Here is Kim Chipman, Bloomberg:
“Farmers, hedge funds and municipalities alike will be able to hedge against — or bet on — potential water scarcity starting this week, when CME Group Inc.launches contracts linked to the $1.1 billion California spot water market. According to Chicago-based CME, the futures will help water users manage risk and better align supply and demand.
The contracts, a first of their kind in the U.S., were announced in September as heat and wildfires ravaged the U.S. West Coast. They are meant to serve both as a hedge for California’s biggest water consumers against skyrocketing prices and a scarcity gauge for investors worldwide.”
And, this…
”The futures will be financially settled, as opposed to requiring the actual physical delivery of water, and are based on the Nasdaq Veles California Water Index started two years ago. The index sets a weekly benchmark spot price of water rights in California, underpinned by the volume-weighted average of the transaction prices in the state’s five largest and most actively traded water markets.”
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