Singapore Exchange launches SM, MEG swaps/futures contracts

SINGAPORE (ICIS)–Singapore Exchange’s (SGX) recent launch of styrene monomer (SM) and monoethylene glycol (MEG) futures and swap contracts will provide the market with an alternative tool to over-the-counter deals, an exchange spokesperson said on Friday.

SGX on 23 October introduced the SGX ICIS Monoethylene Glycol (MEG) Swaps and Futures as well as the SGX ICIS Styrene Monomer (SM) Swaps and Futures contracts. (please see tables below for further details)

The underlying prices for the contracts will be based on ICIS’ MEG and SM price assessments.

With the launch, SGX is the first exchange to offer clearing of petrochemical swaps and futures that reference the ICIS MEG CFR China Main Ports Index and ICIS SM CFR China (weekly price range) Index, the exchange said in an earlier statement.

“With the launch of these styrene monomer and monoethylene glycol swaps and futures we are providing the market with an exchange-traded and centrally cleared tool, which is important given that they have traditionally been traded on an over-the-counter (OTC) basis,” said William Prajogo, an associate director at SGX Commodities.

Prajogo said that the contracts will also give participants reduced counterparty risk, an elimination of delivery risk, as well as margin offsets with other SGX petrochemical products.

“We look forward to collaborating further with ICIS to further broaden our offering in the petrochemicals space, and building the community of participants in the market,” he added.

MEG players in region said that the newly launched swaps and futures contracts are still in the infancy stage and will take some time before they are fully utilised.

“Its still at the starting state so no trades are done yet,” a MEG broker said.

In the SM market, traders said that the futures and swaps contracts will be a good way to minimise counterparty risks, but this will come with less liquidity.

“It’s a good way for term contract holders to hedge, since many are based off the ICIS weekly CFR China assessment. It will be difficult to hedge spot transactions though,” a  SM trader said.

Another SM trader added that it is “not seeing much interest from the market at the moment…if more Chinese players participate there will be more liquidity”.

With additional reporting by Deborah Lee and Eric Su