ICAP is to launch a new electronic tanker freight derivatives broking service which will go live on 1 April and offer OTC trading in tanker Forward Freight Agreements (FFAs), cleared through LCH.Clearnet.
Initially, the routes that will be supported are TD3, TD5, TD7 and TC2, with more routes expected to be added in due course.
“Freight derivatives have seen strong growth and offering an electronic broking functionality that clears through LCH.Clearnet will increase liquidity in the tanker FFA market. This new electronic functionality will be the first OTC tanker derivative broking platform with the added security of a clearing link into LCH.Clearnet and we believe that this of real value to our customers,” says Edmund Gordon Clark, managing director, ICAP Hyde Tanker Derivatives Ltd.
“We are very pleased about the launch of ICAPs cleared FFA screen, and the opportunities it creates for our members and market customers. As a consequent benefit to our members, we are delighted to be able to offer a three month clearing fee holiday for our Tanker FFA service, starting on April 1,” adds Isabella Kurek-Smith, director, Energy and Freight Markets.
The wet freight physical market has seen good growth over the past five years, but strong demand conditions are expected in the very near future. The Chinese share of the crude oil trade is currently small compared to dry bulk cargo, and as both China and Indias middle classes are expanding at a rapid rate, demand for oil in the East is set to transform the market.
FFA wet freight derivative volumes have already grown substantially over the last few years, but the prospect of significant change in the underlying trade is expected to drive further long term growth in this market.