CME Group Announces First Trades, Clearing of Hot-Rolled Coil Steel Options

The derivatives market maker CME Group, based in Chicago, has announced the first trades of its U.S. Midwest Domestic Hot-Rolled Coil (HRC) Steel Index options, which are equivalent to 20,000 short tons (1,000 contracts), have been cleared through CME’s ClearPort. The contract is listed by and subject to the rules of NYMEX.

According to the CME Group, Jeffries Bache and Macquarie Futures USA LLC provided the clearing services for the transactions through CME’s ClearPort. A number of companies were counterparties to the trade, including Jeffries Bache and Flack Steel, a Cleveland-based steel service center.

Harriet Hunnable, CME group managing director for metals products, says, “Continued uncertainty about global growth and price volatility in the industry has resulted in interest in our steel futures and options products. Options in particular offer market participants a cost-effective means to manage that uncertainty and mitigate their price risk. Clearing these hot-rolled coil steel options further validates our decision to work closely with the U.S. ferrous industry, providing them with a suite of products, like our scrap futures contract launching later this month, to meet their risk management needs.”

CME also says August represented a record month for two CME Group Virtual Steel Mill contracts: Iron Ore 62 percent Ferrous and CFR China (TSI) Swap futures and options. In August 2012, 1,060 swap futures and 4,010 options on swap futures contracts were cleared, equivalent to more than 2 million dry metric tons.

Jeremy Flack, Flack Steel founder and president, says, “As representatives of the physical side of the business and proponents of the benefits of using ferrous derivatives to mitigate price risk, we are encouraged by this trade as it shows the gathering and growing liquidity and understanding of ferrous derivatives in our industry.”