Solaris trades first Black Sea swap contract on CME

Futures and commodity exchange CME on Monday launched its cash-settled futures contracts for wheat and corn on the Black Sea, with Swiss trader Solaris executing the first contract.

The contracts are settled against monthly or fortnightly averages of price reporting agency Platts’ survey of the market.

Solaris said it was the first of two counterparties to trade the contract, trading 40 lots (2,000 mt) for next marketing year’s crop for August at $184.50/mt.

Scott Wellcome, risk manager at Solaris, told Agricensus the trade “showed support to a product that shows the best correlation” to wheat prices in the Black Sea region.

Solaris is a keen adopter of the survey assessment.

Swithun Still, a director at the company, told the Global Grain conference in November that he had traded the first OTC contract earlier this year and had held 100% of the open interest.

At the time of writing, open interest on both contracts was zero according to the CME website.

The last time a Black Sea grains contract was listed on the CME in 2012 it failed to gain traction with the market, with a lack of liquidity and the complexity of arranging a physically-settled contract in the region hampering its adoption.

While cash settlement of the contract removes the problems of physical delivery, liquidity is an issue which stirred some mutterings of discontent from the audience at a speaker’s panel at last month’s Global Grain event in Geneva.

Panel members, which included representatives from Platts and Solaris, sought to placate fears of liquidity issues, saying the timing of contract’s launch during a traditional period of downtime for markets in the former Soviet Union, may mean it is several months before the contract begins to trade in earnest.

“Don’t panic if it doesn’t trade in the next couple of months,” INTL FC Stone’s Matt Ammermann, Vice President Eastern Europe/Black Sea, told the audience.

With much of the Black Sea’s current focus on shifting Russia’s mammoth wheat crop, the corn contract may face a longer lead time.

“We’re not doing so much on corn, we’re more of a wheat trader,” Wellcome said.