CME Group Suspends Euro-Denominated Cocoa Contract

By Katherine Dunn

LONDON--CME Group will suspend its euro-denominated cocoa contract, two years after the contract was launched as an alternative to the incumbent sterling contract run by Intercontinental Exchange.

The current March 2017 contract will be the last that is traded, CME said.

"Though the initial launch of this innovative product had very strong market support, its performance decreased over time," a CME representative said. "As a result, we have decided to suspend all cocoa futures and options contracts beyond April 2017."

The euro contract was launched in March 2015 after feedback from the European cocoa industry, Jeffry Kuijpers, executive director for agricultural commodities at CME Group, said in an interview with the Wall Street Journal last year.

Traders said the industry initially supported a euro-denominated contract as an alternative to the London-based sterling contract, because the euro is the main currency for trading between cocoa hubs in West Africa and Europe. The contract's structure also addressed some traders' concerns about issues with delivery and settlement of the ICE sterling contract.

However, trading volumes never took off, highlighting the difficulty many commodities exchanges face when attempting to lure liquidity from incumbent markets.

By early 2016, European cocoa traders said the liquidity was too low for the contract to be usable, and many expected that the contract would eventually be suspended.

A rival euro-denominated cocoa contract, launched by ICE in March 2015, also failed to take off. That contract still exists, but it has also seen only very low volumes.

Write to Katherine Dunn at [e-mail].

(END) Dow Jones Newswires

January 24, 2017 09:14 ET (14:14 GMT)

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