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SGX to launch low sulphur fuel oil derivative contracts on 18 November 2019

11 Nov 2019

The Singapore Exchange (SGX) on Friday (8 November) announced plans to launch two new Low Sulphur Fuel Oil derivative contracts on 18 November 2019.

The contracts offer the shipping and bunker industry futures contracts to hedge price risks, following the upcoming implementation of the new IMO2020 fuel oil sulphur limit. 

The new contracts on 18 November 2019 are as follows: 

  • SGX Argus LSFO 0.5%S Singapore Bunker Swap
  • SGX Argus LSFO 0.5%S Singapore Bunker Index Futures
  • SGX Platts Marine Fuel 0.5% FOB Singapore Swap
  • SGX Platts Marine Fuel 0.5% FOB Singapore Index Futures

The Argus contract will be based on a bunker index whereas the Platts contract will be based on a cargo index to allow market participants to precisely manage price risk according to their specific requirements, says SGX.

These contracts add to SGX's current suite of fuel oil contracts, namely Singapore 180cst Fuel Oil and Singapore 380cst Fuel Oil. Margin offsets will be offered against other oil contracts as well as FFAs, leading to greater capital efficiency.

“The increasing environmental awareness worldwide is changing the hedging needs of our clients. We are launching these new contracts ahead of the IMO2020 implementation to provide our clients with the ease and ability to hedge price risks in a volatile bunker market,” said Cheong Jin Yu, Director of Commodities at SGX.

“Rising environmental concerns is impacting our clients' risk management needs. In addressing this, SGX continues to calibrate and build on its suite of commodities risk management solutions.”

Published: 11 November, 2019
 

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