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  • 4.5.4-COTTON TRADING-ELECTRONIC TRADING OF FUTURES CONTRACTS

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  • Electronic trading of futures contracts

    Chapter 4 - Cotton trading - The former NYBOT and now ICE Futures U.S. cotton marketplace

     
     
    NYBOT and the IntercontinentalExchange (ICE), the leading electronic energy marketplace, merged on 12 January 2007. NYBOT is now a wholly owned subsidiary of ICE, which is a for-profit, publicly traded corporation. On 2 February 2007, side-by-side electronic trading of NYBOT commodities contracts was launched on the ICE electronic trading platform. NYBOT contracts offered for electronic trading include cocoa, coffee, cotton, orange juice and sugar.

    With the introduction of ICE, contract specifications and commodity codes remain unchanged for both floor and electronic contracts, which will be fungible with one another. The nearest 10 delivery months are available for trade. NYBOT open outcry trading hours for cotton remain unchanged: 10.30 a.m. to 2.15 p.m., Monday through Friday. Electronic trading in cotton is currently offered between 1.30 a.m. and 3.15 p.m. Eastern Time. A pre-open market facility is available between 8:00 p.m. and 1:30 a.m. Eastern Time to allow participants to enter bids and offers that will be executed after the electronic market opens, on a first-in first-out (FIFO) basis. There are no changes to the current NYBOT/ICE exchange fee structure, with floor and screen trades offered at existing, equivalent rates. There is one daily settlement price established for each futures contract month each trading day. Open positions are marked-to-market each day using the settlement price, regardless of whether the position was initiated via electronic or open outcry trading. The daily settlement price is determined at the close of the contract’s open outcry trading session. Trading floor brokers are key providers of liquidity, have full access to the electronic system and can execute trades in the electronic system on behalf of their customers.

    Access to electronic trading is available to qualified individuals, regardless of membership status, upon execution of an access agreement with ICE. ICE believes that offering electronic trading in agricultural futures products alongside the traditional open outcry trading allows both existing and new customers worldwide maximum flexibility in accessing these markets and gives them the ability to choose how best to take advantage of the broad liquidity of these contracts.

    During February 2007, the first month of side-by-side trading of NYBOT/ICE open outcry and electronic trading of cotton futures, 713,894 cotton futures contracts were traded, including 120,503 contracts traded electronically, or 17% of the total. The volume of cotton futures contracts traded in February 2007 exceeded February 2006 volumes by 44%. During March 2007, 375,964 cotton futures contracts were traded, including 107,048 contracts traded electronically, or 28% of the total. During April 2007 a record of 765,244 contracts were traded, including 244,279 contracts traded electronically (32%).