Intercontinental weather derivative products were developed under the guidance of Aquila, Inc. and other major weather market participants. They are unique from weather derivatives currently available on other exchanges. Intercontinental weather derivatives are financially settled on the basis of five-day average temperature readings for either the current week or the next forward week, Monday - Friday. Settlement temperatures are measured by the National Weather Service at five major airport weather stations located throughout the U.S.: Chicago-O'Hare, Dallas-Fort Worth, New York-La Guardia, Philadelphia-International and Sacramento-Executive. The settlement temperatures are gathered and reported to Intercontinental participants by EarthSat, a recognized third party vendor of weather data. Intercontinental weather derivatives are tradable in multiple contract quantities. Each contract is sized to settle at $10,000 per degree of deviation from the strike.
"Our expansion into the weather derivative marketplace is not only an exciting development for our participants to better manage their exposure to weather factors, but is also a great opportunity for Intercontinental to expand into new markets," said Rafael Pirutinsky, Senior Vice President of IntercontinentalExchange. "As with all our markets, the weather derivative products grew primarily out of client demand, and complement our efforts to provide a full spectrum of risk-managed products to meet the needs of users and traders of energy and metal products."
"We are pleased to have been able to help Intercontinental with the design and development of their new weather products," added Ravi Nathan, General Manager, Weather at Aquila, Inc. "The five-day average settlement period means these products are well aligned with the National Weather Service mid-range temperature forecasts (MRF) -- a key weather reference source for most energy traders and weather traders alike, and a major driver of short term trading in power and natural gas. Intercontinental weather products are a great new risk-management tool for the energy industry and have the potential to become the first crossover product that will be used by traders on the weather desk and the energy desks in the OTC market."
IntercontinentalExchange is one of the world's most liquid and fastest growing electronic commodity marketplaces.
Today the Exchange system, which was recently upgraded to accommodate customer requests and system functionality, is installed on over 6,500 desktops worldwide from which traders log on each day of the business week to trade more than 600 listed commodity and derivative contract types, approximately 200 more than when Intercontinental went live. Broadly, these include crude oil and refined products, natural gas, power, precious metals and emissions allowances. Contract forms include physical delivery as well as financially settled swaps, spreads, differentials and options based on a variety of fixed and floating price indices.
Based in Atlanta (and with offices in New York, Houston, Chicago, London and Singapore), this electronic exchange is taking the technological revolution that occurred in international financial markets and extending it into global commodity markets.
Intercontinental provides 100% electronic transaction capability. Backed by strong customer support and a 24-hour help desk, registered users of the exchange can now trade commodities products around the clock and around the world every single day of the business week.
This summer, Intercontinental completed the acquisition of the International Petroleum Exchange (IPE), Europe's leading futures and options exchange. The IPE provides a highly regulated marketplace where industry participants use futures and options to minimize their price risk exposure in the physical energy market.
Products traded on IPE include Brent Crude futures and Options, Gas Oil futures and Options, Natural Gas futures and Electricity (baseload) futures.
