(Adds CME comment, background)
CHICAGO Jan 23 CME Group Inc will
suspend trading in all CME Europe cocoa contracts starting with
the May 2017 contract, the company said on Monday.
The CME euro-denominated cocoa contract was launched on
March 30, 2015, but volumes and open interest remained low and
the new market never mounted a serious challenge to the
dominance of the IntercontinentalExchange, which
operates both of the most actively traded markets in the
The suspensions of the CME contracts take effect from the
close of trading on Monday, CME said in a notice to customers.
The March 2017 contract will remain available for trading and
any open interest in that contract will be unaffected, according
to the notice.
Supporters of the CME contract argued that a switch to a
euro-denominated contract from ICE's sterling-based market would
reduce currency risks for the leading cocoa processors operating
in euro zone countries.
CME had also sought to capitalise on concerns that ICE's
in-store contract did not always align closely with the physical
market in Europe and dealers said that its free on truck (FOT)
basis should correlate more closely.
Dealers said that ICE's sterling-denominated contract was,
however, already firmly entrenched and there were concerns that
there was insufficient liquidity in the comparatively small
European cocoa market to support two rival contracts.
Furthermore, a significant proportion of the 2015/16 cocoa
crop had already been hedged against ICE's sterling contract
when the euro market was launched, which made it challenging for
the new market in the early stages.
"Though the initial launch of this innovative product had
very strong market support, its performance decreased over
time," a CME spokesman said in an emailed statement.
"As a result, we have decided to suspend all cocoa futures
and options contracts beyond April 2017."
ICE also operates a United States-based cocoa futures market
that was never threatened by the CME euro-denominated contract.
(Reporting by Tom Polansek in Chicago and Nigel Hunt in London;
Editing by David Goodman)