Announcing the long-awaited launch of a contract that faced several hurdles, the New York Intercontinental Exchange's (ICE.N) world cotton futures contract will finally start trading on November 2, 2015 after a pending regulatory approval. This contract which allows only for delivery of US cotton, has for long been considered as the world benchmark, though the US has been surpassed as the world's largest grower. Merchants have been pushing for years for a world contract.
The exchange said, origins will comprise of the US, Australia, Brazil, India, Benin, Burkina Faso, Cameroon, Ivory Coast, and Mali. The contract will consist of 12 delivery points in the US, Australia, Taiwan, and Malaysia. The exchange first said it planned to introduce the contract in 2013, but progress was stymied by regulatory issues in the United States and other key regions. The new contract will trade alongside the cotton No. 2, ICE said.
The exchange will enjoy discounts by delivering to locations in Australia and the US. The Asian delivery points are located near the world's biggest textile markets. For pricing, US cotton will be used as a benchmark, with other origins trading at discounts and premiums. ICE stated that those differentials will be announced closer to the launch date.
