| Originating department: | Commercial Services |
| Company Circular No: | LCH.Clearnet Ltd Circular No 2250 |
| Service Circular No: | LCH EnClear No 197 |
| Date: | 04 February 2008 |
| To: | All LCH EnClear Clearing Members |
Introduction of Clearing Services for Freight Forward Agreement Option Contracts
LCH.Clearnet is pleased to announce the imminent launch of its clearing service for Forward Freight Agreement (FFA) Option contracts. These contracts are an extension of the existing LCH.Clearnet FFA clearing service.
The launch date will be Friday 8 February 2008.
The FFA Options will be cleared on the ECS system. No additional LCH.Clearnet legal agreements are required for existing FFA Clearing Members. The volatility parameter shifts can be found on the LCH.Clearnet website under http://www.lchclearnet.com/margin_rates.asp
Fees
LCH.Clearnet will collect clearing fees from Clearing Members, and these will be included in month end fee invoices. No option exercise or assignment fees will be charged
| Route | Clearing Fee Per Lot |
| CTCO | $15/lot |
| PTCO | $7/lot |
| STCO | $7/lot |
Contract Details
| Description | Cash settled Premium Paid Option on any of the following Dry Timecharter Basket Routes:- CTCO (Capesize TC Avg 4 routes) PTCO (Panamax TC Avg 4 routes) STCO ( Supramax TC Avg 5 routes) These contracts, if “in the money” expire into their underlying freight forward contracts with a traded price equal to the Strike Price (see below) |
| Lot Size | 1 Day |
| Currency | US $ |
| Pricing | US $ per day |
| Minimum Tick | US$ 1 per day |
| Option Type | Options are European style and will be automatically exercised on the expiry day if they are “in the money”. If an option is “out of the money” it will expire automatically. It is not permitted to exercise the option on any other day or in any other circumstances. No manual exercise is permitted. |
| Option Premium | The Premium is paid at the time of purchase. |
| Last Trading Day | At 17:00 hours UK time on last Business Day of each month within the contract series.Exception – December contracts will expire on the 24th December, or previous Business Day, where the 24th December is a non working day |
| Expiry | 17:00 hours UK time on the Last Trading DayAutomatic exercise settings are pre-set to exercise contracts which are one minimum price fluctuation ($0.0001) or greater in-the-money when compared to the relevant reference price. Members are not permitted to override automatic exercise settings or manually enter exercise instructions for this contract. The reference price will be a price in US dollars, cents and hundredths of a cent ($0.0001), per day equal to the final settlement price for the underlying freight forward contracts. For these purposes “final settlement price” means the final settlement price on the expiry day of the underlying freight forward contracts. |
| Contract Series | Front 1 or 2 months (remaining from expired front quarter)Front 4 Quarters, Front 2 Calendar Years. |
| Strike Price | CTCO – Thirty strike prices in increments of $1000 per day both above and below the “at-the-money” strike price in all contract series.PTCO & STCO - Thirty strike prices in increments of $500 per day both 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. |
| Business Days | Uk Business Day |
If you have any questions, please do not hesitate to contact me on +44(0)207 426 7460 or Isabella.kurek-smith@lchclearnet.com
Isabella Kurek-Smith
Head of Energy and Freight Markets
Commercial Services