LCH.Clearnet, an independent clearing house group, said it has cleared the first single expiry OTC coal options trades.

Initial transactions have totalled 670 lots in API 2 options to date, across both quarterly and calendar tenures, reaching volumes of 2.46 million tonnes.

According to the company, the use of thermal coal in power generation continues to increase in Asia, driving demand for coal option contracts which offer diversification to hedge funds, banks and physical market participants looking to manage price risk or gain exposure to price volatility.

Clearing these contracts increases trading capacity and reduces concerns over counterparty risk, enabling further growth of the market, the company said.

LCH.Clearnet director of energy and freight Isabella Kurek-Smith said that these encouraging figures indicate a strong demand for the benefits of cleared coal option contracts.

The API 2 and API 4 indices are the key focus of coal management, accounting for 90% of the world’s coal derivatives trading.

The coal option contracts are based on Rotterdam in the Netherlands and Richards Bay in South Africa and are traded in multiples of 5,000 tonnes per month.

API 2 and API 4 are trademarks and are used under license from Argus Media and IHS Global Limited.