Winefex Bordeaux represents the world's first wine futures, and will give industry professionals an effective means of hedging price risk. Factors likely to promote use of these contracts include the emergence of new distribution circuits and new producing countries, plus price volatility in fine Bordeaux wines. This was particularly in evidence for the 2000 vintage.
Prior to the launch, wine professionals including growers, brokers and wine dealers in Bordeaux familiarised themselves with the principles underlying futures markets and how to use Winefex Bordeaux contracts in short courses offered over a four-month period. Feedback from these courses has been excellent, with experts on hand to answer wine professionals' many questions on this innovative product.
Contracts for the sale or purchase of Winefex Bordeaux futures are based on five cases of 12 identical 75-cl bottles.
En primeur wines are delivered in November two years after harvest, at a price that is usually announced in the second quarter of the year following the harvest.
The first maturities traded are for delivery in November 2002 and November 2003, covering 2000 and 2001 vintages. Contracts will open in July of the harvest year and close 28.5 months later in November, i.e., when wines en primeur are delivered.
Labels qualifying as underlying wines are chosen from the appellations and rankings of 1855, Graves and Saint Emilion, each with a price history for wines en primeur going back at least two years - i.e., 140 wines in all. These are divided into three groups. For the 2002 maturity, the Group 1 will include fine Bordeaux red wines with primeur prices of over EUR 30. Group 2 represents primeur prices of between EUR 15 and EUR 30, and Group 3 prices of between EUR 7.5 and EUR 15. Group 1 will be the contract's quotation base.
At delivery dates, sellers may either liquidate positions in cash by paying to the buyer the equivalent of a settlement price plus a premium of around 5%, or deliver labels included in the underlying wines, substituting other labels in Group 1 if they wish. Sellers may also deliver a wine in Group 2 or 3, but in this case will receive only 50% or 25%, respectively, of the contract settlement price.
Winefex Bordeaux contracts will be traded on the electronic trading system of Euronext Paris from 10:45 a.m. to 1:00 p.m. and from 3:00 p.m. to 6:30 p.m. (Paris time).
Euronext is the first pan-European exchange, created in September 2000 by the merger of the exchanges in Paris, Amsterdam and Brussels. As of December 2000, Euronext was Europe's largest exchange organisation in terms of cash trading volumes through the central order book, and the second largest in terms of number and total market capitalisation of listed companies. Euronext manages both regulated and unregulated markets and offers a complete and varied range of services encompassing all exchange activity, including listing of financial instruments, trading in securities and derivatives (including futures and options on stocks and a variety of interest rate and commodity derivatives), clearing, settlement and custody of securities. Since 6 July 2001, Euronext has been listed on the premier marché of Euronext Paris.
