The Electronic Marketplace for OTC Cleared Derivatives

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  • 1. The Electronic Marketplacefor OTC Cleared Derivatives Strictly Private and Confidential 1
  • 2. Regulatory Reform Opportunity for change What size market can OTC instruments are subject we expect to see ? to global regulatory reform. By late 2012, institutional & retail traders and brokers under the Dodd-Frank Wall $700 Trillion Street Reform and Consumer Derivatives Market Regulation G20 Nations Protection Act will be Implement ISOCO Principals required to execute trades via For OTC Derivatives regulated swap execution SWAP & SEF Rules facilities (SEF’s). definition CFTC Globally, regulators are MiFID / ESMA / ISOCO tightening rules and emulating the Dodd-Frank Dodd-Frank Act July 2011 Act. 2011 2012 2013 Time Demand Curve of RegulationThe Dodd–Frank Wall Street Reform and Consumer Protection Act lays the foundation defining a SEF as a “facility, trading system or platform in which multiple participants have the ability to execute or trade swaps by accepting bids and offers made by other participants that are open to multiple participants in the facility or system”. Strictly Private and Confidential 2 Cleartrade Exchange comfortably satisfies this definition
  • 3. The industry challenge … bridging the “gap”*Freight / Ferrous Metals Complex of Derivatives 3
  • 4. Introducing The Cleartrade Exchange Cleartrade Exchange provides seamless transaction flow of OTC derivatives from electronic execution, through to GCM via Credit Filter to clearing house(s), and back. 4
  • 5. The Cleartrade Exchange (CLTX) - Introduction• Centralised, transparent & anonymous electronic market• Regulated by Monetary Authority of Singapore (MAS) as a RMO• Leading technology and operational infrastructure with an open API• CLTX platform is available as a Platform as a Service (PaaS) for private markets• Venue for OTC cleared derivatives – Dry FFAs, Iron Ore, Steel, Fertilizer and Container swaps – Coking Coal & Bunker Fuel Oil (Q4’12) pending approval with MAS – Established two Spot Indices for the development and settlement of swaps markets. (Cleartrade Exchange China Steel Index, World Container Index assessed by Drewry)• Supports many-to-many participants trading styles via easy web interface• No screen, software or set up costs; no membership fees; a transaction fee exchange• Multiple clearing house connections ( LCH, NOS, SGX, CME) Cleartrade Exchange Timeline Over 250,000 2009 2010 2011 LOTS 2012 (FEB) Cleartrade Exchange Processed PaaS DMA & Market Study Incorporation in Singapore 1st IDB RMO License Launched Mobile Apps Regulated Market Technology Member Design & Build Onboarding Live Trading & Container 5 Credit Filter& 1st Clearing House Freight 3 Product Families
  • 6. The Cleartrade Platform the infrastructure of a regulated marketplace EDGE Execution Platform Principals Orders, Routing, RFQ’s & Trade Link to Broker Trade Hub Management, Credit Matrix, Trade / recap Web interface Quote Vendor GCM’s Recap Engine Management (Trade & Feeds Rules & algorithms Systems Recap reports) LCH 3rd Party Cleartrade Trading Screens Clearing HUB API Operations DMA EDGE TRADE HUB NOS Post Trade Reporting and Management Execution : Pre & Post Trade EDGE Processing : Marketplace API management, trading rules and algorithms FIX5.0 STP Gateway Credit Cleartrade Mobile SGXPrice & Trade Discovery Matrix Cleartrade Credit Matrix for GCM’s CME Set financial margins by account import positions, Net P&L risk view Cleartrade Screens Broker – Trade - GCM Execution to Clearing : PriceStrictly Private andTrade Reporting : Risk Management Discovery : Confidential 6
  • 7. The technology :Fully integrated exchange solution The Cleartrade Exchange EDGE platform consists of 5 key elements: Trade 1. Electronic execution screen Repository and Recap 2. Block trading / deal registration Manager 3. Link via credit filter to clearing houses for pre-approval of FIX & XML API trades access for third 4. Consolidated recap manager party trading and reporting and risk management system systems 5. Market supervision and operations team (17hrs p/day) Cleartrade Exchange provides the “plumbing between execution and clearing” Clearing House 7
  • 8. The products : OTC cleared commodity markets Market Value US$ Physical Volume Lot Volume (Paper)Dry Bulk FFA $15bn 611 M DWT 1.1 M lotsContainer Freight $111bn 155 million moves 3000 lotsFertilizers $640m 160 M tonnes 2.1M tonnesIron Ore $150 bn 1,779 M tonnes 44M tonnesSteel $10.6bn 1,5 bn tonnes 409.6 M tonnesScrap $56bn 120 M tonnes n/aCoal $80bn 1,086 M tonnes 9,000 M tonnesCleartrade Exchange has focused product development on Dry Bulk trade commodities in the initial phase, a physical marketPrivate and Confidential in excess of $400 billion. Strictly complex worth 8
  • 9. Dry Bulk Commodity ComplexVolatility – Volatility - Volatility Dry Bulk Multiple Industrial Commodities Dry Bulk Trade Growth 2012-14 – 6.2% Other 1,040 Iron Ore 1,179 Grain 352 Coal 1,086 250000 Dry Cargo - Cape Brazil/China 200000 150000 $/day Bunkers 100000 as % of 50000 Freight 70% 0 Rates 38% Cape 172k dwt Panamax 74k dwt Supramax 52k dwt 2002 2012 Dry Bulk Time Charter Volatility Very Extreme Fuel Oil – a hedge to Brent Crude adding volatility 9
  • 10. Strategic Market DevelopmentSettlement Indiceswww.worldcontainerindex.comWorld Container Index assessed by Drewry,created as a 50/50 joint venture betweenCleartrade Exchange and Drewry ShippingResearch.• Launched September 2011• Over 1800 registered email subscribers• 20 paying members• Licensed to LCH for Contract Settlement• Providing 11 contract prices weekly Cleartrade Exchange China Steel Index A 5-year partnership between Cleartrade Exchange and Umetal of China. • Launched November 2010 • Covers China HRC/Rebar/Wire & Rod • Over 800 registered email subscribers • Licensed to LCH for Contract Settlement • Providing 4 contract prices daily 10
  • 11. Benefits of partnering with Cleartrade Exchange Broker Principal Participating brokers gain access to a deeper, centralized pool of Easy to access open market prices -Trade direct for regular trades liquidity Cleartrade fee structure does not undercut brokerage commissions Trade via a broker for more complex tailored orders - Retain and does not add significantly to the cost of transactions relationship Brokers can route orders securely to traders “Legging” functions gives better view of available spreads and ratios All open screen prices are shown anonymously to all participants Bespoke contract functions for time strips / calendar stripsBlock trading of pre-matched trades (dark trades) are available to OTC MTF risk management function allows full visibility of positions and brokers P+L Cut your back office costs and let Cleartrade take care of Automated recap system and downloadable reports integrates with confirmations, clearing registration and recording your accounting systemsMulti product platform enables cross selling of prices to relationship Private and Confidential trades allowed in block trading system (very clients dark trades)Positions you in a positive light with clients by participating in a level Better closing prices and forward curves playing field 11
  • 12. CONTACT DETAILSRichard Baker Robert AntellChief Executive Officer Business Development DirectorEmail : rbaker@thecleartrade.com Email : bantell@thecleartrade.com 12