ICE Is Ready to List a New Cotton Contract in 2014
January 21, 2014 Following years of conversations and several months of more focused discussions with market participants, the cotton trade has reached a consensus on the broad terms of an international cotton contract. This would truly be a new frontier in cotton trade. We are pleased that the major industry groups in cotton have selected ICE to finalize the design and development of the new contract and we look forward to supporting the market with a new futures contract that can be listed alongside the Cotton No. 2 contract in 2014.
Because ICE’s history in the cotton market dates back to 1870, we have a great appreciation for the fact that markets change. In order to fully support the price discovery and price risk management processes that futures markets are intended to serve, we know that our contracts must evolve with the changing risk management landscape that our customers face. Contracts that don’t adapt to changing market dynamics are doomed to become irrelevant.
We have a strong record of responding to the evolving needs of our market participants – be it adjustments to our current contracts or adding new contracts that introduce a new way to manage risk.
Our customers are our primary source for design input and inspiration. New and revised ICE products are driven by customer feedback and an international cotton contract is an example of how we collaborate with our customers. We communicate with the markets through various means including product committees that we established to gather direct input from market participants.
With a history dating back to the establishment of the New York Cotton Exchange in the late 1800s, ICE Futures US is the leading exchange for soft commodities. The exchange has invested heavily in these markets and today offers liquid, efficient markets, cutting edge technology and commercially-relevant contracts that are all designed to be flexible and keep our customers ahead of the curve.
Introducing a Global Contract
As the home of the US cotton benchmark, ICE is excited to support the launch of a complementary international contract to trade alongside the US cotton benchmark No. 2 contract. We are ready to invest in this new contract and look forward to listing it in 2014.
Based on input from market participants including the American Cotton Shippers Association and the International Cotton Association, the current draft contract terms include:
- Physical delivery at expiration,
- Delivery of multiple origins, including Brazil, Australia, the United States, India and West Africa, and
- Delivery at both origin and Asian destination delivery points.
- An international contract will give cotton producers, merchants, spinners and mills an enhanced ability to manage their risk.
At ICE we have carefully selected the markets and products in which we participate. We are in the U.S., Canada, Brazil, the UK, Continental Europe and now in Singapore. This positions us well to support our customers as their businesses and regional regulation continue to unfold.
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