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First Cleared LNG Swap Traded
Monday (July 16) saw the world’s first cleared liquefied natural gas (LNG) swap traded. The contract settles on the ICIS East Asia Index (EAX) for physical LNG. The deal was done for September at $13.90/MMBtu and brokered by Tradition over the CME Direct trading platform and has been cleared by CME Europe.
On Monday the New York Mercantile Exchange (Nymex) also launched the East Asia Index (ICIS Heren) Swap futures contract for open outcry trading, having received approval from the Commodity Futures Trading Commission (CFTC). The product is to be cleared through CME ClearPort. Four ICIS Heren LNG swaps, including the East Asia Index swap, were already available for clearing through CME Clear Europe as of April 16.
“ICIS has been supporting trade in natural gas markets for over 18 years, since the first Heren Energy reports were launched,” said ICIS Managing Director Christopher Flook. “In 2007 we launched the first LNG spot market assessments. Since then, the growing volume of spot trade and market confidence in the ICIS prices have helped lay the foundation for this new era in LNG trade.”
There had been a very small over-the-counter swaps market for LNG, with a limited pool of counterparties and no clearing services, ICIS said. Clearing services and more active brokering should accelerate liquidity growth, said Louise Boddy, ICIS head of gas, power, emissions and coal. “The entrance of CME and Tradition promise to bring new counterparties and liquidity, helping the swaps to become more effective hedging tools. The ICIS EAX also provides the market with its first really accurate, transparent and reliable price benchmark.”
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