CME Group, the world’s leading and most diverse derivatives marketplace, on 7 September 2012 announced the first trades of its U.S. Midwest Domestic Hot Rolled Coil (HRC) Steel Index options equivalent to 20,000 tons (1,000 contracts), which were cleared through CME ClearPort. The contract is listed by and subject to the rules of NYMEX.

Jeffries Bache and Macquarie Futures USA LLC provided clearing services for the transactions via CME ClearPort. A number of companies were counterparties to the trade including Jeffries Bache and Flack Steel, a Cleveland, Ohio-based steel service center.

Harriet Hunnable, CME Group Managing Director, Metals Products says, "Continued uncertainty about global growth and price volatility in the industry has resulted in interest in our steel futures and options products. Options in particular offer market participants a cost-effective means to manage that uncertainty and mitigate their price risk. Clearing these hot-rolled coil steel options further validates our decision to work closely with the U.S. ferrous industry, providing them with a suite of products, like our scrap futures contract launching later this month, to meet their risk management needs."

"We are very excited to have brokered the first cleared HRC option and believe that this is a great example of the innovation that is taking place within the steel sector," said Nick Webb of the Jefferies Bache Metals team in Chicago. "With the growth of products like this being offered in the marketplace, we as brokers are better able to add value to all levels of the ferrous supply chain."

Jeremy Flack, founder and president of Flack Steel, added, "As representatives of the physical side of the business and proponents of the benefits of using ferrous derivatives to mitigate price risk, we are encouraged by this trade as it shows the gathering and growing liquidity and understanding of ferrous derivatives in our industry."

CME Group offers a diverse suite of risk management tools to the steel market via its Virtual Steel Mill derivative products, which help customers manage price volatility across the steel value chain.

Additionally, August represented a record month for two CME Group Virtual Steel Mill contracts, Iron Ore 62% Fe, CFR China (TSI) Swap futures and options. In August 2012, 1,060 swap futures and 4,010 options on swap futures contracts were cleared, equivalent to over 2 million dry metric tons.