New Futures Contract For California Water

23 Sep 2020 by OOSKAnews Correspondent
CHICAGO IL, United States

Nasdaq and derivatives marketplace CME Group have announced plans for a new futures contract on the Nasdaq Veles California Water Index. Futures markets help create forward curves so water users can hedge future price risk. The new water future will function the same way as future contracts in other commodities, and is designed to help California water market users hedge price risk and provide a regulated, market-based solution for managing risk.

A new first-of-its kind tool will provide information that will more efficiently align supply and demand for water. It is intended to offer municipal, agricultural, and commercial users with improved pricing information, greater transparency, and more flexible risk transfer.

The new futures contract is of particular value in water-stressed regions. For example, it offers agricultural producers, who use significant quantities of water for irrigation, information on the changing costs of water. It would also inform large industrial water consumers to understand water price fluctuations and to hedge against this operatingrisks.

"With nearly two-thirds of the world's population expected to face water shortages by 2025, water scarcity presents a growing risk for businesses and communities around the world, and particularly for the $1.1 Billion USD California water market," Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products has commented.

"The Nasdaq Veles California Water Index helps drive better outcomes for water market participants through verifiable price discovery," said Lauren Dillard, Executive Vice President and Head of Nasdaq Global Information Services. "Our collaboration with CME Group has the power to deliver greater transparency around the management of an important natural resource."

The data utilized in the calculation of the index is provided by WestWater Research, an economic consulting firm focused on pricing, valuation, and transaction advisory services for water rights and water resource development.