With a stated goal of offering people within the energy industry a way to reduce the burden of rolling index commodities forward every month while also allowing them to track the effects of contango and backwardation in the crude markets, the New York Mercantile Exchange Inc. (Nymex) said last week that it plans to launch the MACI futures and the Backwardation-Contango index futures contracts in February 2008.
Nymex said the products represent a "new generation" of futures based on a proprietary index system. Nymex will list financially settled futures and options contracts for the MACI, which is a six-month rolling strip index, as well as for the Backwardation-Contango index. The exchange said additional indexes and related futures contracts using the MACI system will be launched for various energy, metals and other commodities in the near future.
The Nymex Crude Oil Backwardation-Contango Index futures contract will be based on rolling the first nearby crude oil futures to the seventh nearby contract. This "roll" will be dampened by dividing by six. The first month will be listed for December 2010 expiration. Beginning in 2009 each January Nymex intends to list an additional contract month for the subsequent December termination such that on the second business day of January 2010, there will be three contracts listed, with expirations in December 2010, 2011 and 2012.
The Nymex Crude Oil MACI Index futures contract will be based on the arithmetic average of the first six contract months of crude oil plus the Nymex Crude Oil Backwardation-Contango Index. The first month to be listed will expire in January 2011. Each subsequent January Nymex intends to list an additional contract month for the subsequent January termination, such that on the second business day of January 2010 there will be three contracts listed, with expirations in January 2011, 2012 and 2013.
Reaction to the new products is tentative. "The way things are structured now, Nymex can just come up with new products and put them out there to test interest," said a New York trader. "People can choose whether to trade these new offerings or not, so we will have to see what the market decides and whether natural gas and other commodities end up following."
The contract value for both products will be $200 times their respective index values and the minimum tick size will be 0.05 index points or $10.00 per contract. Both contracts will be listed on the Nymex trading floor, CME Globex, and Nymex ClearPort. They will trade from 9 a.m. to 2:30 p.m. on the Nymex floor; and on CME Globex and Nymex ClearPort they will trade from 6 p.m. Sunday through 5:15 p.m. Friday New York time, with a 45-minute break between 5:15 p.m. and 6 p.m. on Mondays through Thursdays.
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