An introduction to Euronext MATIF
Nick Kennedy, Head of Commodities at Euronext, explains what is Euronext MATIF - Marché à Terme International de France, and what does agricultural commodity derivatives offer.
Listen to the full interview. Watch the video.
What is Euronext MATIF?
When people think of Euronext, they tend always to think about primary markets and cash equity trading, which is great because there are some really strong names out there.
The lesser known is the derivatives and particularly commodities franchise that we have, known as the MATIF - says Nick Kennedy. That’s the Marché à terme international de France, which is a very French name but it’s got deep European roots – and it’s also an international name now.
MATIF is used everywhere; you speak to people in Singapore and Chicago and they all talk about MATIF grains. So what is it?
We run agricultural commodity derivatives, which are basically three big products: rapeseed, corn and milling wheat. We built this over less than 30 years, so we are relatively young, especially compared to some of our peers, but now we’re firmly established as European and even global benchmarks for these products.
What does it offer and who uses it?
What makes Euronext MATIF really different from the other product groups, is the user base - explains Nick Kennedy. At the very core you have physical users of agriculture, so this ranges all the way from producers, the cooperatives, trading houses, millers, etc. These form the very basis of our contract.
They use them for hedging, so to cover a price risk.
What’s interesting is that the growth we see also, and very importantly, is in financial users, because while there is the hedging part, there is also the financial investment and how best can we get a proxy – a real accurate price – to price commodities in Europe through the use of futures and options. So, we have become a global benchmark in this field.
MATIF in a few figures
2020 was actually our all-time record on the franchise in its 27-year history. This is due to the great internationalisation of the franchise and also a return of volatility. The tools that are being put out there are being used more and more, and it’s much more diverse, which is a great thing.
Putting that into figures, if you focus just on our milling wheat, which is our flagship, 55,000 lots are traded every single day – which basically, if you transform into real stuff, is 45 Panamax vessels or 10 billion baguettes (which we all love here for our breakfast).
Imagine that in a warehouse or whatever; it’s just absolutely huge.
Anything in the pipe?
The franchise today is physically-delivered contracts - goes on Nick Kennedy. That’s another specificity of our world in commodities, which means basically that if you are a holder, if you hold a position in milling wheat for example and you keep it right to the expiry, then you’ll go to delivery. In effect it happens very rarely, it is designed to be able to, but it doesn’t; it is more a proxy price reference.
That is important because our core contracts will continue to be physically delivered, and it works very well; but on top of that, what we will be able to do, which is great news, is offer cash-settled instruments. That is going to be great for new instruments, smaller instruments, niche instruments, spreads, different kind of instruments.
All it takes for us then is to work with an index provider. They do all the work of creating that index and we will then encapsulate it in a very simple cash-settled platform.
In fact, the first one we are going to be launching this year is going to 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.