Euronext expands weather potential

Euronext is launching six weather indexes for France, called 'NextWeather', as a first step to offering exchange-traded weather derivatives contracts in continental Europe next year.

Euronext has joined forces with French weather service Météo-France to calculate six French weather indexes for the pan-European exchange's online NextWeather service. The indicators, five regional and one nationwide, are designed as a daily reference for business sectors dependent on weather conditions to factor the impact of weather into their operations.

Euronext and Météo-France will extend the indexes, first to the Netherlands and Belgium, and subsequently to wider European coverage, by September.

A spokeswoman at Euronext told RiskNews that derivatives contracts based on the temperature indexes would be launched next year. But this is conditional on the indexes' successful performance in the coming year. Météo-France will provide the technical expertise for calculating indexes and contract values.

Euronext said it hopes to attract energy, insurance and reinsurance customers that currently trade in over-the-counter weather derivatives. As a regulated market, Euronext would guarantee full completion of transactions in the event of default by a participant through its clearing entity, Clearnet.

Euronext is currently undertaking a cash takeover of the London International Financial Futures and Options Exchange (Liffe), which launched weather futures contracts on its electronic Liffe Connect trading platform last December.

Euronext’s derivatives business is due to be migrated to the Liffe Connect trading platform. Euronext told RiskNews that the continental weather derivatives would be launched on the Euronext derivatives trading system in place at that time.