Qui veut gager sur des chutes de neige!

[marcanch]

New indexes will help cities manage risk associated with snow accumulation

 

CHICAGO, February 9, 2006 CME, the worlds largest and most diverse financial exchange, announced today that it will begin listing and trading snowfall futures and options on futures beginning Sunday night, February 26 on the CME® Globex® electronic platform. CME Snowfall futures will be based on a CME Snowfall Index and will be offered initially on two U.S. cities Boston and New York. These contracts will trade on a monthly basis from October through April.

 

The impact of weather can influence regional and local markets, playing a critical role in the overall economy, said CME Managing Director of Products and Services Rick Redding. Since 1999, CME has been offering temperature-based futures products to help market participants manage weather-related risks. Backed by CME Clearing, CME weather futures provide the safety and soundness investors are seeking to manage their weather-related risk.

 

From municipal snow removal budgets to holiday retail sales, snowfall, or lack thereof, can have a major impact on local and regional economies, observed Scott Mathews, President of WeatherEX LLC, a commodity trading advisor and manager of a branch office of Glass Futures Corp., an introducing brokerage firm. With CME snowfall futures and options, our clients will be able to hedge either the expense or the revenue side of the snow risk equation.

 

The CME Snowfall Index defines daily snowfall as the total snowfall recorded at a particular location between 12:01 a.m. and 12:00 p.m. midnight, as reported by Earth Satellite Corporation (EarthSat). Trace amounts of daily snowfall will be considered to be zero.

 

Monthly snowfall is defined as the sum of daily snowfall values for a particular location for a calendar month. A unique feature of the snowfall index includes the fact that the daily settlement price can be zero since a strike price of zero equates to no snowfall.

 

CME currently offers weather derivative products in 29 cities around the world, including 18 in the United States, nine throughout Europe and two in Japan. The exchange also offers a frost index contract for Amsterdam, Netherlands. Monthly weather volume in January 2006 reached 108,000 contracts traded compared with 42,000 in January 2005. Overall weather volume in 2005 surpassed 889,000 contracts at CME.

 

Chicago Mercantile Exchange Inc. (www.cme.com) is the worlds largest and most diverse financial exchange. As an international marketplace, CME brings together buyers and sellers on CME Globex electronic trading platform and on its trading floors. CME offers futures and options on futures primarily in four product areas: interest rates, stock indexes, foreign exchange and commodities. The exchange moved about $1.4 billion per day in settlement payments in 2005 and managed $45.6 billion in collateral deposits at December 30, 2005, including $3.2 billion in deposits for non-CME products. CME is a wholly owned subsidiary of Chicago Mercantile Exchange Holdings Inc. (NYSE, NASDAQ: CME), which is part of the Russell 1000® Index.

 

Statements in this news release that are not historical facts are forward-looking statements. Chicago Mercantile Exchange, CME, the globe logo and CME Globex are registered trademarks of Chicago Mercantile Exchange Inc.

 

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CME to start trading snowfall futures and options

 

New York, 16 February:

The Chicago Mercantile Exchange (CME) will begin trading snowfall futures and options on futures on 26 February.

 

The exchange will initially offer contracts on snowfall in New York and Boston. Contracts will trade on a monthly basis from October through April.

 

It will base the contracts on the CME Snowfall Index, which defines snowfall as the total snowfall at a particular location between 12:01 a.m. and 12:00 midnight, as reported by Earth Satellite Corporation. In New York, the location will be Central Park and in Boston, Logan International Airport. Monthly snowfall is the sum of daily snowfall values for those locations over the month.

 

Municipalities could use the futures to control their costs for snow removal, says CME spokesman Allan Schoenberg. New York City has estimated its snow removal costs at about $1 million per inch, he notes.

 

The futures could also be used to hedge against business interruption, Schoenberg adds. Retailers or importers of clothing could use the contracts, as could owners of ski resorts, who would be affected by lack of snow.

 

The CME has not estimated potential volume for the snowfall contract, but Schoenberg says that the exchanges's weather contracts increased in volume from 4,400 in 2000 to 890,000 in 2005. The exchange offers weather derivative products referenced to temperatures in 29 cities around the world, including 18 in the US, nine in Europe and two in Japan. CME also offers a frost index contract in Amsterdam.

 

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Updated 01 March 2006 Updated 16 February 2006

 

From the AP:

 

Anybody want to bet it's going to snow?

 

The Chicago Mercantile Exchange is selling snow--snow futures that is. Similar to their temperature and frost futures, snow futures will allow local municipalities to hedge their risk from major snow events.

 

Here's how it will work.

 

Snowfall futures and options are geared to a snowfall index focusing initially on Boston and New York. The index will change based on official daily snowfall totals.

 

Investors can buy and sell contracts trading on a monthly basis from October through April. A trader makes money on a contract when the index rises after it is purchased and loses money when it falls.

 

Why, you ask?

 

From the standpoint of municipalities or companies that are concerned with excessive snowfall and whether they will have shipment of goods, there's now the opportunity to hedge your removal costs or transportation delays or other weather-related exposure," [brian O'Hearne, managing director of the environment and commodities markets for Swiss Reinsurance Co. and president of the Weather Risk Management Association] said. "CME's had a very good idea on the weather."