* CME cocoa plans stir currency debate
* Faces some resistance from UK-based participants
By Sarah McFarlane
LONDON, July 30 The Intercontinental Exchange
is considering changing the currency of its
sterling-denominated Liffe cocoa futures to euros, market
Europe is the leading region for chocolate demand and many
in the chocolate industry are in favour of a contract in euros.
ICE is consulting the market on whether it would support the
move, but there is no time frame in place for a decision, the
The exchange declined to comment.
The currency of the Liffe contract has been discussed
intermittently for years, but plans by rival exchange CME
to launch a cocoa contract have given new impetus to the
debate, sources said.
The CME has not announced the currency of its new product
but sources said it had reconsidered its earlier plans to launch
a sterling contract and was instead looking at using the euro.
The CME declined to comment.
"If all things were equal then this would be an ongoing
debate ICE would have that no one would pay much attention to,
but ICE is under tremendous competitive pressure now because of
the CME," a London-based broker said.
"If they (CME) are going to release a euro contract then ICE
cannot not release a euro contract because it's too much of a
ICE acquired the NYSE Liffe softs commodity contracts
including cocoa in November 2013 and ahead of the acquisition,
Ben Jackson, president and chief operating officer of ICE
Futures U.S., said the exchange would look at the currency of
the cocoa contract.
The London cocoa futures contract was launched in 1928, long
before the euro currency came into use, and is one of the last
commodities futures traded in sterling.
But the new currency has grown rapidly in importance.
"The whole business of cocoa in Europe is more euro
denominated than sterling denominated," a second broker said.
In addition to this, the currency of the world's top grower
Ivory Coast, is pegged to the euro.
"I am in favour of moving from a sterling contract to a euro
contract because I think it's a better reflection of the
currency domination of both the supply side and the demand
side," a European trader said.
Chocolate makers buying cocoa products such as powder and
butter mainly purchase in euros.
"It would make life a little bit easier and simpler to have
a euro contract because it takes away several currency hedges
which we need to do in order to run our positions," said a
Some resistance remains, however, mostly from UK-based
"There's a handful of trade houses that have a nostalgic
view of sterling, they think there's nothing wrong with the
contract, it works in sterling and the open interest is very
healthy," said a London-based broker.
"The other concern is the transition, there is no elegant
way to do it."
The transition away from sterling has already happened in
other markets, including Liffe's robusta coffee contract, which
changed to dollars in the 1990s.
"The main counter argument is that to do it is only going to
cause disruption," said the broker.
"The transition is messy but having said that it will
happen, it's inevitable and we should get on with it."
(Editing by Keiron Henderson)