After the news spread in the first days of December that water began to trade in the market of Wall Street futuresCitizens were alarmed by speculation that this resource could be bought or sold due to its continuing shortage.
Using the podcast “Water in the futures market” Valeria moy, Director of the Mexican Institute for Competitiveness (IMCO), alongside the expert Jorge Alegria, In charge of business development for Latin America at CME Group, argued why water is now listed in the New York Stock Exchange, What are the futures and whether this good will enter this indicator due to its scarcity.
The specialist explained that water entered the index Nasdaq Waters Water Index in California, With the “ticker” NQH2O, because it seeks to report on the price behavior of this resource in California and its goal is that water users can use this indicator to better cover their risks.
Also read: Water is starting to trade on the Wall Street commodity market
He added that this index has been created since 2018; however, its sole purpose was informative, but now this instrument can be bought or sold worldwide.
When asked what the futures are, Alegria mentioned that they are financial instruments (Water, oil or corn) listed on a market and one of its purposes is to allow investors / users to buy or sell something. Another goal is to put a price on it today, but deliver it in the future, either in six months or a year.
“For example, you can buy one today ton of corn… or some other financial instrument or commodity, put a price on it today and deliver it in the future. It has the advantage that it gives the market the possibility to cover risks “, he detailed.
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The benefit is that by closing the deal, the buyer can pay it time later: “Just set aside the quantity, set aside the price, you have to leave a small amount ranging from 5 to 10% to ensure compliance of the transaction, but the full amount will be paid at maturity “.
In addition, he clarified that the sale of water is not related to its scarcity nor by the climate change; in other words, it is because its value is volatile.
“Earlier this year, that index was over $ 250 and today, already operating in Chicago the index is at $ 508. Even this indicator came to be trading at $ 700, $ 800,” he revealed.
listen HERE the full talk.
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