CME Group, the world’s largest futures market operator, said it wants to expand its base metals offerings with the new contract.
CME Group (NASDAQ:CME) plans to expand its base metals offerings with the launch of a copper premium Shanghai contract next month, the company said on Tuesday (October 31).
Copper trading on the COMEX exchange has been surging, said the firm, which is the world’s largest futures market operator. In fact, more than 115,000 contracts traded on average each day in September.
“We believe this new contract, which will complement CME Group’s existing physically delivered benchmark COMEX copper futures, will become a reference price for copper traded in or delivered to China,” said Young-Jin Chang, CME Group’s head of metals.
The Copper Premium Grade A CIF Shanghai futures contract will begin trading on November 20, and will be settled against Chinese copper prices calculated by Metal Bulletin. The LME, the dominant venue for copper trading, does not offer a China copper premium contract.
“Our new copper contract will provide the first, financial settled exchange-traded futures product to enable customers and market participants to hedge their exposure to the China copper premium,” Chang added.
CME Group, which owns the COMEX, already offers a range of global benchmark products across major asset classes, and provides electronic trading on its CME Globex platform.
As with the LME, many banks, trading firms and commercial hedgers use COMEX copper for risk management purposes, and CME Group prides the COMEX on being “[a] global benchmark for copper prices” used by respected indices such as the Bloomberg Commodity Index.
Copper prices have been surging since the beginning of the year, and are up more than 24 percent since January. On Tuesday, COMEX copper was trading at $3.10 per pound, while LME copper was down 0.3 percent, at $6,849 per tonne.
For investors new to copper investing, the Investing News Network has put together a brief overview of the difference between LME Copper and COMEX copper. Click here to read more.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.