According to CME Group, the contracting company, this will enable better management of the risk associated with insufficient vital fluid and regulate supply and demand in the markets.
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Starting this week The water is traded on the Wall Street futures market due to its scarcity. The price of the vital fluid will fluctuate just like oil, gold or wheat, the CME Group reported.
According to the index, the price of water in California doubled last year Nasdaq Velez California Water Index. Experts assure that its arrival in the commodity market will allow better management of the future risk associated with this asset.
The US company CME Group signs contracts for California spot water, a $ 1,100 million market. With the ticker NQH2O, today’s price for California water futures, was trading at around $ 486.53 per acrecorresponding to 1,233 cubic meters.
The index is based on prices in California’s major river basins where water scarcity has increased. This value can be used as a reference for the rest of the world in the water markets.
.@ Nasdaq The Veles California Water Index (NQH2O) futures are the first of its kind here, with which market participants can control the risk of water supply and demand.
– CME group (@CMEGroup) December 7, 2020
Farmers, funds or municipalities can protect themselves or speculate against changes in the water price. According to CME Group, the new contracts will enable better management of the risk associated with water scarcity and establish a better correlation between supply and demand in the markets.
These futures contracts do not require the physical delivery of water and are purely financial in nature. They are based on the weekly price averaged over the five largest water catchment areas in California through 2022.
These contracts are the first of their kind in the United States and were announced in September when the country’s west coast was devastated by heat and forest fires. according to Bloombergare intended for “As a hedge for California’s largest water consumer against rising prices and as an indicator of the scarcity of investors around the world.”
China and the United States are the world’s largest consumers of water. According to the United Nations 2 billion people live in countries with serious access to water problems. The agency estimates that two-thirds of the planet could suffer from water scarcity in the next few years, displacing millions of people.
The inadequacy of vital fluids is related to the over-exploitation of these resources by the primary sector, industry and human consumption, as well as climate change.