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NOREXECO launches pulp and paper derivatives exchange

First Published 15th September 2015

NOREXECO launches derivatives exchange platform for pulp and paper industry. ECC to provide clearing services.

Stein Ole Larsen, NOREXCO

Stein Ole Larsen, NOREXCO

"We are very optimistic about the opportunity to supplement and to move a share of the trading from the bilateral OTC market to a fully regulated and secure marketplace."

Kongsvinger and Leipzig - NOREXECO is set to start exchange services for the pulp and paper industry, becoming the world´s only derivatives exchange for this sector. NOREXECO is supported by European Commodity Clearing (ECC), the European clearing house for energy and related products, which will provide clearing and settlement for the newly launched contracts.

NOREXECO has been granted a license by the Norwegian Ministry of Finance, which covers financial derivatives within forestry and paper. The first products listed on NOREXECO are two financially settled pulp contracts (NBSK Softwood Kraft Pulp and BHKP Hardwood Kraft Pulp). The estimated market size on pulp in the open market is approximately 60 million tons with a market value exceeding 50 billion USD. Financial contracts have recently only been available in the OTC market.

NOREXECO offers a transparent trading system with equal risk management opportunities for all participants. From launch date on NOREXECO will set closing prices and offers the registration of block trades for clearing. Trading will be compliant with national regulations and all transactions will be cleared through ECC, based in Germany. NOREXECO and ECC have been closely working together since early 2014.

"We are very excited about opening the exchange", says Stein Ole Larsen, CEO of NOREXECO. "We have received great interest from participants around the world. To start a unique exchange platform for pulp from the Norwegian forestry hub Kongsvinger just outside Oslo has taken some time, but now we are ready to start and are proud of what we can offer to our growing member base."

"Through the cooperation with NOREXECO, we extend our clearing offering to a completely new asset class", comments Dr. Thomas Siegl, chief risk officer of ECC. "Offering clearing services for NOREXECO forms yet another milestone for us towards moving to a multi-commodity clearing house. Our standard procedures and processes as well as the uniform risk management approach integrate both existing and upcoming commodity markets."

Larsen adds that his ambition is to give both the industry and the financial sector a regulated exchange for financial contracts. "Despite the fact that it is nearly the same size as the aluminium market, the pulp market does not have an exchange for trading. In a volatile world with great challenges we have been welcomed as a stabilizing factor. We are very optimistic about the opportunity to supplement and to move a share of the trading from the bilateral OTC market to a fully regulated and secure marketplace. It is about time that the forestry and paper industry gets the same opportunity for risk management as other mature industries", Stein Ole Larsen adds.