The Singapore Exchange (SGX) has launched a set of high-grade iron ore derivatives to meet demand for new risk-management tools.
The move announced yesterday comes as China increases its use of premium iron ore for steel-making in its pursuit of environmentally friendly growth.
The SGX MB Iron Ore CFR China swaps and futures, designed in consultation with market participants, reference CFR Qingdao - the 65 per cent Fe Brazilian fines index provided by Fastmarkets MB - the bourse said.
It called the derivatives a "world's first", noting that the new contracts will "add vibrancy" to the global iron ore market and offer investors the opportunity to trade grade differentials and manage widening basis risks.
"Iron ore has become Asia's first truly global commodity, increasingly following in the footsteps of the oil complex in terms of size and economic importance," said Mr Michael Syn, head of derivatives at SGX.
"With the high-grade contracts, we are delivering access tools to bridge domestic pricing in China - iron ore's most important market - to an international benchmark."
The SGX began clearing iron ore derivatives in 2009 and clears nearly 100 per cent of all iron ore and coking coal derivatives globally.
Separately yesterday, the SGX announced a partnership with Nanhua Futures, a China-based financial derivatives services platform, to develop indexes representative of China's Belt and Road Initiative (BRI).
It involves the SGX's index business, SGX Index Edge, working with Nanhua Futures subsidiary Nanhua Fund to identify the types of indexes and methodologies that would be of interest to Chinese and international investors. They will also conduct and promote equity research on Singapore stocks.
"Utilising SGX Index Edge's index-calculation expertise, coupled with Nanhua's research capabilities in China, we are looking to compile an index for investors to track and capture investment opportunities arising from the BRI," said SGX head of market data and connectivity Ng Kin Yee.
He added that many Asean and China players in a variety of sectors are listed on the SGX and will benefit from the BRI.