Iron ore trading platform CBMX inks MOU with SGX

SINGAPORE - China Beijing International Mining Exchange (CBMX), the only iron ore spot trading platform in China, has signed a Memorandum of Understanding with the Singapore Exchange (SGX) to boost their cooperation in developing the iron ore markets, the two exchanges said on Tuesday.

Under the MOU, they will jointly explore areas of cooperation including product development, market development and information sharing. The two exchanges will also explore a medium-term roadmap towards improvement of interaction and risk-transfer between the spot and derivatives markets.

Both exchanges said it was an important "first" in the global iron ore market, as the agreement brings together an international derivatives clearing platform and a spot trading platform.

Dong Chaobin, president of CBMX, said the exchange is hoping to 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," Dong said.

Since the opening of CBMX on May 8, 2012, more than 13 million tons of iron ore have been traded. The trading pattern of the platform and the base price it generates, are gradually gaining market influence.

SGX AsiaClear is the pioneer commodities over-the-counter clearing service in Asia and enjoys over 90 percent global market share in the clearing of iron ore swaps.

The physical iron ore seaborne market in Asia has been growing fast in the last few years, driven partly by China's demand for steel production amid continued industrial development.

The derivatives market has developed alongside as the complementary risk-management and hedging tool against price volatility. SGX cleared a record 109 million tons of iron ore swaps in 2012, representing a growth of almost 2.5 times over the previous year.

Magnus Bocker, chief executive officer of SGX, said that the exchange is trying to expand the reach of its markets and clearing capabilities to Asia and globally.

"Closer collaboration between the various physical marketplaces and our derivatives market sets an ideal foundation for growth. It also aligns our respective platforms more effectively to the benefit of all market participants," he said.