Tradition Places Largest CME Trade Volume for a Specific Weather Futures Contract in a Single City
February 19, 2009 - Tradition, a leading interdealer broker, today announced its US weather derivatives division completed a significant risk transfer via Dutch auction and direct placement on behalf of an end-user looking to mitigate weather risk for the London area. The auction reached its full capacity of 3,000 lots plus an additional 2,000 lots at the level 305, which is equal to £100,000 per degree-day. This capacity increased the open interest on the Chicago Mercantile Exchange (CME) by 588%, the largest-ever volume for a specific weather futures contract in any one city on a given day.
Offers were solicited for heating degree-day (HDD) swaps for the period of March 2009 for London Heathrow (LHR). Formal proposals were submitted to Tradition (formerly TFS Energy) and executed on Wednesday, February 18, 2009.
"We are extremely pleased to have successfully brokered such an auction. To increase activity by such a large percentage truly exemplifies the growing interest in this product and the depth of the market," commented Kendall Johnson, a Managing Director and Global Head of Weather Derivatives for Tradition.
Tradition has hosted numerous auctions ranging in magnitude from $1 million to upwards of $100 million of transferred risk. Tradition is a pioneer in the Dutch auction space and has been responsible for placing weather risk in the U.S., Europe and Asia. Its weather derivatives desks are located in Stamford, London, and Sydney.
Editor Notes on the Auction Style - Dutch Auction
For the London Heathrow (LHR) auction, offers were accepted in a minimum bid size of 100 lots, with increments of 50 lots thereafter,
and cleared on the CME. When a level was deemed to be acceptable, no less than a minimum transaction size of 500 lots was executed
through the auction. The levels were posted on the CME.
Media Contacts
Jennifer Van Hofwegen, Tradition
+ 1.212.791.6491
jvh@tfsbrokers.com
Gemma Hart, Brunswick Group
+ 1.212.333.3810
ghart@brunswickgroup.com
About Tradition
Tradition is one of the world's largest interdealer brokers in the
over-the-counter financial and commodity-related products. Tradition is
represented in 26 countries and has approximately 3,000 institutional clients.
It employs 2,250 people globally, including 1,450 brokers. Tradition is owned by
Compagnie Financiere Tradition (CFT), which is listed on the Swiss Stock
Exchange. www.tradition.com