Singapore to clear container swaps
The Singapore Exchange (SGX) said Thursday it will clear four new over-the-counter container swap contracts tied to components of the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index starting Aug. 2.
The announcement comes on the heels of the launch of container freight swap trading on the LCH Clearnet Exchange in London.
As in London, SGX will offer clearing services for container swap contracts on the four major container freight routes from Shanghai to North Europe, the Mediterranean and the U.S. West and East coasts.
“Launch of the contracts will support the nascent container freight derivatives market by managing counterparty credit risk. Participants are able to gain access to SGX AsiaClear's large pool of counterparties without the need to set up credit agreement with individual counterparty,” SGX said.
Freight derivatives allow a buyer to take a position on where freight rates will stand at a point in the future, allowing shippers, carriers, and other participants in transportation industry to hedge container freight as they can dry bulk and tanker freight.
Another sign of the growing interest in the container swaps is the formation of the Container Freight Derivatives Association as a forum for brokers and principals to discuss issues relating to the market. It has established a Web site, and will hold its first meeting and a forum in Shanghai on Sept. 14.
The association said it would seek to promote the trading of container freight derivatives, high standards of conduct by market participants and use of standard contracts. It said it would also act as a liaison with the Shanghai Shipping Exchange to ensure the production of high quality indices for use by the container freight derivatives industry and develop the use of other “over the counter” and exchange traded derivative products for container freight derivatives and related price risk management.
Container freight derivatives were the subject of an article in the March American Shipper, “Hedging your box bets.” ' Chris Dupin
Singapore to clear container swaps
