CME Launches Steel Swap Futures

With a view to help customers manage the price risk associated with the Chinese construction and rebar industries, CME Group Inc. (CME - Analyst Report) has announced the launch of Chinese Steel Rebar HRB400 (Mysteel) Swap Futures. The trading of these futures, which will be listed on CME’s subsidiary NYMEX, is slated to commence on October 15, 2012.

The futures will be denominated in U.S. Dollars and will be cleared by CME ClearPort. These will be subject to the rules and regulations of NYMEX. However, the launch is dependent on the attainment of regulatory approval.

This is the first CME product based on the price data services of Mysteel – China’s leading provider of ferrous price and indexing services. The two companies had announced a joint agreement in January this year, to develop risk management products for the ferrous industry based on Mysteel's market-leading price data services.

The new futures are aimed at meeting the demand for a product that can help manage the impact of the instability in steel prices. Rebar HRB400 is a 20mm ribbed steel bar that is required by the construction industry for concrete reinforcement. Apart from managing steel price volatility, the new futures will also protect clients from counterparty credit risk.

CME keeps launching new futures to expand its range of benchmark products. The exchange has the most diverse product range, which is a result of continued innovation and evolution as well as mergers and acquisitions.

Earlier this month, CME introduced a new genre of futures contracts that will be linked with deliverable interest rate swaps (IRS). These new IRS futures, which are scheduled to launch on November 13, 2012, will be listed on Chicago Board of Trade (CBOT) and be regulated by Commodity Futures Trading Commission (CFTC).

Prior to that, CME announced the launch of the Brazilian Ibovespa Futures in the U.S. from October 22, 2012. Ibovespa is already traded on the Brazilian Stocks, Mercantile & Futures Exchange (BM&FBOVESPA). Now it will be traded in U.S. Dollars denomination and will be listed on CME.

CME, which competes with other exchanges such as NYSE Euronext Inc. (NYX - Analyst Report) and Nasdaq OMX Group Inc. (NDAQ - Analyst Report), currently carries a short-term Zacks #4 Rank (Sell). Considering the fundamentals, we maintain our long-term ‘Neutral’ recommendation on the stock.