CME to alter ethanol futures contract from April 1
CHICAGO - The CME Group announced changes to its Chicago Board of Trade (CBOT) ethanol futures contract on Tuesday to bring the contract more in line with current cash market practices.
The changes, effective April 1, 2010, shorten the required load-out time for deliveries to 10 days from 17 so buyers can receive physical supplies within the month of delivery, the CME said.
The changes also lower the maximum denaturant content of deliverable grade ethanol and require more detailed Certificates of Analysis for ethanol deliveries to more closely match the RFA guidelines used by many traders.
In addition, CME will also require the transfer of Renewable Identification Numbers, needed for compliance with the Renewable Fuels Standard, in the current year and through February of the following year. Ethanol futures currently allow delivery of previous year RINs through the end June.
We are responding to what the industry has requested, said CME spokesperson Mary Haffenberg, declining to say whether the changes would result in greater trading volumes.
Volume and open interest in ethanol futures has increased significantly this year, but remain tiny compared with those for corn or wheat.
The average daily volume in ethanol futures in the year to date is 246 contracts, up from 112 last year, and the open interest has doubled to about 6,000 contracts, from about 3,000 a year ago, Haffenberg said.
Analysts said the contract changes may generate better interest from commercial traders, but the market will not likely attract much new investment interest from non-commercial traders or speculators.
It will make it a little more user-friendly for those that have been or are willing to be in that market, said Telvent DTN ethanol analyst Rick Kment. It will be easier to program in different hedges or different uses of futures contracts.
But the reality is that it is still a very commercially driven contract. In my opinion, it is never going to be at the level of corn or crude oil markets that are not only commercially driven but also used as an investment tool by speculators.
(Reporting by Karl Plume; Editing by Christian Wiessner)
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