Trading on MGEXpress premiered February 15, 2002, with the launch of NCI and NSI futures and options. According to Kent Horsager, president and chief executive officer of MGEX, the system performed flawlessly. "We couldn't have asked for a better performance from the technology," stated Horsager. "We had full confidence from the beginning in OM's technology and we weren't disappointed. We look forward to testing the limits of the system."
OM Technology, based in Stockholm, Sweden, developed the technology for MGEXpress. The company specializes in exchange technology. Currently, 25 exchanges worldwide use OM technology.
Firms and individuals wishing to trade NCI and NSI futures and options simply need to call their broker. Direct access to MGEXpress is granted through MGEX clearing member firms. Those clearing firms then make the decision to grant direct access to their customers. Currently, there are 54 MGEXpress terminals in use and the majority of MGEX clearing firms have either direct or indirect access to the system.
Seventy-nine NCI futures contracts were executed on February 15 and 13 NSI futures contracts. Through February 20, a total of 134 NCI futures, 24 NSI futures and 2 NCI options contracts have been traded.
Al Kluis, president of North Star Commodities in Minneapolis, said, "NCI and NSI futures and options are very effective hedging tools for producers, elevator managers and processing companies seeking corn and soybean price protection. I believe interest will build in these contracts as potential users become more fully educated about their benefits and also learn more about the order execution process."
The National Corn Index and the National Soybean Index are calculated daily by Data Transmission Network (DTN), a leading business-to-business electronic commerce and information services company. DTN collects bids from roughly 1,500 elevators daily, and in turn calculates the NCI and NSI. NCI and NSI futures do not trade at the cash index prices daily; however, following the last trading day outstanding positions are settled by a cash transfer against the average of the indexes for the last three trading days of the settlement month. Market participants may trade in and out of positions throughout the life of the contracts, as is the case with any futures or options contracts.
Bill Davison, DTN vice president of sales, said, "What the NCI and NSI futures contracts mean to producers and consumers of corn and soybeans is that there are finally futures contracts available that reflect the prices at which they truly buy and sell. The current delivery futures contracts traded in Chicago reflect the export market for corn and soybeans and those prices can often move in a direction that is opposite of those traded in the country. These contracts will prove to be a great tool for anyone selling or originating corn and soybeans at country elevators."
Cash-settlement is new to the grains and oilseeds industry and MGEX officials admit there is a bit of confusion concerning how the contracts work. Teri Huffaker, MGEX vice president of marketing, says there is still a lot of education to be done. "Initially, there has been some confusion that the instruments are cash contracts," said Huffaker, "Cash-settlement simply means that outstanding futures and options positions will be offset by means of a cash transfer on the day following last trading day, as opposed to offset by delivery of a physical product. It is actually a very simple way to insure convergence between cash and futures markets. Very few individuals are in a position to take advantage of the current delivery system for corn and soybean futures."
MGEX offers educational information, historical prices and quotes for NCI and NSI futures at www.mgex.com. Additionally, a tutorial about the contracts may be found on DTN in the "Grains" section.
The Minneapolis Grain Exchange was founded in 1881 and is the only market for hard red spring wheat, white wheat, durum wheat, Twin Cities electricity, cottonseed and NCI and NSI futures and options. Visit www.mgex.com for more information.
Data Transmission Network is a leading business-to-business electronic commerce and information services company located in Omaha, Neb. For more information on DTN products and services visit www.dtn.com.
