The CME Group faces a tough job, if she wants to convince the European grain trading the futures with the delivery procedure for the CME. It have great French grain traders become known now but to cooperate with the U.S. stock market and thus urge the established Euronext to compete. Some traders believe that there is only room for a wheat futures in Europe.
CME, the carrier company of the Chicago Board of trade (CBoT), which prices guide prices for the world market represent, wants to offer futures and options on EU wheat on September 12 and include that in the world's largest wheat growing region.
Traders know that the breakthrough that calls for time and that new derivatives must first build up liquidity. It had already failed the CME futures for Black Sea wheat and recently also the milling wheat No. 3 on Euronext. These newcomers quickly into the seemingly insurmountable dilemma that all operators are waiting that liquidity will be made by the other. Also, they hang out with their forward contracts over time in the price determination mechanism of Euronext.
The U.S. model for physical delivery to fulfill futures contracts differs significantly from the Euronext. CME - futures can be met in a variety of delivery locations. This could become a challenge at the beginning of trade with EU-CME wheat.
The relatively low quality of CME-EU wheat (10.5% protein and 170 number of cases) have disappointed market participants - specially German vendors - demanding clear grinding wheat standards year 2014 after the Qualitätskritischen.
The CME has won but interest from other influential market participants. A international trading houses are appreciating the advantage that at the CME with a EU wheat futures all Weizenfutures on Globex are United in a trading system, resulting in that come into play when the arbitrieren margin benefits.
In addition, the CME could authorize the largest French grain traders, including the Sufflet group, the cooperatives of Axereal and Vivescia as places of delivery. These market participants had complained for 20 years with Euronext about the limited storage capacities for the delivery of futures market wheat in the port areas of Rouen and Dunkirk. In addition, the Euronext silo operators have their own acceptance conditions that differ from the stock exchange specification. That had led in 2014 to complaints from the market and could provide this year again discontent.
Some traders now fear that the hedging activities are divided on two stock exchanges in Europe and hold the financial investors in times of low volatility, to participate in the trade. Ultimately, a majority of observers believe that despite the growing importance of Europe in the grain market, this region only a wheat futures can withstand.
