June 26, 2018 / 9:20 AM / 5 months ago

CME to add options for Black Sea grain futures

PARIS, June 26 (Reuters) - CME Group is to introduce options contracts for its Black Sea wheat and corn futures as it seeks to further develop the derivatives targeting a major export zone.

The options will start trading on July 16, subject to regulatory approval, CME said in a statement on Tuesday.

The market operator had launched last December its cash-settled futures based on Platts price benchmarks for Russian wheat and Ukrainian corn.

The cash-settled wheat futures have attracted regular volume, in contrast with CME’s illiquid Black Sea wheat contract with physical delivery dating back to 2012.

Options, for which the holder pays a price in order to have the right to buy or sell related futures at a particular level, are widely used in grain and other commodity markets to cover price risks.

CME is developing the Black Sea grain options in response to market demand, notably from physical grain merchants and also certain investors who trade options in combination with futures, Jeffry Kuijpers, executive director, agricultural commodities, CME Group, told Reuters.

The cash-settled wheat futures, based on Platts’ Russian Wheat 12.5 percent protein FOB (free on board) Black Sea Deep Water daily price assessment, have open interest of over 22,000 lots, equivalent to 1.1 million tonnes, he said.

Russia is currently the world’s biggest wheat exporter.

The derivatives have attracted both physical traders and financial investors, while geographically participants cover most of the world’s regions, Kuijpers added.

The Ukrainian corn contract has attracted less activity, with open interest currently at around 500 lots.

CME has turned to cash-settled futures after struggling to replicate in Europe the success of its physically deliverable Chicago futures, which are a global benchmark for grain markets.

Like its illiquid Black Sea wheat contract from 2012, European Union wheat futures launched by CME in 2016 in a challenge to Euronext’s established market have failed to take off. (Reporting by Gus Trompiz; Editing by Mark Potter)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below