(EnergyAsia, December 23, Tuesday) — The gC ICE Newcastle coal futures contract, developed jointly by IntercontinentalExchange (ICE) and globalCOAL, has begun trading on ICE Futures Europe.

The first trade of the new contract on December 5 was financially settled against the globalCOAL NEWC Index, the leading price benchmark for seaborne thermal coal in the Asia-Pacific region. The trade was given up to the exchange for clearing using the contingent EFS mechanism.

The contract is being  traded directly on the ICE platform, as well as through Exchange of Futures for Swaps (EFS), Exchange of Futures for Physical (EFP) and block trade mechanisms.

ICE said it is offering a month-long fee holiday for the EFS/EFP/Block Trade transaction of Rotterdam/NEWC and Richards Bay/NEWC futures spreads from the date of the contract launch.

“This is the beginning of a new chapter for the Newcastle coal derivatives market,” said Eoghan Cunningham, CEO of globalCOAL.

“Access to a cleared alternative to Newcastle swaps has the potential to unlock significant liquidity by providing efficiencies for firms that may be impacted by the current credit markets. Cleared contracts can also help to pave the way for new participants to trade financial coal.

“In 2009, globalCOAL estimates that cleared contracts could account for 25% to 40% of the overall Newcastle coal derivatives market.

“We are optimistic that the gC ICE Newcastle coal contract will gain traction in the near-term. Some traders have been deferring business in the swap market in anticipation of the futures launch, whilst others have struggled with over-the-counter liquidity and credit issues. We also look forward to building open interest in the contract as traders clear historical swap positions through the Exchange of Futures for Swaps mechanism.”

globalCOAL was founded by leading members of the world coal industry to promote screen trading of standardised coal products. The company said it has developed the world’s leading electronic marketplace for thermal coal, as well as a range of standardised coal quality specifications, a Standard Coal Trading Agreement (SCoTA), and robust methodology for coal price index calculation.

globalCOAL has formed a joint venture with leading energy exchange ICE Futures Europe to develop two new coal futures contracts.

ICE operates regulated global futures exchanges and over-the-counter (OTC) markets for agricultural, energy, equity index and currency contracts, as well as credit derivatives.