkish ferrous scrap, Black Sea steel billet, U.S. and European steel coil, and Australian coking coal swaps contracts. The CME’s U.S. scrap futures contract is financially settled against AMM’s Midwest Ferrous Scrap Index for No. 1 busheling.

Traders said that the fee holiday could attract new participants to the market as well as those looking to trade the arbitrage between different steel derivatives products.

The move comes as ferrous derivatives traders assess the implications of new U.S. financial regulations on their activities.

Under the Dodd-Frank Act, all clearers of swaps for U.S. customers must be registered as designated clearing organizations (DCOs). The Singapore Exchange, the iron ore swaps contract’s most popular clearing venue, is not yet registered as a DCO, meaning that U.S.-registered market participants will not be able to clear on the exchange when the legislation goes into effect.

The change in regulation, coupled with CME’s ferrous contract fee waiver, could see some iron ore swaps market participants moving over to the U.S. exchange, market sources said.

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