LCH.Clearnet is to launch clearing of OTC coal swap contracts. The move will expand the clearers freight service, which clears 85% of allOTC forward freight agreements for the most actively traded dry routes.
In July LCH.Clearnet also announced that it had started constructing a clearing service for the over-the-counter wholesale London gold market in a joint initiative with the London Metal Exchange. In June the firm became the first to clear OTC container freight swap agreements. 50-year interest swap trades have also been cleared for the first time by LCH.Clearnets SwapClear subsidiary.
The clearing of OTC contacts has been encouraged by regulators after the credit crisis.
The OTC coal swap contracts, which will be launched on 13 September, will be monthly cash settled swaps based on Rotterdam in the Netherlands and Richards Bay in South Africa and will be traded in multiples of 1,000 tonnes. The contracts will be settled against the underlying API2 and API4 index prices as published in the Argus/McCloskeys Coal Price Index Report.
Isabella Kurek-Smith, director, energy and freight said: With the coal market continuing to grow rapidly, introducing coal swaps to our broad range of existing OTC commodities, which include emissions, freight and iron ore swaps, is a valuable addition. Providing our specialist OTC clearing services will attract more players, which will in turn enhance liquidity and transparency and support the ongoing development of the international coal derivatives market.
The Chicago Mercantile Exchange will also start trading API2 and API4 cleared coal swaps on September 13.