Ronly and Morgan Stanley Commodities have traded the first cash-settled cleared swap in the emerging China domestic rebar market.
The trade, which was brokered by Freight Investor Services, was for China Domestic Rebar Q1 2011 executed at USD690/tonne, with settlement against the Cleartrade China Steel Index and clearing at LCH.Clearnet.
The new contract is one of a series of new products introduced in October and November to provide access to European and Chinese steel futures markets for traders who want to execute OTC cleared transactions without the need for exchange membership.
Earlier this month, FIS began offering contracts in China domestic rebar and Turkish scrap imports. In mid-October it began marketing three new contracts for hot rolled coil, (North and South Europe and China), as well as beginning coverage of US Mid-West HRC. All the contracts are offered as cash-settled products with clearing at LCH.Clearnet.
The decision to offer the new European and Chinese contracts was made in response to market demands for a cleared, cash-settled swap product that would provide access to these markets for a new investor base.
Sam Mehew, senior steel derivatives broker at FIS, says: “We are delighted to have concluded the first China domestic rebar swap. Despite the enormous success of the SHFE rebar contract, barriers to entry to all foreign entities outside of China due to capital and regulatory restraints have effectively restricted access to parties wishing to trade the market. We are confident that the CCSI China Domestic Rebar swap acts as a reliable proxy to the current SHFE contract and will provide access to the steel market for those looking for exposure to the China market.”
Jamie Afnaim of Ronly Trading adds: “The evolution of ferrous-related derivatives is a very positive step for our industry; it will support us in better managing risk and increasing the breadth of services we can offer to our customers and suppliers.”
