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New York’s Original Futures Exchange Where the World Trades Food, Fiber and Financial Products.

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Presentation on theme: "New York’s Original Futures Exchange Where the World Trades Food, Fiber and Financial Products."— Presentation transcript:

1 New York’s Original Futures Exchange Where the World Trades Food, Fiber and Financial Products

2 For 135 years, the futures and options markets of NYBOT have provided effective risk management tools for major international industries and opportunities for well-informed investors.

3 Sugar = 12.7m FCOJ = 1.5m Coffee = 6.2m Cocoa = 2.8m Cotton = 4.9m NYBOT Ags $466 Billion 2004 FCOJ = $15.4B Cotton = $130.4B Coffee = $174.9B Cocoa = $40.8B Sugar = $104.4B

4 What Makes A Successful Futures Market? 1.Price Volatility No volatility – Why trade? 2.Active Commercial Trade Multiple competitors who face risk and need futures Trade not dominated by small number of companies/individuals 3.Easy/efficient arbitrage between futures and commercial markets.

5 What Conditions Create Easy Arbitrage? Quality of Price Discovery Futures price must be true benchmarkFutures price must be true benchmark Cash price must be readily availableCash price must be readily available No entry barriers to exchange or commercial marketsNo entry barriers to exchange or commercial markets

6 Do the NYBOT Markets Meet Criteria? Benchmark Active Cash Easy Access Sugar #11 YesYesYes Coffee “C” YesYesYes Cotton #2 YesYesYes CocoaYesYesYes FCOJYesNoYes PulpYesNoYes EthanolYesNoYes

7 Does Cash Trade Basis Futures? Sugar #11 Yes Coffee “C” Yes Cotton #2 Yes CocoaYes FCOJSometimes Pulp Not Yet Ethanol

8 The Necessary Condition for a Successful Futures Market A strong, visible & continuous relationship between cash & futures

9 But….. even the best designed futures contract cannot eliminate Basis Risk* * Basis - The difference between the spot or cash price of a commodity, and the futures price of the same or related underlying item.

10 Differences in: Quality Origin Timing Location Sources of Basis Risk

11 Even a properly structured futures hedge can break down if normal basis relationship breaks down.

12 Options strategies can offer macro protection and “conditional” protection What Can Options Do About Basis Risk?

13 An active, liquid, cost efficient options market is becoming a requirement for an effective futures market A New Element of Successful Futures

14 Options are assuming some of the risk transfer functions traditionally taken by futures The Growing Importance of Options Futures now lean more toward their primary price discovery role

15 As a pioneer in options on futures, NYBOT has developed efficient, liquid options markets served by specialized options traders Options at NYBOT

16 Technology = Customer Service NYBOT State-of-of-the-Art Trading Facility Targeted Technology ATC – EOR –OBMS eCOPS NYBOTLive

17 NYBOT – The Global Marketplace 1870 – cotton 1870 – cotton 1882 – coffee 1882 – coffee 1914 – sugar 1914 – sugar 1925 – cocoa 1925 – cocoa 1966 – orange juice 1966 – orange juice 2004 – ethanol 2004 – ethanol 2005 – wood pulp 2005 – wood pulp 1982 NYSE Composite ® Index 1982 NYSE Composite ® Index 1985 – US Dollar Index ® 1985 – US Dollar Index ® 1986 – Reuters/CRB Index 1986 – Reuters/CRB Index 1994 – Currency Pairs 1994 – Currency Pairs 1999 – Russell Equity Indexes 1999 – Russell Equity Indexes 2005 – Reuters/Jefferies CRB 2005 – Reuters/Jefferies CRB The NYBOT is the exclusive marketplace for the following contracts: Cotton No. 2 sm, Coffee “C” ®. Sugar No. 11 sm, Sugar No. 14 sm, US Dollar Index ®

18 World Financial Center One North End Avenue New York, NY or


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