NOS Clearing ASA (NOS) has today launched clearing for Iron Ore Futures and Option contracts. This service is a natural extension to NOS’s market leading clearing service for the Freight Option market.
The contracts launched by NOS for Iron Ore is CFR China, 62% Fe Fines, delivered Chinese Port and the contracts will be settled against The Steel Index (TSI). The Future contract will be monthly cash settled and the Option contract will be a monthly cash settled Asian style option.
The expansion of NOS to Iron Ore will benefit the overall market since all existing NOS Direct Members and General Clearing Members will have immediate access to the new products, and the increased number of participants will contribute to the liquidity in the market.
The introduction of the Option contract will complement the available range of hedging tools for both financials and physical players.
Morten Erichsen, Managing Director of NOS said: “We were approached by our members and we are happy to be the first to offer a full suite of financial contracts to the Iron Ore market.”
Steven Randall, Managing Director of The Steel Index, commented: “We are delighted NOS has selected TSI’s iron ore index for settlement of its contracts. OTC iron ore trading is one of the fastest growing commodity markets and NOS’s entrance helps to meet the growing customer demand. TSI’s iron ore prices have been adopted as the industry standard worldwide, with over US$3 billion of financial contracts already cleared against its index. But with around 1 billion tonnes of iron ore shipped this year alone, the potential futures market is many multiples of this.”
Market participants also welcome the introduction of cleared Iron Ore Options.
John Wright, Head of GFI’s London Iron Ore Desk said: “We expect a growing demand for risk management hedging tools in the Iron Ore market in the near future. Introduction of cleared cash settled Iron Ore options will add value, and will complement and add liquidity to the existing futures market. We support this development in the market.”
David Abzatz, Head of Freight and Iron Ore at Macquarie Bank Limited, said: “The introduction of cleared options into the Iron Ore market is another positive step forward for the development of this new financial product. We are working very closely with a number of market participants who will use the option market to hedge their forward risk.”
Full Product Specification is available in Appendix 5, annex 5R to the Rulebook.