ICE Commits to Five-Year Ceiling on Liffe Soft Commodity Trading Fees

Fees for Sugar, Cocoa and Coffee to Be Capped at the Same Level as Current Brent Contracts

ICE Commits to Five-Year Ceiling on Liffe Soft Commodity Trading Fees

Trading Fees to Be Capped at 82 Cents

Soft commodities represent the main area of overlap between NYSE Euronext and IntercontinentalExchange (ICE). The former is best known for its stock markets and financial futures, while Atlanta-based ICE runs derivatives exchanges heavily geared towards energy products, as well as soft commodities following its acquisition of the New York Board of Trade. In December, ICE announced that it had agreed to buy NYSE Euronext for $8.2 billion (£5.5 billion). After the completion of the prospective merger, currently undergoing European and US regulatory approvals, ICE will keep the NYSE Euroenext soft commodity derivative contracts based in London and will put a five-year ceiling on their trading fees. The pending change was unveiled by an ICE senior executive in a presentation held last week, the Wall Street Journal first reported on March 8.

Reuters quoted ICE Futures US President Ben Jackson as saying at the Cocoa Merchants Association of America conference in the Dominican Republic on Thursday that the exchange would cap its screen trading fees on iffe soft commodities at 82 cents for five years, which is the current fee for ICE Brent and up 2 cents from the current Liffe fees.

Along with the pledge for a ceiling on trading fees for soft commodity derivative contracts, ICE said in the presentation filed with the Securities and Exchange Commission that other European commodity futures such as milling wheat will be part of a potential Euronext initial public offering (IPO). ICE also revealed that it is committed to setting up customer committees for Liffe robusta coffee, white sugar and cocoa to assess trading hours and other aspects of these soft commodity markets currently managed by the NYSE's UK futures arm. Jackson further stated that ICE will "identify [an] appropriate trading currency for cocoa." Liffe cocoa currently trades in British pounds whereas ICE cocoa trades in US dollars, and currency fluctuations often play a significant role in the market, adding pressure or support to one market according to the value of its currency, ICE said, adding it would address the issues surrounding this currency difference.

Addressing Traders’ Concerns

The ICE’s pledges come in response to concerns of some traders that following the merger between NYSE Euronext and ICE, the enlarged exchange would amass too much control over the soft commodities market into its hands. Earlier this year, traders and brokers met to discuss the effect of the potential merger of the two marketplaces under one corporate parent and while some have been optimistic that the consolidation will reduce costs, others have expressed fears that ICE's planned takeover may create a near monopoly and hike trading fees.

Price Movements

On March 8, cocoa for May delivery rose 1.4 percent to £1,420 a tonne on NYSE Liffe and 1.6 percent to $2,094 a tonne on ICE. White sugar for May delivery was 0.7 percent higher at $536.30 a metric tonne on NYSE Liffe in London, while raw sugar for May delivery gained 0.1 percent to 18.79 cents a pound on ICE Futures in New York. On Friday, traders also saw robusta coffee for delivery in May gaining 0.2 percent to $2,159 a tonne in London and arabica coffee for delivery in May declining 0.1 percent to $1.43 a pound in New York.

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