Atlanta, GA-based IntercontinentalExchange (ICE) said Tuesday that weather derivatives are now available on the ICE online trading system.

ICE’s weather derivative products will provide energy market participants with a tool for managing energy volume or demand risk in the marketplace. The company added that these products can be used to support a variety of energy-related cross-product and risk-shifting strategies utilized in a variety of industries.

The ICE weather derivative products were developed under the guidance of Aquila Inc. and other major weather market participants. ICE said they are unique from weather derivatives currently available on other exchanges. The ICE weather derivatives are financially settled on the basis of five-day average temperature readings for either the current week or the next forward week, Monday-Friday.

Settlement temperatures are measured by the National Weather Service at five major airport weather stations located throughout the U.S.: Chicago-O’Hare, Dallas-Fort Worth, New York-La Guardia, Philadelphia-International and Sacramento-Executive. The company said the settlement temperatures are gathered and reported to ICE participants by EarthSat, a third party vendor of weather data.

The ICE weather derivatives are tradable in multiple contract quantities. Each contract is sized to settle at $10,000 per degree of deviation from the strike. “Our expansion into the weather derivative marketplace is not only an exciting development for our participants to better manage their exposure to weather factors, but is also a great opportunity for ICE to expand into new markets,” said Rafael Pirutinsky, senior vice president of IntercontinentalExchange.

“As with all our markets, the weather derivative products grew primarily out of client demand, and complement our efforts to provide a full spectrum of risk-managed products to meet the needs of users and traders of energy and metal products.”

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