ICE to Launch LNG Freight Futures Based on Spark Commodities’ Assessments in Key Milestone for Global Natural Gas Markets

Rhea-AI Summary

Intercontinental Exchange (NYSE:ICE) announced plans to launch LNG freight futures contracts based on Spark Commodities’ price assessments. The Spark30S Atlantic and Spark25S Pacific contracts will aid in managing price risk for LNG transportation between key global markets. They will be cash settled and launched on March 22, 2021, pending regulatory approval. These contracts respond to the increasing volatility in LNG freight rates, which peaked at $322,500/day in January 2021, highlighting the demand for robust risk management tools in the market.

Positive

• Launch of LNG freight futures contracts aids in managing price risk.
• Contracts based on Spark's assessments enhance market transparency.
• Responds to increased volatility in LNG freight rates.

Negative

• Market volatility necessitates new risk management tools due to fluctuating LNG freight rates.

Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of mortgage technology, data and listings services, announced today that it plans to launch LNG freight futures contracts based on Spark Commodities’ (“Spark”) price assessments, marking a milestone in the evolution of the LNG market.

These new contracts - called the Spark30S Atlantic and Spark25S Pacific LNG Freight Future contracts - are traded and settled in USD per day. The numbers in the contract names indicate the number of days it takes an LNG vessel to complete a return voyage on the respective routes. The settlement price of the contracts are based on the Spark30S (Atlantic) and Spark25S (Pacific) LNG freight spot price assessments. Market participants can use the contracts to manage price risk in respect of round-trip voyages between the US Gulf Coast and North West Europe (Spark30 assessment); and Australia and Japan, Korea, Taiwan and China (Spark25 assessment). ICE plans to launch these cash settled futures contracts on March 22, 2021, subject to regulatory approval.

These new freight contracts will form part of ICE’s global natural gas complex as the market manages freight price risk alongside existing TTF, NBP, Henry Hub, JKM LNG (Platts) and WIM LNG (Platts) contracts.

“We have been in close engagement with the LNG market for more than two years about the right assessment on which to base LNG freight futures. During that time, LNG freight markets have become increasingly volatile, significantly increasing demand for suitable LNG freight risk management tools,” said Gordon Bennett, Managing Director of Utility Markets at ICE. “We believe that our freight futures contracts, priced against Spark’s assessment, will provide the hedging tools the market has been waiting for. They will trade and clear alongside the highly liquid and global gas benchmarks on ICE including TTF, Henry Hub, NBP, JKM and WIM. This is a milestone moment in the evolution and maturity of the LNG market and one we think can benefit all those involved in LNG markets.”

“After a summer of LNG freight rates at record lows, this winter followed with the highest LNG freight rates ever assessed, peaking at $322,500/day on January 8, 2021. This volatility necessitates new risk management tools as well as future orientated, tech-driven price discovery platforms”, said Tim Mendelssohn, Managing Director at Spark. “By partnering with ICE, something we are very proud to do, we are hitting a critical milestone for our business; providing our customers with a cleared, tradeable LNG freight product within a platform that gives them far greater insight than their alternatives. Importantly, it demonstrates that the market wants progress.”

About Spark Commodities

Spark Commodities is focused on providing technology based solutions that promote liquidity in the LNG market. Spark wants to redefine how LNG freight prices are understood. With a strong technical background, support from major industry players and commercial experience trading in the LNG market, we aim to provide a meaningful and robust index that allows the market to manage freight risk whilst benefiting from the increased levels of transparency that our platform provides. Empowering Trade, Together.

About Intercontinental Exchange

Intercontinental Exchange (NYSE: ICE) is a Fortune 500 company and provider of marketplace infrastructure, data services and technology solutions to a broad range of customers including financial institutions, corporations and government entities. We operate regulated marketplaces, including the New York Stock Exchange, for the listing, trading and clearing of a broad array of derivatives contracts and financial securities across major asset classes. Our comprehensive data services offering supports the trading, investment, risk management and connectivity needs of customers around the world and across asset classes. As a leading technology provider for the U.S. residential mortgage industry, ICE Mortgage Technology provides the technology and infrastructure to transform and digitize U.S. residential mortgages, from application and loan origination through to final settlement.

Trademarks of ICE and/or its affiliates include Intercontinental Exchange, ICE, ICE block design, NYSE and New York Stock Exchange. Information regarding additional trademarks and intellectual property rights of Intercontinental Exchange, Inc. and/or its affiliates is located here. Key Information Documents for certain products covered by the EU Packaged Retail and Insurance-based Investment Products Regulation can be accessed on the relevant exchange website under the heading “Key Information Documents (KIDS).”

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 -- Statements in this press release regarding ICE's business that are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see ICE's Securities and Exchange Commission (SEC) filings, including, but not limited to, the risk factors in ICE's Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC on February 4, 2021.

ICE- CORP
Source: Intercontinental Exchange

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FAQ

What are the new LNG freight futures contracts by ICE?

ICE plans to launch LNG freight futures contracts called Spark30S Atlantic and Spark25S Pacific to manage price risk in LNG transportation.

When will ICE launch the LNG freight futures contracts?

The LNG freight futures contracts are set to launch on March 22, 2021, subject to regulatory approval.

What is the significance of the LNG freight futures contracts?

These contracts represent a milestone in the LNG market, providing tools for price risk management amidst increasing market volatility.

What were the recent trends in LNG freight rates?

LNG freight rates peaked at $322,500/day on January 8, 2021, marking the highest rates ever assessed.

How do the Spark assessments impact the new LNG contracts?

The Spark assessments will serve as the basis for the settlement price of the new LNG freight futures contracts, enhancing market pricing accuracy.