Swiss Re Insurance-Linked Fund Management

PCS - Emerging Risks, New Opportunities

Weather futures market looks healthy as Tradition places largest ever trade


The weather futures trading market is looking incredibly healthy today after the news that Tradition has placed the largest ever volume for a specific weather futures contract at the CME. The deal entailed a Dutch auction style placement to protect their client from weather risks in the London, UK area. The extra capacity this massive deal pumped into open interest at the CME raised open interest by 588%.

The deal was composed of heating degree day swaps for the period of March 2009 for London Heathrow (LHR). The auction reached it’s full capacity of 3,000 lots plus an additional 2,000 lots at the level known as ‘305’ (equivalent to £100,000 per degree day).

So could we be heading for a bumper year in the weather markets? The growth year-on-year has been healthy although in recent years growth slowed somewhat, could 2009 be the year that the weather futures market comes of age?

The full press release is available here.

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