CME Group to Launch First-Ever Water Futures Based on Nasdaq Veles California Water Index

Rhea-AI Summary

CME Group and Nasdaq announced the launch of a new futures contract based on the Nasdaq Veles California Water Index (NQH2O) in late Q4 2020, pending regulatory review. This innovative contract aims to enhance price transparency and risk management for agricultural, commercial, and municipal water users in California, a market valued at $1.1 billion. The contract allows hedging against future water price fluctuations, addressing risks related to water scarcity projected to impact two-thirds of the global population by 2025. This partnership seeks to improve market efficiency for a critical resource.

Positive

• Launch of a new futures contract targeting the $1.1 billion California water market.
• Expected to enhance price transparency and risk management for water users.
• Provides a tool for hedging against future water price fluctuations.

Negative

• None.

CHICAGO and NEW YORK, Sept. 17, 2020 (GLOBE NEWSWIRE) -- CME Group, the world's leading and most diverse derivatives marketplace, and Nasdaq, a global technology company serving the capital markets and other industries, today announced plans for a new futures contract on the Nasdaq Veles California Water Index (NQH2O). CME Group will launch its new Nasdaq Veles California Water Index futures contract in late Q4, pending regulatory review.

Nasdaq Veles California Water Index futures will be an innovative, first-of-its-kind tool to provide agricultural, commercial, and municipal water users with greater transparency, price discovery, and risk transfer – all of which can help to more efficiently align supply and demand of this vital resource.

“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 California water market,” said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products. “Developing risk management tools that address growing environmental concerns is increasingly important to CME Group. This innovative, new water contract builds on our strong partnership with Nasdaq, as well as our proven 175-year track record of helping end users and other market participants manage risk in essential commodity markets including agriculture, energy, and metals.” 

“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.”

A liquid, transparent futures market will help to create a forward curve so water users can hedge future price risk. For example, 40% of water currently consumed in California is used to irrigate its nine million acres of crops. Nasdaq Veles California Water Index futures would allow an agricultural producer to plan ahead for changing costs of the water they need for large-scale irrigation. It would also allow a commercial end user, like a manufacturer, to better navigate business and financial risks when water prices fluctuate.

The new California water futures contract will be financially settled based on the Nasdaq Veles California Water Index launched in 2018, with each contract representing 10 acre-feet of water. The index sets a weekly benchmark spot price of water rights in California, based on the volume-weighted average of the transaction prices in California’s five largest and most actively traded water markets. Nasdaq developed the NQH2O Index in partnership with Veles Water Limited, a firm specializing in the development of financial products for water markets. 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.

Nasdaq Veles California Water Index futures will be listed by and subject to the rules of CME. For more information and contract specifications, please visit www.cmegroup.com/waterfutures. For more information on the NQH20 Index, visit www.Nasdaq.com/waterindexes.

About CME Group
As the world's leading and most diverse derivatives marketplace, CME Group (www.cmegroup.com) enables clients to trade futures, options, cash and OTC markets, optimize portfolios, and analyze data – empowering market participants worldwide to efficiently manage risk and capture opportunities. CME Group exchanges offer the widest range of global benchmark products across all major asset classes based on interest rates, equity indexes, foreign exchange, energy, agricultural products and metals. The company offers futures and options on futures trading through the CME Globex® platform, fixed income trading via BrokerTec and foreign exchange trading on the EBS platform. In addition, it operates one of the world's leading central counterparty clearing providers, CME Clearing. With a range of pre- and post-trade products and services underpinning the entire lifecycle of a trade, CME Group also offers optimization and reconciliation services through TriOptima, and trade processing services through Traiana.

CME Group, the Globe logo, CME, Chicago Mercantile Exchange, Globex, and, E-mini are trademarks of Chicago Mercantile Exchange Inc. CBOT and Chicago Board of Trade are trademarks of Board of Trade of the City of Chicago, Inc. NYMEX, New York Mercantile Exchange and ClearPort are trademarks of New York Mercantile Exchange, Inc. COMEX is a trademark of Commodity Exchange, Inc. BrokerTec, EBS, TriOptima, and Traiana are trademarks of BrokerTec Europe LTD, EBS Group LTD, TriOptima AB, and Traiana, Inc., respectively. Dow Jones, Dow Jones Industrial Average, S&P 500 and S&P are service and/or trademarks of Dow Jones Trademark Holdings LLC, Standard & Poor's Financial Services LLC and S&P/Dow Jones Indices LLC, as the case may be, and have been licensed for use by Chicago Mercantile Exchange Inc. All other trademarks are the property of their respective owners. 

About Nasdaq
Nasdaq (Nasdaq: NDAQ) is a global technology company serving the capital markets and other industries. Our diverse offering of data, analytics, software and services enables clients to optimize and execute their business vision with confidence. To learn more about the company, technology solutions and career opportunities, visit us on LinkedIn, on Twitter @Nasdaq, or at www.nasdaq.com.

CME Group Media Contacts	Nasdaq Media Contact
Chris Grams, +1 312 930 3435	Matthew Sheahan, + 1 646 284 8573
Liz McGee, +1 312 206 7186	matthew.sheahan@nasdaq.com
news@cmegroup.com
www.cmegroup.mediaroom.com	Joe Christinat, +1 646 441 5121
	Joseph.christinat@nasdaq.com
CME Group Investor Contact
John Peschier, 312.930.8491

-NDAQO-

FAQ

When will the Nasdaq Veles California Water Index futures contract launch?

The Nasdaq Veles California Water Index futures contract is expected to launch in late Q4 2020, pending regulatory review.

What is the purpose of the Nasdaq Veles California Water Index futures?

The contract aims to provide greater transparency, price discovery, and risk transfer for agricultural, commercial, and municipal water users.

How does the Nasdaq Veles California Water Index futures benefit agricultural producers?

It allows agricultural producers to hedge against changing water costs necessary for large-scale irrigation.

What is the Nasdaq Veles California Water Index based on?

It is based on the volume-weighted average of transaction prices in California's five largest and most active water markets.