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BM&FBOVESPA will launch three new soybean derivatives next week. Trading in the new cash settled soybean futures contract will start on January 27. The underlying commodity for the new cash settled soybean futures contract is export type soybeans, in bulk, transferred to and sold at the Paranaguá port, Paraná state. The contract uses the SFI ticker symbol and its trading is authorized as of May 2011, from 9:00 am to 5:00 pm. Each futures contract is quoted in US dollars and represents 450 60-net kilogram bags of soybeans, or 27 metric tons. The maximum daily price fluctuation will be +/- 5% from the previous day’s settlement price.
The new call and put options on cash settled soybean futures, meanwhile, can be traded as of January 28. These are American options, which the holder may exercise at any time. The unit, symbol, trading times, and expiration dates for the options contracts are the same as for the futures contract.
Settlement to be based on a price index created by the Exchange and CEPEA
The new soybean futures and options on futures will have the Paranaguá port, Paraná state, as their reference point and will be settled in accordance with the ESALQ/BM&FBOVESPA Soybean Price Index. The index methodology is exclusively based on soybeans transferred to and sold from warehouses and silos in the export corridor of the Paranaguá port, which is the main reference point for Brazilian soybeans.
The index is drawn up by the Center for Advanced Studies on Applied Economics (CEPEA) of the Luiz de Queiroz College of Agriculture (ESALQ) of the University of São Paulo (USP), and is published every business day after 6:01 pm on the BM&FBOVESPA and CEPEA websites.
Cash settlement to increase participation and liquidity
With the launch, BM&FBOVESPA seeks to increase the participation of cooperatives, exporters, cereal merchants and other agents in the soybean market. By substituting physical delivery of the merchandise for cash settlement, the Exchange has created greater efficiency in the sale of the commodity. Participants such as individual investors, bank treasuries, foreign investors and soybean importers can also contribute towards greater liquidity in the contracts.
The new soybean contracts join futures and options in ethanol, corn, and live cattle and complete the BM&FBOVESPA portfolio of cash settled commodity derivatives. In the case of the soybean contract with physical delivery, trading will remain authorized in the Exchange’s electronic trading environments.
