UPDATE 1-Liffe launches coffee, cocoa warehousing review
By Sarah McFarlane
LONDON Oct 31 (Reuters) - Exchange NYSE Liffe has launched a consultation into warehousing practices in the coffee and cocoa markets, it said in a notice published on its website.
Warehouse storage rents and load-out rates have sparked debate since business models used controversially in metals markets were replicated in coffee and cocoa.
The warehouses make money partly by charging low rates to attract material and higher rates to those taking delivery to retrieve material, while at the same time limiting access.
In metals, warehousing complaints have resulted in U.S.-based lawsuits by consumers, distributors and others alleging aluminium price-fixing and anti-competitive behaviour by investment banks, large trading houses and the LME.
Coffee traders said warehousing delays and expenses have contributed to certified stocks of robusta coffee sliding to historical lows, fuelling expectations of significant price rises to attract fresh beans. Exchange certified coffee backs the futures contract.
The exchange is asking market participants to give information on rents, movement out rates and the amount of notice given to warehouses on upcoming stock movements.
"The information provided as part of this review will assist the exchange in assessing whether the terms and conditions under which Liffe exchange-related goods are handled and stored are appropriate when compared with those for commercial goods," the notice said.
Responses to the consultation paper were due by Nov.13 and the exchange did not specify a timeline for when it would update market participants.
The consultation comes ahead of InterContinentalExchange's (ICE) acquisition of NYSE Liffe soft commodity contracts, with completion of the deal delayed from Nov. 4 to a later date, yet to be announced, to allow additional time for regulatory approvals.
Last week ICE said that once it has acquired NYSE Liffe soft commodity contracts, warehousing practices in coffee and cocoa were amongst the top items to be tackled.
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