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| Originating department: | Commercial Services |
| Company Circular No: | LCH.Clearnet Ltd Circular No 2769 |
| Service Circular No: | LCH EnClear No 325 |
| Date: | 25 January 2011 |
| To: | All LCH.Clearnet EnClear Clearing Members |
OTC Clearing Service for API 2* and API 4* Coal Option Contracts – Amendment to Last Trading Day
Further to LCH.Clearnet Ltd Circular 2676 informing Members of the launch of API 2 cif ARA and API 4 fob Richards Bay Coal option contracts on the 7 February please be advised that the specification for these contracts has been amended. The last trading day has been changed to reflect contract expiry:
• 30 days prior to commencement of the underlying Coal swap contract. Where this is a non working day expiry will be on the business day immediately prior.
Please see the revised contract specification below.
API 2 cif ARA and API 4 Richards Bay (Argus/McCloskey) coal option contracts
| Description | Single expiry, cash settled, premium paid, option on the underlying API 2 cif ARA or API 4 Richards Bay (Argus McCloskey) Coal Swap contract for the corresponding expiry. |
| Lot size | 1,000 tonnes per month. A quarter contract will comprise 3,000 tonnes, a calendar contract will comprise 12,000 tonnes. |
| Minimum lot size | 5 lots per month. A quarter contract will comprise 15 lots, a calendar contract will comprise 60 lots. |
| Currency | USD |
| Pricing | USD and cents per metric tonne |
| Minimum tick | $0.01 per tonne |
| Option type | Options are single expiry European style options and will be automatically exercised on the expiry day if they are “in the money” unless set to expire manually. If an option is “out of the money” it will expire automatically unless exercised manually. Manual exercise is only permitted on expiry day. |
| Option premium | The Premium is paid at the time of purchase. |
| Last trading day | 30 days prior to commencement of the underlying Coal swap contract. Where this is a non working day expiry will be on the business day immediately prior e.g. the Calendar 2012 and Q1 2012 contracts will expire on 02/12/2011. |
| Expiry | 17:00 hours UK time on the last trading day Automatic exercise settings are pre-set to exercise contracts which are one minimum price fluctuation or greater "in-the-money" when compared to the relevant reference price. Contracts are single expiry options. A quarter contract will expire in to the underlying monthly swap contracts that comprise the quarter on last trading day. A calendar contract will expire into the underlying monthly swap contracts comprising January through December on last trading day. Members are permitted to override automatic exercise settings or manually enter exercise instructions for this contract. The reference price will be a price in USD and cents, equal to the final settlement price for the underlying API 2 or API 4 Swap contract. For these purposes “final settlement price” means the final settlement price on the expiry day of the underlying API 2 cif ARA or API 4 Richards Bay (Argus/McCloskey) Swap contract. |
| Contract series | 3 to 6 quarter contracts and 3 whole calendar contracts. All option contracts expire into the underlying months of the corresponding contract series.
|
| Strike Price | 50 strike prices in increments of $1.00 above and below the “at-the-money” strike price in all contract series. Where the “at the money” strike price of the underlying commodity moves, additional strikes will be added each business day. |
| Margin | Options will be subject to Initial Margin and Net Liquidation Value variation margin on a daily basis. |
| Business Days | UK business days |
If you have any questions relating to this circular, please do not hesitate to contact Jason LaBrooy on 020 7426 6323 or [email protected]. Alternatively, more information on the coal contracts is available on our website at www.lchclearnet.com/commodities
Yours sincerely
Isabella Kurek-Smith
Director, Head of Energy and Freight Markets
Commercial Services
*Trademark and copyright notice
API 2 and API 4 are trademarks and are used under license from Argus Media Limited and IHS Global Limited. All copyrights and database rights in the API 2 and API 4 indices belong exclusively to Argus Media Limited and IHS Global Limited and are used herein under license. LCH.Clearnet Ltd is solely responsible for the API 2 cif ARA and API 4 fob Richards Bay (Argus/McCloskey) Coal Swap and Options Contracts. Argus and IHS take no position on the purchase or sale of LCH.Clearnet’s financially settled listings.