Cleartrade Exchange, the over-the-counter (OTC) electronic global marketplace for freight and commodity derivatives, has launched four daily Cleartrade Exchange China Steel Indices. Steel was the second largest commodity market in 2010 and is a key component of the world economy; as China is the largest steel-producing country, steel is crucial to its continuing growth.
Cleartrade Exchange will support the development of a swaps ferrous metals complex product portfolio by providing a trade execution venue, cleared contracts and the supporting straight-through processing (STP) infrastructure. There is great demand from traders for cash-settled swaps as a means of managing price risk and exploiting new market opportunities.
The Cleartrade Exchange China Steel Indices are: China Domestic Hot Rolled Coils (HRCs), China Domestic Hot-rolled Ribbed Bar (Rebar), China Domestic High Speed Wire Rod and China Domestic Medium Plate. The indices are based on data relating to spot market transactions, provided by steel industry participants who have built up a long working relationship with Umetal, a partner of Cleartrade Exchange.
Richard Baker, chief executive officer (CEO) of Cleartrade Exchange, said: “There is a clear need for improved hedging and risk management. The Cleartrade Exchange Steel Indices address that need. The indices are an excellent barometer of China’s domestic steel market as they are assessed in the local currency and then converted into a dollar value. In publishing these indices Cleartrade Exchange hopes to capture growth in the liquidity of steel futures, which can be combined with trading iron ore swaps and FFAs [forward freight agreements].”
The products will be launched alongside iron ore and freight on the Cleartrade Exchange platform, with coking coal to follow. This will allow participants to trade as a complete virtual steel mill and manage and hedge the relevant elements of production.
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