World Bunkering >Articles > Company profiles > SGX ASIACLEAR

Strategically located in Asia, Singapore has prided itself as an international maritime centre. Its busy seaport, together with its comprehensive range of maritime-related services such as cargo handling, logistics and distribution management and ship repairing services, have given the country a clear advantage to supply bunkers to ships that make their call in Asia. This has paved the way for Singapore to be developed into the world’s largest bunkering port with 36.39 million metric tonnes of physical bunker fuel sold in 2009, a 4.15% rise over the previous year.

Singapore Exchange (SGX) launched SGX Fuel Oil 380 cSt Futures in February this year. The launch complements Singapore’s active physical trading with a better risk management infrastructure, thereby bolstering Singapore’s role as a key energy trading centre and world’s largest bunkering port. The SGX Fuel Oil 380 cSt Futures is based on Marine Fuel Oil (MFO) 380 cSt grade, or bunker fuel, and is physically settled upon contract expiry.

Designed with the international oil trading and bunker market participants in mind, the SGX Fuel Oil 380 cSt Futures trades in minimum lot sizes of 100mt and is quoted in US Dollar per metric ton. To meet the risk management need of participants during Asian, European and US hours, the SGX Fuel Oil 380 cSt Futures market is open 15 hours a day from 9.00am to 6.30pm and 7.30pm to 1.00am the next day (Singapore time), giving market participants increased trading opportunities from Asian opening to US mid-day.

SGX Fuel Oil 380 cSt Futures has successfully completed physical deliveries for the first five contract months from April to August 2010 during which a total of 102,200mt of fuel oil has been successfully loaded.

SGX Fuel Oil 380 cSt Futures offers market participants the following key benefits:

Additional Trading and Hedging Tool

This contract offers fuel oil market participants a wider range of derivative contracts in addition to the OTC energy derivatives, thereby introducing new trading opportunities such as arbitraging and spreading from Asian opening to US-mid day time zone.

Better Price Discovery and Transparency

Electronically traded on SGX, this contract offers the MFO 380 cSt bunker market a more efficient and transparent price discovery mechanism as best bids and offers and last traded prices on SGX are continuously disseminated on a real-time basis through price vendors for the benefit of all market users. SGX also provides the daily settlement price at 7.30pm (Singapore time).

Alternative Means for Bunker Sales and Purchase

Physical settlement provides market participants with the flexibility to use the futures contract as an alternative means for bunker sales and purchase based on a fixed price basis.

Enhanced Trading Facilities

In addition to on-exchange trading, this contract also provides oil market participants with enhanced trading facilities such as Exchange of Futures for Physicals (EFP), Exchange Future for Futures for Swaps (EFS) and Negotiated Large Trade (NLT). Such transactions are privately negotiated so that the parties to the transactions are not confined to the exchange delivery terms, executed off-exchange and registered with the Exchange for clearing. These facilities allow market participants to better manage their physical, swaps and futures positions.

Global Access via Electronic Trading

The SGX electronic market can be easily accessed via the internet using SGX Clearing Members’ in-house trading systems or systems provided by 10 Independent Software Vendors (ISVs).

Financially Strong and Proven Clearing House

SGX’s derivatives market has over 20 years of experience in the trading and clearing of derivatives products. It has a tested and proven system of financial safeguards that has weathered diverse market cycles and crises over the years. Under its system, SGX clearing house is able to mobilise additional resources should a derivatives clearing member fail to meet its obligations to the clearing house. These additional resources include the Exchange’s clearing funds, default insurance and funds of other non-defaulting Clearing Members under the common bond system. However, there has never been a need to tap into these additional resources in our clearing history.

For more information on trading the SGX Fuel Oil 380 cSt Futures, please contact:
Brenna Koh
Assistant Vice President
Singapore Exchange Limited
Tel: (65) 6236 8827
E-mail: brenna.koh@sgx.com
Website: www.sgx.com/fueloil