US - The Chicago Mercantile Exchange is to launch a European inflation futures contract based on the Eurozone Harmonized Index of Consumer Prices ex Tobacco (HICP).
The CME Eurozone HICP futures contracts, which are scheduled to begin trading on 19 September, are to complement CME’s existing US inflation futures contract, which began trading in 2004.
“Our new Eurozone futures product is designed to track European inflation and demonstrates CME’s commitment to developing new products that appeal specifically to European market users,” said CME CEO, Craig Donohue.
“With this new futures contract, banks, hedge funds, pension funds and other institutional investors will now be able to hedge their exposure to inflation in the 12 European Union member states that have adopted the euro as their common currency.”
HICP measures the level of prices for market goods and services consumed by households in Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal and Spain. The Eurozone HICP is an aggregate of the member states’ HICPs and is targeted to cover nearly 100% of all Eurozone household consumption. Harmonisation refers to the fact that the same categories and methodology are adopted for the price index in all 12 countries.
CME HICP futures represent inflation on a notional value of e1mfor a period of 12 calendar months.
Similar to the pricing of CME Eurodollar futures contracts, CME HICP futures will be quoted as 100 minus the annual inflation rate in the 12-month period preceding the contract month.
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