SGX launches options on natural rubber pricing benchmark

Rubber bicycle tyres; taken September 2018.Rubber bicycle tyres; taken September 2018.

Singapore Exchange launched Monday the industry’s first options contract on TSR 20 rubber, called the SGX SICOM TSR 20, as a risk-management tool.

The options contract is based on SGX SICOM TSR 20 (FOB) Futures contract and expires into futures positions, which gives users the ability to take physical delivery to settle their positions, SGX said in a statement.

SGX SICOM TSR 20 is a global pricing benchmark for natural rubber.

“This launch follows strong demand from market participants and is timely given the increased liquidity of the underlying futures,” William Chin, head of commodities at SGX, said in the statement. “With the new options contract, we are expanding our service to a well-diversified SICOM community and enhancing price discovery of TSR 20 rubber.”

The options contract provides opportunities for delta-hedging strategies and can limit downside risk, SGX said.

SGX has previously offered other rubber derivatives, including SGX SICOM TSR 20 Futures, SGX SICOM RSS 3 Futures and SGX SICOM Over-The-Counter (OTC) TSR 20 Rubber Forwards.

In 2018, SGX cleared more than 9 million metric tonnes of rubber derivatives, up 23 percent on-year, while in the January-to-April period, volume was nearly 3.5 million tonnes, up 21 percent on-year, the exchange said.


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