PARIS, June 28 (Reuters) - CME Group will enter the Australian wheat market next month by launching a futures contract based on an export price index calculated by S&P Global Platts, the Chicago-based exchange said on Wednesday.
The move extends CME’s global reach in grain markets, after its launch last year of a European Union wheat contract, and also marks a push to cater for derivative deals not traded on exchanges.
The Australian futures will launch on July 24, pending regulatory approval, as a cash-settled contract without physical delivery, priced in relation to Platts’ daily assessment of Australian Premium White (APW) wheat, CME said.
“Australia is very important for wheat, one of the top 5 exporting nations in world, and this contract really completes our suite of wheat contracts,” Nelson Low, CME’s executive director, agricultural products, told Reuters.
The product, which will be priced in U.S. dollars and traded in 50 tonne lots, will be available both on CME’s Globex exchange and for over-the-counter (OTC) deals cleared through its ClearPort system.
“We expect that most of the trades will be executed on an OTC basis and then submitted to ClearPort for clearing,” Low said.
A cash-settled contract would probably appeal to a wider range of participants than a physically delivered one, he said, adding that CME had no plans to develop physical delivery for wheat in Australia.
CME’s Australian contract will offer a rolling one-year trading horizon with 12 consecutive months available, starting with July 2017, Low said.
CME will compete with ASX Ltd, which runs eastern and western Australian wheat futures.
The Australian contract adds to CME’s U.S. soft red winter and hard red winter wheat futures, its French-based EU wheat contract and its Black Sea wheat futures.
The Black Sea region, which includes the world’s biggest wheat exporter Russia, has increasingly attracted interest for developing price references.
Euronext, whose France-based contract acts as the benchmark for the western European market, is looking at Black Sea derivatives.
Platts, part of S&P Global Inc, has in the past year launched a price assessment for Black Sea wheat to cater for OTC trades.
Reporting by Gus Trompiz; editing by Jason Neely