Apr. 18 - CME Group will list its iron ore futures contracts on its electronic platform from May, the exchange operator said on Wednesday, hoping to boost liquidity in a derivatives market dominated by the Singapore Exchange.
Firm demand from top iron ore consumer China and increased market volatility has been pushing more market participants toward hedging tools such as swaps and futures.
CME, the largest operator of U.S. futures exchanges, began clearing iron ore futures in August 2011 and said the decision to list it on its Globex trading platform on May 13, Singapore time, was aimed at providing "more transparency and greater market access".
The existing contracts are settled against the 62-percent grade iron ore price as assessed by Steel Index .
The Singapore Exchange clears more than 90 percent of the globally traded iron ore swaps. In the first quarter, it cleared 51.5 million tonnes, with volume hitting a record 18.5 million tonnes or nearly 37,000 lots in March.
Volume for CME's iron ore contract stood at 979 lots last month, falling from a high of 2,371 lots in September last year, based on data from the exchange.
Some traders say it will be a challenge to lure money away from an entrenched benchmark that has the support of the market's biggest traders.
More than three years after the launch of its first iron ore derivative, Intercontinental Exchange in February expanded its offering with the launch of two iron ore swap futures contracts.
The Singapore bourse began an iron ore futures contract earlier this month in a bid to attract U.S. clients faced with tougher rules in trading over-the-counter derivatives, although liquidity has been low.
"We are prepared for a modest pick-up in the AsiaClear Futures at this stage," Lily Chia, vice president for product management at SGX, said in an email.
But Chia added that presently, "majority of the iron ore transactions in Asia are in swaps mode as preferred by customers".