Kent Horsager, president and chief executive officer of the Minneapolis Grain Exchange said, “This is a wonderful opportunity for both MGEX and DTN. We believe possibilities exist for creative, new cash-settled risk management tools in many agriculture and non-agriculture product areas; however, MGEX will focus initially on agricultural contracts. Corn and soybean futures and options will be our first focus and we will launch them on our electronic trading platform, scheduled to be released during the third quarter of this year.”
Darren Siekman, president of DTN Ag Companies, stated, “The opportunity to work with one of the oldest and most trusted futures exchanges presents not only tremendous opportunity for DTN, but will ultimately benefit our customers and all of agriculture with innovative solutions. The combination of electronic trading and cash settled instruments truly presents a 21st century solution for agriculture.”
Bill Davison, corporate vice president of DTN, said, “DTN has extensive databases that correlate highly with corn and soybean cash markets. The products under development will benefit everyone from farmers to large multi-national companies. There is demand from commercial market users for flexible, innovative risk management products. Cash-settled indexes will go a long way in fulfilling that demand.” DTN is the most comprehensive commodity reporting service in the United States, collecting, auditing and reporting daily corn and soybean bids from elevators across the country. As part of this agreement with MGEX, DTN data will be used to calculate average daily prices for corn and soybeans. Those daily prices will make up the National Corn Index (NCI) and National Soybean Index (NSI), respectively. MGEX will then use those averages as the settlement prices for corn and soybean contracts. Cash-settled futures contracts differ from traditional futures contracts in that delivery is not an option; therefore, market participants can hold their outstanding futures positions until contract expiration without the threat of delivery. This also allows for simultaneous expiration of futures and options.
On a cash-settled contract’s last trading day, outstanding positions are settled in cash against an index that is calculated from public or private sources (in this case, DTN data), and defined in the contract rules. The Minneapolis Grain Exchange, established in 1881, is the only futures market for hard red spring wheat, white wheat, durum wheat, cottonseed, Twin Cities on-and off-peak electricity, black tiger shrimp and white shrimp. MGEX announced February 6, 2001 that it entered into an agreement with UNIVITS, an electronic exchange design company with offices in Stockholm and London, to begin development of an electronic trading platform. To learn more about the Minneapolis Grain Exchange, visit www.mgex.com.
Headquartered in Omaha, Nebraska, DTN is a leading business-to-business electronic commerce and information services company. DTN has served professional users in the agriculture, weather, energy and financial services industries since it was founded in 1984. For each of these business sectors, DTN provides its customers with targeted (proprietary and third-party) time-sensitive information through a variety of distribution methods including the Internet, satellite, leased lines and other technologies.
