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 ReformOpportunity for changeWhat size market canOTC instruments are subjectwe expect to see ?to global regulatory reform.By late 2012, institutional &retail traders and brokersunder the Dodd-Frank Wall$700 TrillionStreet Reform and ConsumerDerivatives MarketRegulationG20 NationsProtection Act will beImplement ISOCO Principalsrequired to execute trades viaFor OTC Derivativesregulated swap execution SWAP & SEF Rulesfacilities (SEFs). definitionCFTCGlobally,regulators areMiFID / ESMA / ISOCOtighteningrules andemulatingthe Dodd-Frank Dodd-Frank ActJuly 2011Act. 2011 20122013 TimeDemand Curve of RegulationThe DoddFrank Wall Street Reform and Consumer Protection Act lays the foundation defining a SEF as a facility, trading system or platformin 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 Confidential2Cleartrade Exchange comfortably satisfies this definition 3. The industry challenge bridging the gap*Freight / Ferrous Metals Complex of Derivatives 3 4. Introducing The Cleartrade ExchangeCleartrade Exchange provides seamless transaction flow of OTC derivativesfrom 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 (Q412) pending approval with MAS Established two Spot Indices for the development and settlement of swapsmarkets. (Cleartrade Exchange China Steel Index, World Container Index assessedby 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 TimelineOver250,0002009 2010 2011 LOTS 2012 (FEB) Cleartrade Exchange Processed PaaS DMA &Market Study Incorporation in Singapore1st IDBRMO License Launched Mobile AppsRegulated MarketTechnologyMember Design & BuildOnboarding Live Trading & Container5Credit Filter& 1st Clearing House Freight3 Product Families 6. The Cleartrade Platformthe infrastructure of aregulated marketplace EDGE Execution PlatformPrincipals Orders, Routing, RFQs & Trade Link to BrokerTrade HubManagement, Credit Matrix,Trade / recap Web interfaceQuote VendorGCMsRecap EngineManagement (Trade & FeedsRules & algorithms SystemsRecap reports) LCH3rd Party CleartradeTrading ScreensClearingHUB API OperationsDMAEDGETRADE HUBNOSPost Trade Reporting and Management Execution : Pre & Post Trade EDGEProcessing : MarketplaceAPImanagement, trading rules and algorithmsFIX5.0 STP GatewayCredit Cleartrade Mobile SGXPrice & Trade Discovery MatrixCleartrade Credit Matrix for GCMs CMESet financial margins by account import positions, Net P&L risk viewCleartrade Screens Broker Trade - GCMExecution to Clearing : PriceStrictly Private andTrade Reporting : Risk ManagementDiscovery : Confidential 6 7. The technology :Fully integrated exchange solutionThe Cleartrade Exchange EDGEplatform consists of 5 key elements:Trade1. Electronic execution screenRepositoryand Recap2. Block trading / deal registration Manager3. Link via credit filter to clearing houses for pre-approval ofFIX & XML API trades access for third4. Consolidated recap managerparty trading and reporting and risk management systemsystems5. Market supervision and operations team (17hrs p/day) Cleartrade Exchange provides the plumbing between execution and clearing Clearing House7 8. The products : OTC cleared commodity markets MarketValue US$ Physical Volume Lot Volume (Paper)Dry Bulk FFA $15bn611 M DWT 1.1 M lotsContainer Freight$111bn 155 million moves3000 lotsFertilizers$640m160 M tonnes 2.1M tonnesIron Ore$150 bn1,779 M tonnes 44M tonnesSteel $10.6bn 1,5 bn tonnes 409.6 M tonnesScrap$56bn120 M tonnes n/aCoal $80bn 1,086 M tonnes 9,000 M tonnesCleartrade Exchange has focused product development on Dry Bulk trade commodities in theinitial phase, a physical marketPrivate and Confidential in excess of $400 billion. Strictly complex worth 8 9. Dry Bulk Commodity ComplexVolatility Volatility - VolatilityDry Bulk Multiple Industrial CommoditiesDry Bulk Trade Growth 2012-14 6.2%Other1,040Iron Ore 1,179Grain 352Coal 1,086 250000 Dry Cargo - Cape Brazil/China 200000 150000 $/dayBunkers 100000as % of 50000Freight70% 0Rates38%Cape 172k dwt Panamax 74k dwt Supramax 52k dwt 2002 2012Dry Bulk Time Charter Volatility Very ExtremeFuel 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 weeklyCleartrade Exchange China Steel IndexA 5-year partnership between CleartradeExchange 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 daily10 11. Benefits of partnering with Cleartrade ExchangeBrokerPrincipalParticipating brokers gain access to a deeper, centralized pool ofEasy to access open market prices -Trade direct for regular trades liquidity Cleartrade fee structure does not undercut brokerage commissionsTrade via a broker for more complex tailored orders - Retainand does not add significantly to the cost of transactions relationship Brokers can route orders securely to tradersLegging functions gives better view of available spreads and ratiosAll open screen prices are shown anonymously to all participantsBespoke 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 brokersP+LCut your back office costs and let Cleartrade take care of Automated recap system and downloadable reports integrates with confirmations, clearing registration and recordingyour accounting systemsMulti product platform enables cross selling of prices to relationship Private and Confidential trades allowed in block trading system (very clientsdark 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 OfficerBusiness Development DirectorEmail : rbaker@thecleartrade.com Email : bantell@thecleartrade.com12