| NEW YORK, April 11
NEW YORK, April 11 The CME Group Inc,
the world's biggest futures exchange operator, has canvassed
traders in recent months about opening a cocoa futures contract
to challenge its rival's grip on the niche $15 billion market,
Discussions about the viability of a cocoa contract that
would compete with IntercontinentalExchange Group Inc
are at an early stage, according to two traders whose companies
have been approached by the Chicago-based exchange.
In the strongest sign yet that the exchange will push ahead
with its plans, CME in Europe has invited around 20 companies to
a soft commodity briefing in London later this month, where they
are expected to present an overview of the proposed cocoa
contract, one of the trade sources with knowledge of the meeting
"CME's investigating whether they should open a cocoa
contract in competition with ICE," the trade source said, adding
the exchange has met with all the "important players" to discuss
A CME spokesman declined to comment.
The move marks the latest sign of the exchange's ambitions
to expand in agricultural markets in Europe, where it plans to
launch a European milling wheat contract that will challenge ICE
Euronext's Paris-based wheat market.
Europe is by far the world's biggest region for cocoa
processing and chocolate consumption.
It would be the CME's first push into soft commodities, that
include coffee, cocoa and sugar, since it hired two soft
commodity experts in April last year. Both had previously worked
The cocoa futures market is small compared to other
Cocoa futures open interest in both ICE and Liffe markets is
just under 495,000 contracts, equivalent to nearly 5 million
tonnes of beans, which is a fraction of the 1.4 million
contracts, or 178 million tonnes, of CBOT corn.
Late last year, ICE scooped up London-based cocoa, coffee
and sugar contracts through its acquisition of NYSE Euronext
(Liffe) to operate alongside its New York-based markets.
The purchase gave the Atlanta-based exchange, which operates
a U.S. dollar-traded futures cocoa contract, the larger NYSE
Liffe cocoa contract that is dealt in British sterling. Many
traders actively trade the arbitrage between the two contracts.
In sugar, it gained Liffe's white sugar and robusta coffee
contracts, in addition to its relatively larger ICE raw sugar
and arabica coffee contracts.
Europe is home to major manufacturers such as the world's
biggest industrial chocolate manufacturer Barry Callebaut
, Lindor chocolate ball maker Lindt & Spruengli
and Nutella chocolate spread maker Ferrero.
When ICE bought Liffe, some traders said they were concerned
about one exchange operating two of the world's main cocoa
futures contracts, but ICE appears to have quieted these worries
during the transition through several regulatory changes.
In March, ICE announced plans to introduce additional
guidance on position management on Liffe cocoa and coffee
markets, where current rules allow these markets to become
artificially squeezed from time to time.
Traders said the proposed contract will either trade in the
British sterling or the euro, but questioned if the cocoa market
is big enough for three futures contracts, with their main
concern being a lack of liquidity.
"We don't like to see liquidity split between several
markets," said another trade source. "A number of companies
they've targeted and a number of people have said they'd support
(Editing by Josephine Mason and Grant McCool)