Iron Ore Futures and Options Overview

  • 27 Sep 2016
  • By CME Group
  • Topics: Metals

What we offer

CME Group offers the most complete suite of Iron Ore products in the market, including:

Type Name Maturity Index
TIO Future Iron Ore 62% FE CFR China (TSI) 48 M TSI*
ICT Option Iron Ore 62% FE CFR China (TSI) 36 M TSI*
TIC Future Iron Ore 58% FE Low Alumina CFR China 36 M TSI*
PIO Future Iron Ore 62% FE CFR China (Platts) 36 M Platts
ICP Option Iron Ore 58% FE Low Alumina CFR China (Platts) 36 M Platts

All CME Group Iron Ore futures contracts have a size of 500 dry mt. Minimum block trade size is 10 lots. The contracts are financially settled. Our Iron Ore contracts are part of the suite of Ferrous products that delivers effective risk-management solutions ranging from:

  • input (coking and thermal coal),
  • finished products (US and European Hot-Rolled Coil steel) to
  • scrap (US and Turkey busheling).

Cost-Effective Trading

In addition to affordable and transparent exchange fees, all CME Group Iron Ore products are currently on fee waiver (no charge for clearing) until the end of December 2016.

Enjoy the Best of the Futures Market

Transparency of the daily settlement mechanism

The daily settlement is based on market information that may include but is not limited to:

  • resting bids and asks on CME Globex with consideration given to trades executed on Globex throughout the day;
  • price data obtained from a cross section of the OTC brokers collectively representing buyers and sellers as well as other OTC market participants;
  • price data from other sources deemed reliable and
  • accurate rather than leaving price discovery to a potentially smaller group.

Visibility and anonymity of the trade flow

CME Group Iron Ore products are predominantly traded online on the CME Globex platform or via block trades cleared through CME ClearPort.

Market players have unprecedented visibility of the trade flow while maintaining anonymity of all participating parties.

Immediate Profit and Loss Realization

As a traditional futures market, CME Group Iron Ore offers immediate realization of the trading profit and loss upon close- out of the contract with an offsetting transaction.

If the contract is run to expiry, the settlement occurs after the last business day of the spot month.

Market Maker Program

Products: TIO and ICT traded on Globex

Program offers high volume liquidity providers no fees and monthly volume based bonus pool.

Cross-Margin Benefits

Margin offsets up to 65%

CME Group offers margin offsets of up to 65% against key correlated products.

The initial margin charge on a CME Group Iron Ore contract could be partially offset if a client has the opposite position in another commodity contract cleared through the same FCM at CME Group.

Iron Ore could be offset with a majority of liquid commodity contracts, including not only Ferrous and Base Metals but also Precious Metals and Coal.

Exchange Spread Products Credit
NYM PIO - Iron Ore (Platts) Futures 65%
CMX HG - COMEX Copper Futures 50%
CMX ZNC - Zinc Futures 45%
CMX ALI - Aluminum Futures 35%
NYM PA - Palladium Futures 35%
CMX SI-COMEX 5000 Silver Futures 30%
NYM TIC - Asian Iron Ore Futures 30%
NYM MCC - Indonesian Coal Mccloskey Subbit 30%
CMX A38 - Aluminum A-380 Alloy Platts Futures 30%
NYM NY-ALW - Australian Coking (Platts) Low Vol 25%
NYM MTF - Coal Api2 Cif Ara Arg- Mcclosky Futures 20%
NYM SSI - Coal Api 8 Cfr South China 20%

Exponential Growth in Iron Ore Options (ICT) Open Interest

Tap in to active markets across all three major time-zones: Asia, Europe and USA

Capital-Efficient Margin Erosion

Eroding margins are margins that decrease in value over time.

Many products have eroding margins because the margins are based on the average price for the month and, thereby, they present less risk than regular margins.

Currently, eroding margins are calculated with the formula: price scan* (calendar days remaining/total calendar days in the month) so that as the month goes on, the eroding margin decreases in value.

This means the margin is only posted on the residual risk as the contract month progresses.

A reduction in the initial margin requirements of almost 50% by mid-month means you can use your capital savings in other ways.

CME TIO Iron Ore Futures as of 14 July 2016:

Start Period End Period Maintenance Maint. Vol. Scan
07/2016 07/2016 1,596 USD 0.06
08/2016 10/2016 2,500 USD 0.045
11/2016 12/2019 2,500 USD 0.03

Good Liquidity along the Forward Curve

As of end July 2016, TIO total open interest exceeded 22,000 lots with positions open all the way to Dec 18.

Growing Market Share, Turnover and Open Interest

Increased volume is being attracted from two main segments:

  • Clients who historically trade the physical underlying
  • New prop houses and money managers

Cutting-Edge Technology

CME Direct is the most cost-efficient and transparent way to trade, offering:

  • Front-end access to NYMEX, COMEX, CME and CBOT markets
  • Depth of market view, highlighting own and firm live orders
  • Secure, easy to install and easy-to-use application
  • Support for all CME Globex trade types and Time in Force orders: Limit, Market, Stop orders; Day, GTC, GTD, FAK, FOK
  • Easy and straightforward trading execution and order placement

To learn more about CME Group Iron Ore Futures, please visit cmegroup.com/ferrous or contact metals@cmegroup.com.

About CME Group

As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. Comprised of four exchanges - CME, CBOT, NYMEX and COMEX - we offer the widest range of global benchmark products across all major asset classes, helping businesses everywhere mitigate the myriad of risks they face in today's uncertain global economy.

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