HVAC Breaking News

Feb. 19, 2003: Weather Contracts Attain Record Growth In January

WASHINGTON and CHICAGO — Trading of weather-related futures and options contracts on the Chicago Mercantile Exchange (CME) reached record levels in January, with a significant increase over the transaction level in January 2002, the Weather Risk Management Association (WRMA) and CME have announced.

The record volume of 1,247 contracts in January for CME weather futures and options compares to just 11 contracts traded in January 2002. After trading activity in weather-related contracts on the CME rose over the course of the year, the January record was aided by recent frigid temperatures in the middle and eastern portions of the United States last month, according to the two organizations.

"This unprecedented growth in the size and liquidity of the weather risk market on the CME demonstrates that these instruments are playing an increasingly vital role in the financial health of businesses in a variety of industries," said Valerie Cooper, executive director of WRMA. "As this past month illustrates, weather-related futures and options contracts are crucial business tools for any enterprise where weather is a factor in its success, from sole proprietorships to Fortune 500 companies. For many, weather risk tools represent the difference between profitability and financial failure."

The worldwide weather risk market totals over $11.8 billion in coverage, the two organizations say. Initially focused on the energy industry, the market for weather derivatives has grown to include participants in other industry sectors such as construction.

"Chicago Mercantile Exchange pioneered exchange-traded weather derivatives with the launch of our heating degree day index in 1999 and cooling degree day index in 2000," said Terry Duffy, CME chairman. "During the past several months, there has been a growing interest in the weather-related futures and options traded on CME. Ultimately, as more customers begin to understand the benefits of these products, we believe they have the potential to become an integral tool for anyone in any business or industry that faces risks associated with changing weather conditions."

In the first few years of weather trading, WRMA members and their customers had only two choices for this process: either insurance contracts or over-the-counter derivative instruments. Nine months ago, when the CME enlisted Wolverine Trading LP as the lead market maker for the weather contracts, customers found more accessible pricing and trading opportunities, says the exchange.

"For corporate risk managers in weather-sensitive businesses and for institutional commodity investors, this is a market that simply cannot be ignored," said Scott Mathews, who chairs WRMA's Americas Committee. "This rapid expansion on the CME over such a short period sets the stage for new weather products and for new participants to enter the field."

Publication date: 02/17/2003

Did you enjoy this article? Click here to subscribe to The NEWS Magazine

Recent Articles by Greg Mazurkiewicz

You must login or register in order to post a comment.

Multimedia

Videos

Image Galleries

2015 HARDI Fly-In

Highlights from HARDI's Congressional Fly-In in Washington, D.C. Post date: May 28, 2015.

Podcasts

NEWSMakers: Kevin Conrad
Kevin Conrad, president, Kevin Conrad Heating and Cooling Inc., Nantucket, Massachusetts, breaks down working in the New England climate, the benefits of insulation foam, and more.


More Podcasts

ACHRNEWS

NEWS 06-29-15 cover

2015 June 29

Check out the weekly edition of The NEWS today!

Table Of Contents Subscribe

Online Reviews

Do you track online review sites like Yelp to look for comments on your company’s performance?
View Results Poll Archive

HVACR INDUSTRY STORE

2015.jpg
2015 National Plumbing & HVAC Estimator

Every plumbing and HVAC estimator can use the cost estimates in this practical manual!

More Products

Clear Seas Research

 

Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications, Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.

DON'T MISS A THING

Magazine image
 
Register today for complete access to ACHRNews.com. Get full access to the latest features, Extra Edition, and more.

STAY CONNECTED

facebook icontwitter iconyoutube iconLinkedIn i con