CME Group Launching "First-of-its-Kind" Water Futures Product

Investors can buy and sell futures contracts for items like pork bellies and oil, so why not for water too? Securities exchange operator CME Group (NASDAQ: CME), which specializes in financial derivatives like futures, announced Thursday it has launched a water futures contract in conjunction with Nasdaq (NASDAQ: NDAQ). The contract will be based on the Nasdaq Veles California Water Index, which was introduced in 2018.

CME Group said in the press release trumpeting the Nasdaq Veles California Water Index futures contract that it "will be an innovative, first-of-its-kind tool to provide agricultural, commercial, and municipal water users with greater transparency, price discovery, and risk transfer – all of which can help to more efficiently align supply and demand of this vital resource."

San Francisco viewed from San Francisco Bay.

Image source: Getty Images.

Each contract will represent 10 acre-feet of water and will be settled on the basis of the index. On a weekly basis, the index sets a spot price for water rights based on the volume-weighted average of prices in the five most significant water markets covering the massive Western state. 

The use of water is a particularly pressing concern in California, as large swathes of the state are arid since it receives comparatively little rain or snowfall. Meanwhile, its Central Valley region is home to some of the most significant and active American farms growing food to be sold throughout the national market and even abroad. CME Group said that 40% of the state's water consumption is used for agricultural purposes.

Investors seem to be amenable to this new product. On Thursday, CME Group's shares bucked the overall bearish trend of the wider market by closing the day marginally higher.

10 stocks we like better than CME Group
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and CME Group wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks


*Stock Advisor returns as of August 1, 2020


Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends CME Group. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More