The Dubai Mercantile Exchange (DME) has announced the settlement mode of four new DME Oman-related contracts.
The Oman Swap will be a cash-settled, cleared-only contract that will be settled on the monthly average of daily DME Oman settlements while the Brent-Oman Swap will be a cash-settled, cleared-only contract that will be settled on the monthly average differential between ICE Brent and DME Oman daily settlements.
On the other hand, the Oman Average Price Option will be a cash-settled, cleared-only options contract that will be settled on the monthly average of daily DME Oman settlements and the Oman European-style Option will be a cash-settled option that will be available for trading on CME Globex.
The DME contracts have been drafted and put out to consultation and are awaiting regulatory approval for launch. "These new contracts will provide the market with additional ﬂexibility in hedging and trading East of Suez price risk," said DME.
In a note to the industry, Thomas Leaver, CEO, DME said that 2009 was a "positive year" for the exchange. Four signiﬁcant developments in the past year have helped the exchange elevate its status as a hub for oil trade in the east of Suez markets, he noted.
"First, liquidity has increased with trading volumes achieving a 69 per cent year-on-year increase and average daily volumes approaching 3,000 lots in the last quarter," he said. Second, the DME continued to be the largest physically-delivered contract in the world, achieving a record delivery of 11.6 million barrels in September 2009, Leaver said.
The adoption of DME Oman as the basis for setting the Ofﬁcial Selling Price for Dubai crude by the Dubai Department of Petroleum Affairs in June 2009 reinforced the growing acceptance of the DME Oman contract as the third global crude oil pricing benchmark, Leaver said.
"Fourth, DME contracts migrated onto CME Globex thereby allowing market participants to access the world's three crude oil benchmarks on a single electronic platform," he added.
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