Korea, renowned for its epic activity in KOSPI Futures & Options has seen a surge in Spot Energy trading at the local bourse. Trading volume for the month of March saw a 4205% increase since the product started in March 2012.
The Korean Exchange released figures for the month of March (2013) which showed that trading volume on the online platform has risen to 155.50 million litres in March compared to just 3.6 million litres in April 2012.
Th government launched the energy products on the 30th of March 2012 on the Korean Exchange in order to stabilise energy prices (Brent Crude peaked at $128 in March 2012) and support the countries four major refiners; SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank.
The main products are Gasoline and diesel for automobiles, the contract size is in units of 20,000 litre.
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The energy products are open to; oil refiners, importers and exporters, brokerages and retail traders are not allowed to trade. The exchange has announced plans to launch energy futures trading in the coming months.
Participants can trade online and take advantage of the price differentials, according to information on Korea National Oil Corp.’s website, the price of gasoil averaged Won 1,785/liter ($1.63/l) in March, while the price of gasoline averaged Won 1,985/l. However, in comparison, the price of gasoil on the online market is currently around Won 1,600/l and the price of gasoline is around Won 1,870/l.
The benchmark Brent Crude is currently trading at $110.13 on ICE.
The government is keen to promote the online trading for participants in the energy sector and as a result they have put in place fiscal incentives including an exemption of a 3% import tariff for oil products traded on the platform, and a Won 16/l tax refund on imported oil products sold online. The incentives will remain in place until June 2014.