CME Group is the world’s largest and most diverse derivatives marketplace, formed by the merger of the CME, CBOT and NYMEX, and plays a key role in helping producers, intermediaries and investors manage risk globally.
What has been CME Group’s involvement in the renewable fuels market?
Just this past year CME Group launched European biodiesel and ethanol swaps, which continue to see increasing interest from the market. Open interest in these contracts has jumped 2.5 times since October. CME Group is home to a range of biofuel hedging tools, including physically-delivered ethanol futures for Chicago and New York and a variety of swap products. Currently, Volumes are greatest in Chicago forward- month ethanol swaps.
How has the market developed over the past 3 years and what are the key issues?
Increasing world production and trade has been the biggest factor in raising the market’s global profile. As can be expected with any market boom, volatility has risen, especially with many market participants highly reliant on government regulation as well as prices of feedstocks such as corn. Against this backdrop, the benefits of centrally-cleared benchmark products have become more widely appreciated.
What new innovations have taken place and how do you see the further development and maturing of the market?
As the biofuel market matures, we also see more aggressive trade growth in related markets such as distillers dried grain (DDGS). This growth means there is growing requirement to hedge prices for feedstocks such as crude palm oil. Wood chips and biomass in general may also been strong markets of the future. CME Group is researching risk management tools for all of these markets.
What key challenges do you see in the development of a true global commodity?
Education is a big challenge in a relatively new industry such as this. Energy traders have been more comfortable using cleared-only swaps, but gradually we are seeing more biofuels and feedstock traders embrace them.
Richard Stevens is speaking at the 2010 World Biofuels Markets Conference in March where he joins 200 of the industry’s most influential speakers.
Click here for a full list of confirmed speakers
Click here for a full conference agenda
About the CME Group
Building on the heritage of CME, CBOT and NYMEX, CME Group serves the risk management needs of customers around the globe. We provide the widest range of benchmark futures and options products available on any exchange, covering all major asset classes, including interest rates, equities, FX, commodities, and alternative investments such as weather and real estate. CME Group’s vision is one of ongoing global growth, innovative product development, continually enhanced technology and the highest level of service available on any exchange.