SMX to host iron ore futures contract on a global platform

Metal Bulletin Iron Ore (MBIO) Index based futures contract will position Singapore as global trading hub for iron ore.

Singapore Mercantile Exchange (“SMX”), the first pan-Asian multi-product commodity and currency derivatives exchange, on Wednesday announced that the world’s first Iron Ore Futures Contract on a global platform, settled based on the Metal Bulletin Iron Ore (MBIO) Index will be launched on the 12th August 2011. Metal Bulletin is the leading independent provider of premium information and pricing for the metals industries. Metal Bulletin’s MBIO index is a good reflection of the seaborne merchant market for sinter fines delivered to China.

The futures contract will complement Singapore as a major trading centre of iron ore and will be an ideal hedging tool for smaller exporters, traders and importers. The physical market for iron ore is valued at about $ 200 billion a year, making it second only to the market for crude oil. China alone accounts for more than $ 100 billion of this market, with production at 250 million tonnes (based on equivalent grade 62% Fe) and imports of 619 million tonnes

The Metal Bulletin Iron Ore (MBIO) Index utilises daily price data of actual transactions on a CFR China spot basis received by Metal Bulletin from a broad spectrum of industry participants, including leading independent Chinese steel consultancy and data provider Shanghai Steelhome’s, which has widespread contact base of steel producers and iron ore traders across China. The MBIO Index is a tonnage-weighted calculation of actual physical transactions, normalised to 62% Fe, CFR Qingdao and is published daily at mid-day London time.

SMX which went live on August 31, 2010 has seen its membership number double over the past 11 months crossing 50. The exchange had started with 25 members and four contracts and today has more than 50 members including 7 clearing members and 11 contracts. Among the leading clearing members signed-up thus far include Newedge, Ong First, Morgan Stanley, UOB, ICICI Bank, Citi and Phillip Futures. The prominent trade members include Glencore, Total Global Steel, Trafigura, Vitol and TransMarket, as mentioned in an SMX report.

SMX trading sessions span Asian, European and US business hours, with central counterparty clearing performed by SMXCC. The SMX platform allows remote participation through its diverse network of members and ISVs. The Exchange also offers its own proprietary front-end solution for direct market access.