An introduction to Euronext MATIF
Nick Kennedy, Head of Commodities at Euronext, explains what Euronext MATIF is, and what agricultural commodity derivatives offer.
Listen to the full interview. Watch the video.
What is Euronext MATIF?
Euronext MATIF is the leading exchange for agricultural commodities in mainland Europe. It began as a French exchange (Marché à terme international de France), but it has deep European roots, and it is now an international name: if you speak to traders anywhere, not just Europe but also Singapore or Chicago, they'll know about MATIF grains.
Our three largest agricultural commodity derivatives products are:
- Milling Wheat.
We have built this franchise over nearly 30 years. Although we are relatively young compared to some of our peers, we are firmly established as the European benchmark, and in some cases the global benchmark, for these products.
What does Euronext MATIF offer and who uses it?
What makes Euronext MATIF really different from other product groups on Euronext is the user base, explains Nick Kennedy. At the core we have physical users of agriculture ranging from producers, cooperatives, trading houses, millers etc. These form the basis for our contacts.
These groups use the MATIF contracts for hedging, to cover their price risk.
However, we have also seen a real growth in financial users. This is because, in addition to hedging, MATIF contracts can be a great financial investment and can act as a proxy - a real accurate price - to price commodities in Europe through the use of futures and options. This is how we have become a global benchmark in this field.
MATIF in a few figures
2020 was our all-time record on the franchise in its 27-year history. This was due to the significant internationalisation of the franchise, as well as the return of volatility. Our contracts are now being used more frequently and our user base has become much more diverse.
In terms of figures, for our Milling Wheat, which is our flagship contract, 55,000 lots are traded every single day - the equivalent of 45 Panamax vessels or, to put it in a French context. 10 million baguettes. If you imagine that in a warehouse, you can see that it's a very large amount.
Today, the franchise is made up of physically-delivered contracts, which is another specificity within the world of commodities. This means that if you are a holder - if you hold a position in Milling Wheat for example - and you keep it right to the expiry of the contract, then you'll go to delivery. This happens very rarely; it is designed to be able to, but it is more a proxy price reference.
This is important because our core contracts will continue to be physically delivered, which works very well.
However, in addition, we are going to start offering cash-settled instruments. This will be great for new instruments, smaller instruments, niche instruments, spreads, as well as other types of instruments.
To do this, we will work with an index provider. They will do the work of creating the index, and we will then encapsulate it in a very simple cash-settled platform..
The first cash-settled contract, which we will launch this year, will be Durum Wheat, which is used to make pasta. We will be doing this with a price reporting agency and there will be more news to come.