Month: December 2020

Traded Waters

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In mid September, CME Group, the world’s major derivative marketplace, and Nasdaq announced a new futures contract on Nasdaq Veles California Water Index (NQH2O). This is all in the name of “creating greater transparency, price discovery and risk transfer on the supply and demand of this vital resource”. The press release is available here — CME Group to Launch First-Ever Water Futures Based on Nasdaq Veles California Water Index.

The contract debuted last week and are so designed that no actual physical delivery of water takes place. Finshots has put out a detailed explanation of how this works in a financial sense. Do read the article here — The Californian Water Futures.

Needless to say, this has created some global concerns at the way water, a life-giving and life-sustaining resource, belonging to every living creature on this planet, is being traded like a commodity, such as gold or oil. The difference is clear — gold and oil can be held and traded without affecting the survival of the planet’s inhabitants right down to the microscopic level; however, without water there is no life, and making money off of this precious resource can make it hard for a major portion of life population to access water in its natural form. Initially it might be easy to keep contracts separate from the actual commodity itself, but in the long run there will be repercussions as water has become a dwindling resource. Hoarding the actual commodity can be a dangerous reality.

Some years ago I wrote a post on the water trade becoming a reality. Do read it here — A Price on our Waters.

It is a serious point to ponder.