Cantor Fitzgerald Expands Weather Derivatives on Tradewx

CX Futures Exchange, a subsidiary of global financial services group Cantor Fitzgerald, L.P. has expanded its offerings by launching a new regulated marketplace for weather derivatives, dubbed ‘Tradewx,’ which allows a wide spectrum of users to either hedge financial risk based upon weather events or speculate on the weather.

To date, trading on weather derivatives was dominated by institutional players such as utility companies, insurers, and reinsurers thanks to their interest in diversifying underlying risks across their portfolios and business deals. Most of these OTC transactions are usually based on historical averages which make any short term coverage prohibitively expensive.

However, TradeWx provides tools to help retail investors get engaged and create their own weather portfolios, allowing risk hedges for traders as well as more elaborate strategies for speculators. The platform doesn’t offer margin trading or Leverage Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term but allows users to trade micro contracts with as little as $1.

“This market provides an opportunity to hedge the financial impact of short term weather as well as speculation. There is no leverage, but the contracts feature limited risk and limited payout. The minimum contract size is $1.00 so a participant can engage with very little funds and potentially get a good multiple on payout if successful,” the company says.

Expanded list of weather products

TradeWx is preparing to launch three additional weather segments relevant to individuals and small businesses, including Daily Aggregate Rainfall, Maximum Daily Temperature, and Minimum Daily Temperature.

Catering to traders, speculators, hedgers and those looking for climate protection, exchange-traded weather derivatives are still struggling to make headway across retail markets.

In theory, this asset class should thrive in regions with seasonal changes, but the experience saw little demand, suggesting a need for further sector education and innovation.

“This is a 24/7 market with daily settlements. The contracts traded are exchange traded swaps and any US individual or legal entity can engage without the need of a broker or an intermediary. They would be dealing directly with the CFTC authorized exchange and their funds are kept at the CFTC authorized Clearing House Clearing House A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the e Read this Term,” Cantor Fitzgerald further states.