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SGX targets US for iron ore trading growth

Mining News - Published on Wed, 20 Mar 2019

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The Singapore Exchange has set its sights on the US marketplace as a growing source of liquidity for its iron ore derivatives contracts. SGX head of derivatives Mr Michael Syn said in an interview with Fastmarkets on Wednesday March 14 at the 44th annual International Futures Industry Conference in Boca Raton, Florida “We are absolutely already seeing liquidity in iron ore in the US time zone.”

Mr Syn said that more traders in Asia continuing to trade into their evenings is one of the key factors driving this increased liquidity. He said that “The market is starting to trade longer and longer.”

He said that this increased trading activity during US business hours is encouraging US-based participants to follow the price of iron ore more closely and participate in trading more than they have.

That is why it has become clear to the exchange that a significant push is needed to get closer to users in the United States, according to Syn. As part of that strategy, the SGX added five US-based employees to its staff over the last year.

All five are part of the exchange’s North American business development team:
Thomas Connors and Laurent Partouche in New York City, primarily focusing on derivatives and equities
Serene Cai and Craig Cohen in Chicago, also concentrating on derivatives and equities
Michael Avila in San Francisco, targeting new technology listings and initial public offerings

He said that “Some people need help understanding why it’s worth connecting to an exchange like SGX. We make sure we send them information about lots of new Asian asset classes that are developing, which are areas where their consciousness might not be as high.”

He added that although, the US is a heavyweight producer and consumer of commodities, iron ore generally isn’t one of them. That’s because most US steel is produced from scrap, and most iron ore is Asia-centric in terms of price references.

Mr Syn said that “That’s why this sort of education is important,” pointing to new products such as the SGX’s high-grade iron ore derivatives, which are settled against the daily Fastmarkets MB 65% Fe Iron Ore Index. He said that “There are many things happening in China that impact the US, and an exchange like SGX has them covered.”

He said that the SGX does not view China’s internationalization of its domestic iron ore or coal contracts as a threat to their objectives. He said “Iron ore is still in the very early stages of network growth. If China internationalizes, that helps the network of people who are connected to iron ore prices.”

US companies exposed to global markets can use the SGX’s risk management tools to strip out fluctuations in raw materials prices. He said that “Just as with oil, the price of iron ore and the component prices of the steel value chain turn up in all sorts of ways, in any piece of infrastructure.”

SGX’s core customer base is physical market participants. “No one really blindly speculates in iron ore; our customers genuinely have needs that are involved or have roots in the physical business in some respect,” he said. “Our job, apart from trying to make sure more people trade it and find uses for it, is to address the needs of the physical marketplace.”

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Posted By : Rabi Wangkhem on Wed, 20 Mar 2019
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