New World Future Cotton Contracts to be launched in November 2015
New York based Intercontinental Exchange ICE Futures U.S. plans to introduce a new World Cotton contract on November 2, 2015, pending regulatory approval
Since December 2013 ICE Futures U.S. staff have been working with members of the trade (and with significant input from both ICA and ACSA members and staff) to develop the terms of a new World Cotton futures contract. ICA Bremen also provided support. Here ICA Bremen was also able to call on the in-depth know-how of the Bremen Cotton Exchange (BBB) and the Fibre Institute Bremen (FIBRE).
While the USDA runs several laboratories within the USA, ICA Bremen has the only authorised laboratory outside the United States which can carry out the classification of cotton for inclusion in the certified stocks of ICE. Within the framework of the cooperation there is agreement that testing methods should achieve the, highest standards and the number of authorised laboratories should be increased in conjunction with the certification program of ICA Bremen in the long run.
The new World Cotton contract will price delivery of nine different origins of cotton, which typically account for approximately 75 % of world cotton exports: the U.S., Australia, Brazil, India, Benin, Burkina Faso, Cameroon, Ivory Coast and Mali.
The U.S. will be the par origin for the contract, and each other deliverable growth will carry a premium or discount to par; these premiums and discounts by growth will be announced closer to the launch date.
The World Cotton contract will permit delivery in 12 delivery locations in four countries: the U.S. (Memphis, Greenville, Dallas/Ft. Worth, Houston and Galveston), Australia (Melbourne, Sydney and Brisbane), Taiwan (Port Keelung and Port Kaoshiung) and Malaysia (Port Kelang and Port Tanjung Pelepas). The Taiwan and Malaysia delivery points will be the par locations for the contract, and delivery in any Australian or any U.S. delivery point will carry a location discount to the par locations; these delivery location discounts will be announced closer to the launch date.
The par description for the new contract is Colour 31/Middling, Staple 36, Leaf 3, Strength 27 and Micronaire reading from 3.5 to 4.9.
The World Cotton futures contract will trade alongside the ICE Cotton No. 2 futures contract, which prices delivery of U.S. cotton in U.S. delivery points only.