CME Unveils Electricity Swaps

CME Group Inc. (CME - Analyst Report) has launched trading and clearing services for two new NYISO Zone F − peak and off-peak − electricity swap futures contracts. While trading will be available on the New York trading floor, the clearing services will be available through CME ClearPort. 

ClearPort is a set of flexible clearing services open to participants in over-the-counter (OTC) market to substantially mitigate counterparty risk and provide neutral settlement prices across asset classes. 

Trading of the option contracts is scheduled to begin on Nov 8 for trade on the next day. These contracts are listed with NYMEX and are subject to the rules and regulations of both NYMEX and CME. 

The futures contracts and commodity codes assigned are: 4L for NYISO Zone F 5 MW Peak Calendar-Month Day-Ahead LBMP Swap Futures and 4M for NYISO Zone F 5 MW Off-Peak Calendar-Month Day-Ahead LBMP Swap Futures. 

These new futures contracts will be cash-settled and the first listed month will be December. The monthly contracts will be listed for current year plus the next five calendar years, consecutively. A new calendar year will be added following the termination of trading in the December contract of the current year. 

NYMEX will allow Exchange of Futures for Physical (EFP) and Exchange of Futures for Risk (EFR), collectively referred to as Exchange for Related Position (EFRP) transactions to be submitted through CME ClearPort. These products will provide a set of complementary risk-management tools to the marketplace. 

CME Group is the largest futures exchange in the world, offering the widest range of benchmark products covering all major asset classes, specifically futures products and options. The broad product groups are futures and options based on interest rates, equity indexes, foreign exchange, commodities, energy & metals and alternative investment products such as weather and real estate. 

Although we remain optimistic about the continued growth prospects, especially with good progress on the integration of the recent acquisitions and the global expansion initiatives, the volumes may continue to be near current levels until the underlying markets stabilize. Therefore, we are maintaining our Hold recommendation on the shares.