After rigorous market testing, the Singapore Exchange (SGX) has chosen the IHS McCloskey Indonesia FOB (4,200kc GAR*) marker from business information provider IHS Markit (Nasdaq: INFO) as the cash settlement price for its Indonesian 4,200kc GAR* coal futures contract.
The launch of SGX’s Indonesian 4,200kc GAR* coal futures contract, which is subject to regulatory approval, will provide a risk management tool for the most widely traded Indonesian coal grade.
“We are delighted to be working with IHS Market on this new product,” said William Chin, head of commodities at SGW. “This new thermal coal contract, for which regulatory approval is pending, is an important extension of our bulks product suite and will also add depth to the Baltic Exchange’s existing Indonesian freight routes.”
Accurate, independent and compliant
IHS McCloskey has been publishing the 4,200kc GAR index since 2013. The index has rapidly gained respect for its ability to track spot market activity accurately and consequently, is increasingly being adopted as a benchmark for physical transactions.
The IHS McCloskey Indonesian FOB (4,200kc GAR) marker is believed to be the only Indonesian coal benchmark to have been, to date, subjected to an external assurance review to ensure compliance with the principles for price reporting agencies (PRAs) set out by the International Organization of Securities Commissions (the IOSCO Principles). The principles are designed to ensure that a benchmark achieves a level of rigor and independence that is trusted by leading regulatory bodies and market participants.
The IOSCO Principles minimise the vulnerability of the assessment process to factors that could undermine the reliability of a PRA assessment as an indicator of market values or increase the susceptibility of a derivatives contract to price distortion.
“Our index has become the ideal tool to manage price risk for Indonesian low calorific coal,” said John Howland, managing director – coal, at IHS Markit. “The index is designed to maximise hard trade data, which is one of the main tenants of the IOSCO principles. This is why it tracks the spot market so well, and doesn’t lag the market, either.
“We have invested in building a team of market reporters and editors who are respected and trusted by the industry,” Howland said. “Their diligence and the team’s commitment to transparency are other key factors that have supported the success of this index.”
The IHS McCloskey index is a reliable and timely index that covers Indonesian coal prices, reacting quickly to price fluctuations in the market. The index follows real trades, bids and offers, driven real time by physical market activity. Every effort is made to make transactional data used in index calculation available to clients.
The IHS McCloskey index is increasingly being adopted as a benchmark for physical transactions in the Indonesian low calorific coal market. Chinese counterparts, in particular, have been using it on its own as or as part of a basket of prices in physical contracts.
IHS Markit is a leading global benchmark administrator at the forefront of changes taking place in the regulation of the various markets in which it is active. The company has a strong history of engaging with regulators to help navigate the evolving regulatory landscape.
*GAR – “Gross As Received”
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