Icap (IAP.L), the world's premier interdealer broker, announced today that it is to launch a new electronic tanker freight derivatives broking service.
The new service, which will go live on 1 April, offers OTC trading in tanker Forward Freight Agreements (FFAs), cleared through LCH.Clearnet. Initially, the routes that will be supported are TD3, TD5, TD7 and TC2, with more routes expected to be added in due course.
Edmund Gordon Clark, Managing Director of ICAP Hyde Tanker Derivatives Ltd, said: "Freight derivatives have seen strong growth and offering an electronic broking functionality that clears through LCH.Clearnet will increase liquidity in the tanker FFA market. This new electronic functionality will be the first OTC tanker derivative broking platform with the added security of a clearing link into LCH.Clearnet and we believe that this of real value to our customers."
Isabella Kurek-Smith, Director, Energy and Freight Markets said: "We are very pleased about the launch of ICAP's cleared FFA screen, and the opportunities it creates for our Members and market customers. As a consequent benefit to our Members, we are delighted to be able to offer a three month clearing fee holiday for our Tanker FFA service, starting on April 1".
The wet freight physical market (tanker transportation of oil) has seen good growth over the past five years, but strong demand conditions are expected in the very near future. The Chinese share of the crude oil trade is currently small compared to dry bulk cargo (coal, iron ore, grains), and as both China and India's middle classes are expanding at a rapid rate, demand for oil in the East is set to transform the market. FFA wet freight derivative volumes have already grown substantially over the last few years, but the prospect of significant change in the underlying trade is expected to drive further long term growth in this market.