SGX launching electronic trading system for iron ore derivatives

The Singapore Exchange (SGX) is encouraging iron ore derivatives traders to put up bids and offers electronically when it begins screen trading next week, market sources told Steel First.

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The move, to be kick-started on Monday September 2, will allow all market participants to see the prices in one place and execute trades directly, effectively overhauling the over-the-counter (OTC) trading dynamics seen currently, the sources said.

The contracts will be the same as those currently cleared by the SGX and they will continue to be cash settled without physical deliveries.

“I think it’s a good development as it makes the market very transparent and creates more efficiency,” an iron ore trader told Steel First.

He expects most market participants to shift to screen trading from OTC in the near future.

“[The screen trading system] will basically kill the brokers,” an iron ore derivatives broker in Singapore said. “I don’t encourage my clients to use that basically.”

SGX will offer some incentives for traders and market makers to help drive the liquidity for the first six months, sources said.

SGX did not respond to a request for comment at the time of writing.

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