The Singapore Exchange (SGX) Monday launched benzene-naphtha derivatives and paraxylene-naphtha derivatives indexed against S&P Global Platts markers, an SGX spokesman said.
The benzene/paraxylene spread derivatives will be cash-settled using the arithmetic difference between the final settlement prices of the SGX Platts benzene FOB Korea/paraxylene CFR Taiwan/China swap/futures and the SGX Platts naphtha CFR Japan swap/futures in the expiring contract month.
The swaps are to be traded in 500 mt lots, while the futures contracts will trade in 100 mt increments.
"The launch was in response to market demand and comes after a period of industry consultation," the SGX spokesman said. "Following the success of our PX and BZ contracts over the last year, there has been increased demand for more risk-management tools in petrochemical products. In particular, market participants are interested in spreads as those are representative of their margins and offer a more efficient way to manage risk."
PX traders earlier also said the derivatives would serve as an additional trading instrument, to take advantage of any volatility in the PX-naphtha spread, which has over the last month been hovering around the $400/mt mark.
The average PX CFR Taiwan/China-naphtha CFR Japan spread in 2017 as of March 24 stood at $392.74/mt, down $13/mt from a year ago over the same period, reflecting recent declines in the PX market amid pressure from a weaker downstream.
In terms of the possibility of SGX launching more product swaps, the spokesman said it would "continue to monitor developments in the petrochemical suites, and look forward to building industry support for risk-management tools that enable the market to develop over the long term."
Derivatives data from SGX showed that the total aromatics (PX and benzene) volume cleared on the exchange (based on Platts markers) hit an all-time high since the launch of the PX swaps in December 2014 at 312,200 mt in February 2017, up 652% from a year before and up 46% on the month.
Of that total volume, PX derivatives made up 185,000 mt, while benzene derivatives recorded their highest level of activity at 127,000 mt, data going back to December 2014 showed.
The data also showed a marked increase in trading of exchange-traded aromatics derivatives, with 2016's total volume of PX contracts settled standing at 1.249 million mt, up nearly 300% from the 2015 total, while total 2016 benzene contracts stood at 173,000 mt, 230% higher on the year.
