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ICE considers iron ore swaps contract to attract US clients

Keywords: Tags  ICE, Intercontinental Exchange, iron ore swaps, Singapore Exchange, futures contracts, CFTC, Michelle Madsen

LONDON — Atlanta-based InterContinental Exchange Inc. (ICE) might launch a new iron ore swaps futures contract in a bid to capture U.S. participants affected by changes under the Dodd-Frank Wall Street Reform and Consumer Protection Act, market sources told AMM sister publication Steel First.

"ICE admits that it can’t capture the Chinese market," an industry source said. "This contract will appeal to U.S. customers (who are unable to) trade with Singapore under the new rules."

An ICE spokeswoman declined to comment on the rumors.

The Singapore Exchange (SGX), which clears the bulk of iron ore derivatives contracts, has yet to achieve Derivatives Clearing Organization status from the U.S. Commodities and Futures Trading Commission.

Market sources said last week that the SGX is looking to launch an iron ore swaps futures contract in January in a bid to retain and attract U.S. clients.

The SGX’s new contract is expected to be voice brokered and function almost exactly as its current cash-settled swap product. The contract will be the second iron ore futures contract traded in Singapore. The Singapore Mercantile Exchange launched a screen-traded iron ore futures contract in August 2011.

The new rules have prompted U.S. exchanges to launch contracts and offer incentives in an attempt to claim an increased share of the rapidly growing iron ore derivatives market.

On Nov. 21, CME Group Inc. announced a fee holiday for five ferrous derivatives contracts in a bid to attract further liquidity to the exchange.

CME Group’s established presence in Asia means that it poses a greater threat to the SGX contract than any iron ore swaps futures launched by ICE, sources said.

ICE already offers a cleared OTC iron ore swaps product based on the Platts 62-percent iron ore c.f.r. China index, which it launched in 2009. The exchange plans to launch a physical iron ore trading platform in 2013.

The new iron ore swaps futures contract will be based on Platts’ steel index.

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

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