The problems of commodity derivatives as a hedge instruments for price risks and the importance of correlation were discussed by the participants of the IX International Conference "Black Sea Grain 2012. Market Maker"
2012-04-20 14:14:15
This report was made by the representative of NYSE Liffe (UK) Elena Patimova. According to her, commodity derivatives is used by hedgers (as a tool to protect against price fluctuations) and investors (in order to profit from favorable price movements). According to the the information she gave, the average daily figures of the contract for milling wheat, which is traded on NYSE Liffe, in 2011 were: trading volume - more than 80 thousand, the number of open positions - more than 1.2 million
In the opinion of E. Patimova, the necessary conditions for the normal functioning of the commodity derivatives market are the non-interference (or projected adjustment) of the commodity market by the state and the volatility (but not instability) prices for commodities. In Ukraine, due to the absence of the first condition, classic futures contract is not possible.
E.Patimova also pointed out for now in Ukraine some of the other prerequisites necessary for the full-fledged functioning of commodity derivatives market are missing: little or no potential hedgers (those large export companies that operate in the grain market of the country tend to hedge price risks in Europe), also there is no appropriate trading site.
The speaker also noted the high rate (96%) of the prices correlation for Ukrainian wheat and milling wheat futures on NYSE Liffe.