The U.S. Midwest Domestic Hot-Rolled Coil (HRC) Steel Index options listed in the CME Group’s derivatives marketplace recorded its first trade comprising 1000 contracts or the equivalent of 20,000 short tons of HRC.
The contract is subject to the regulations of the New York Mercantile Exchange NYMEX. The trade was cleared through the clearing mechanism of CME known as CME ClearPort. The clearing services were facilitated by Jeffries Bache and Macquarie Futures USA. The trade features numerous counterparties which also include the Cleveland-based steel service center, Jeffries Bache and Flack Steel.
According to Harriet Hunnable, Group Managing Director for Metal Products at CME, the interest generated in their company’s steel derivative products is the result of price fluctuations characterizing the industry and the sustained ambiguity over global growth. He stated that options provided market participants with a solution to hedge the price risk resulting from uncertainty. He also said that the clearing of the first hot-rolled coil steel options trade strengthened their decision to work in close collaboration with the ferrous industry in the United States and mentioned the scraps futures contract to be introduced by CME in the coming month as one of many products designed to meet the industry’s risk mitigation requirements.
Jeremy Flack, Founder and President of Flack Steel, stated that his company which represents the physical aspect of the ferrous industry and advocates the use of derivatives for risk mitigation, was buoyed by the trade as it is indicative of increasing liquidity and comprehension of ferrous derivatives in their industry.
Source: http://www.cmegroup.com/
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