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CME Group Declares Trading of UCO & UCOME Futures Contracts

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CME Group Inc. (CME - Free Report) recently declared the first trade of the Used Cooking Oil Methyl Ester (UCOME) futures contracts.

As the European energy markets continue to evolve and decarbonize, there is a greater focus on renewable road transport fuels.

Ten contracts were traded on Sep 16, 2020. Open interest contracts traded were 65 as of Sep 22, 2020.

From January 2021, the renewable content in biodiesel is expected to be 14%, up from the current 10%, with increasing focus on waste oils as part of this strategy. Therefore, Used Cooking Oil (UCO) products are in focus.

Biodiesel blenders are using greater quantities in European products, and UCO is also being used in larger quantities in greener diesel products such as hydrotreated vegetable oil (HVO). These changes are creating demand for risk-based hedging tools to manage greater exposure to these emerging renewable fuels.

Specifically-designed futures contracts are used to manage the basis spreads between UCO and UCOME against Low Sulphur Gasoil futures. To support the transition to a greener energy market for transportation fuels, CME Group is offering four futures contracts for UCO and UCOME.

NYMEX, one of the exchanges of CME Group, which offers the widest range of global benchmark products across all major asset classes, introduced four futures contracts on UCO and UCOME on Aug 17, 2020. These new futures contracts extend the environmental, social, and governance (ESG) of CME Group and renewables offering outside North America and should attract interest from both energy and agricultural customers (existing and new).

Tullett Prebon Energy & Commodities, one of the world's leading interdealer brokers operating as an intermediary in the wholesale financial and energy sectors, became the first broker to transact Europe's first UCOME derivatives contracts between two counterparties.

The contracts are based on a UCO CIF ARA price assessment by PRIMA Markets and a UCOME FOB ARA assessment by Argus Media. Additionally, two spread based futures contracts against Low Sulphur Gasoil will also be listed.

The newly launched UCO and UCOME futures contracts will add to CME Group's robust suite of energy futures and options.

CME Group exchange consists of designated contract markets for the trading of futures and options contracts. It enables clients to trade futures, options, cash and over-the-counter (OTC) markets and optimize portfolios. It focuses on maximizing futures and options growth globally, diversifying business and revenues, and delivering unparalleled customer efficiencies and operational excellence.

The company offers the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange (FX), agricultural, energy and metal commodities. Futures and options trading are offered across asset classes through the CME Globex platform, cash and repo fixed income trading via BrokerTec, and cash and OTC FX trading via EBS.

Shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded has declined 24% in the past year compared with the industry’s decline of 5.3%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should continue to drive shares higher.


The stock currently carries a Zacks Rank #4 (Sell).

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