SGX, CBMX enter pact to develop iron ore markets

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It is a first pact between the Chinese spot iron ore trading platform and an international derivatives clearing house.

Under the memorandum of understanding, both exchanges will jointly explore areas of cooperation including “product development, market development and information sharing”, according to an SGX statement on Tuesday May 7.

“Collaboration on product development is still in the early stages, but we could start with information sharing and the expansion of customer base,” a source with CBMX said.

“CBMX and SGX will also explore a medium-term roadmap towards improvement of interaction and risk transfer between the spot and derivatives markets,” SGX said.

“As the only iron ore spot trading platform in China, we hope that through cooperation with SGX, we can promote the use of both the spot and derivatives platforms as trading and risk-management tools. This will help iron ore market participants to achieve effective and efficient interaction between the spot and financial derivatives markets,” CBMX president Dong Chaobin was quoted as saying in the SGX statement.

SGX clears more than 90% of the world’s iron ore swaps, the Singaporean exchange said.

CBMX operates China’s first spot iron ore trading platform, which it jointly initiated with China Iron & Steel Assn and China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters (CCCMC) and launched in May 2012