The water crisis has gripped many parts of the world in recent years. As per reports, almost two-thirds of the world’s population may face water shortages by 2025. Now, Wall Street is about to begin trading futures contracts for water under new financial products announced by CME Group (world’s leading and most diverse derivatives marketplace) amid climate change. It will be based on the Nasdaq Veles California Water Index. The group will launch it late this year, pending regulatory review.
According to Bloomberg, CME said, “It would allow California’s big water consumers to hedge against surging prices and can act as a benchmark that signals how acute water scarcity is becoming in the state and, more broadly, across the globe.”
It is expected to provide commercial, agricultural, and municipal water users with good clarity, price discovery and risk transfer by aligning supply and demand.
Water supplies have been tight for years in California and most farms and other agricultural businesses rely on water. Nasdaq Veles California Water Index futures would allow an agricultural producer to plan ahead for changing costs of the water they need for large-scale irrigation.
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