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SGX eyes iron ore futures as US tightens OTC rules

Keywords: Tags  Singapore Exchange, iron ore, iron ore futures contract, over-the-counter trading, OTC rules, Commodities Futures Trading Commission, CFTC, derivatives clearing Michelle Madsen

LONDON — The Singapore Exchange (SGX) plans to launch an iron ore futures contract in January as the United States tightens its over-the-counter (OTC) trading rules, market sources told AMM sister publication Steel First.

The SGX is the OTC iron ore market’s most popular clearing venue, but isn’t yet registered with the U.S. Commodities Futures Trading Commission (CFTC) as a derivatives clearing organization, meaning U.S. companies won’t be able to trade on the exchange when the new rules come into effect.

The launch of a futures contract would mean that the SGX would be able to retain U.S. market participants, who make up around 10 percent of the OTC iron ore market.

“SGX is working closely with the (CFTC) to secure recognition as a registered derivatives clearing organization,” SGX head of derivatives Michael Syn said Friday, adding that it is working with regulators to deliver “innovative” products to customers from different regulatory regimes. He didn’t give details of any contract specifications or launch dates.

Under CFTC rules, clearinghouses that clear OTC products for U.S. clients must be registered with the regulator as a derivatives clearing organization.

The new rules are part of Washington’s Dodd-Frank Wall Street Reform and Consumer Protection Act, a regulatory clampdown on derivatives trading—including the $640-trillion OTC market—that is intended to prevent the collapse of major financial institutions in the wake of the 2008 global economic collapse.

A version of this article was first published by AMM sister publication Steel First.

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