Iron Ore Futures and Options Overview

  • 10 Feb 2017
  • By CME Group
  • Topics: Metals

Why Trade Iron Ore at CME Group?

CME Group offers the most comprehensive metals offering that covers all your needs including our unparalleled precious metals liquidity and an expanded slate of base and ferrous metals solutions. Tap into our markets across the product suite, including Iron Ore Futures and Options, and begin benefitting from easy execution, reduced costs and reliable access around the clock. Addional value in our Iron Ore products can be found through:

  • A global price established by international market participants
  • Secure risk management for all market participants via central counterparty clearing
  • Access to transparent, onscreen liquidity through cutting edge technology
  • Nearly 24 hour electronic access to contracts sized 500 dry mt with minimum block trade size of 10 lots

Security in a Highly Regulated Market

Market Regulation works to protect market integrity, to enforce rules that protect all market participants, and to act proactively to mitigate risks in the marketplace.

  • Central counterparty clearing ensures the financial security of the marketplace and help clearing participants limit credit risk and achieve operational and financial efficiency.
  • Privately negotiated block trades submitted for clearing via CME ClearPort, enhancing your secure access to liquidity in the OTC market.
  • Spot month position limits prevent from any potential squeezes cmegroup.com/rulebook/files/position-limits-nymex.xlsx.

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 CME 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

Iron Ore Futures’ Performance Increased Throughout 2016 When Compared to Gold and Copper Futures

Increasing Liquidity in Iron Ore

Deeper Liquidity Versus SGX

The heat map’s depiction of a richer color concentration shows CME Group’s contracts offer deeper liquidity than SGX’s during Asian trading hours which provides traders with lower timing risk and more consistent transaction spreads.

Iron Ore Liquidity Based on Volume and Bid/Ask Spread

Looking out the Forward Curve

Futures Open Interest approaching 18,000 lots, equivalent to over 9 million dmt with open positions through December 2019.

Futures

Options open interest approaching 14,000 lots, equivalent to almost 7 million dmt with open positions through December 2018

Options

Liquidity Around-the-Clock in the Global Market

Begin to benefit from increasing on screen liquidity almost 24 hours each day with accessibility from anywhere in the world. That includes dedicated market makers throughout the trading day to ensure continuous, two-sided markets. Our markets bring together a global, diverse client base from around the world.

Discover Cross-Product Correlations

A simple, yet powerful, way to visualize pairwise correlations of Iron Ore products across other CME Group products with the Cross-Asset Correlation Tool. Identify the degree to which two products are varying similarly over a period of time.

Correlation with Chinese GDP
12 Month Rolling Correlations Chinese GDP vs Iron Ore Price
Jan 2014 – Dec 2016

How You Can Benefit From Trading Iron Ore Futures and Options

Visibility and Anonymity of the Trade Flow

Market participants have unprecedented visibility of the trade flow while maintaining anonymity of all participating parties. All Iron Ore products are available for trading electronically via:

  • CME Globex – our global electronic trading system for futures and options
  • CME ClearPort – for clearing block trades through a comprehensive set of flexible clearing services for the OTC market
  • CME Direct – a highly-configurable trading front end for CME Group markets that offers a complete suite of solutions across the trading life cycle

Cross Margin Benefits

CME Group offers margin offsets up to 55% against key products. The initial margin on an 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.

Exchange

Spread Products

Credit

NYM

PIO - Iron Ore 62% (Platts) futures

55%

CMX

HG - COMEX Copper futures

45%

CMX

ALI - Aluminum futures

35%

CMX

A38 - Aluminum A-380 Alloy Platts futures

30%

NYM

PA - Palladium futures

25%

CMX

SI-COMEX 5000 oz Silver futures

25%

CMX

ZNC - Zinc futures

20%

CMX

ALA - Alumina FOB Australia (Platts) futures

20%

CMX

ALB - Alumina FOB Australia (Metal Bulletin) futures

20%

Rates as of February 3, 2017. For most up-to-date information visit www.cmegroup.com/margins.

For more information visit cmegroup.com/ironore 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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