Thursday, 17 Nov 2011
Reuters, citing two sources familiar with the matter, reported that a unit of the Bank of China, one of the country's top four banks, is planning to kick off an iron ore swaps business next year in a bid to tap growing demand for hedging from steel mills and traders.
BOC International, the investment banking arm of the state owned bank, aims to provide brokerage services, proprietary trading of iron ore swaps as well as physical trading.
As per report “The bank plans to start an iron ore swaps business in the first half of next year, with the aim of providing hedging services for domestic players first. It also plans to apply for clearing membership in the Singapore Exchange SGX next year.”
The source said that BOC International has also applied for category two membership on the London Metal Exchange, which would give it access to all types of LME business except ring trading.
BOCI was approved as a clearing member of CME Group in March. The CME and SGX both offer clearing of iron ore swaps, with the bulk of globally traded volumes cleared on the SGX.
The entry of a major bank from the world's top iron ore buyer could bolster liquidity of the nascent swaps market, and signal a further warming to derivatives in China's state dominated steel sector as prices of the main raw material become more volatile.
Launched in May 2008, iron ore swaps are cash settled contracts that allow steelmakers and traders to hedge price risks. The volume of globally traded swaps soared to an all-time high above 9 million tonnes in October, with Singapore Exchange clearing a record 7.5 million tonnes, as prices gyrated wildly.
(Sourced from Reuters)
Reuters, citing two sources familiar with the matter, reported that a unit of the Bank of China, one of the country's top four banks, is planning to kick off an iron ore swaps business next year in a bid to tap growing demand for hedging from steel mills and traders.
BOC International, the investment banking arm of the state owned bank, aims to provide brokerage services, proprietary trading of iron ore swaps as well as physical trading.
As per report “The bank plans to start an iron ore swaps business in the first half of next year, with the aim of providing hedging services for domestic players first. It also plans to apply for clearing membership in the Singapore Exchange SGX next year.”
The source said that BOC International has also applied for category two membership on the London Metal Exchange, which would give it access to all types of LME business except ring trading.
BOCI was approved as a clearing member of CME Group in March. The CME and SGX both offer clearing of iron ore swaps, with the bulk of globally traded volumes cleared on the SGX.
The entry of a major bank from the world's top iron ore buyer could bolster liquidity of the nascent swaps market, and signal a further warming to derivatives in China's state dominated steel sector as prices of the main raw material become more volatile.
Launched in May 2008, iron ore swaps are cash settled contracts that allow steelmakers and traders to hedge price risks. The volume of globally traded swaps soared to an all-time high above 9 million tonnes in October, with Singapore Exchange clearing a record 7.5 million tonnes, as prices gyrated wildly.
(Sourced from Reuters)
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