CME's Melamed Sees Broader Role For Ukraine In Futures Push

Ukraine's move this month to set up a grain futures exchange gives the country a leg up in the development and consolidation of Eastern European financial markets, according to the chairman emeritus of CME Group Inc. (CME).

Embracing market dynamics for the world's sixth-largest exporter of wheat comes as Ukraine hopes to join the European Union, while Russia also seeks to maintain close ties, according to CME's Leo Melamed, who led CME's efforts to set up the new exchange.

"Ukraine is interested in bringing as many Eastern European markets together as can be," said Melamed in an interview. "They're not ignoring consolidation."

CME and the government of Ukraine this month announced plans to launch within the next six to 12 months a new futures market focused on the country's wheat market, with potential for other agriculture or financial contracts. Trading will be powered by CME's electronic system, Globex.

Ukraine President Viktor Yanukovych has pushed free trade since his election in early 2010, and developing domestic financial markets is key to his aim in opening up the resource-rich nation's economy, Melamed said.

"They want to become central to the rest of the markets in Europe," said Melamed, who engaged with Ukrainian officials more than a year ago.

Ukraine, which also produces much of the world's barley, corn, honey and nuts, is building up as the regional exchange sector evolves against a backdrop of global consolidation among exchange groups.

Poland's Warsaw Stock Exchange, which floated shares in November, has aligned with NYSE Euronext (NYX) for technology development to power its own regional ambitions. Separately, Russia's two major exchanges, RTS and Micex Group, planned in February to combine in a government-backed effort to position the nation as a financial hub.

Melamed said the new Ukraine futures market would open up participation to non-domestic commercial participants, banks and trading firms, all of which have backed the project. "We met with the world's largest dealers and they encouraged us to proceed," he said.

Companies needing to hedge commodity risk would benefit from global standards set for Ukrainian wheat and certainty of delivery, Melamed said. Traders would be able to access the contracts on a familiar platform run by CME and ultimately, consumers would get cheaper goods, he said.

"In well-functioning futures markets the net result is lower prices to the consumer," Melamed said.

Many details remain to be fleshed out before the market's launch, including regulations, contract language and the way physical commodities are delivered to holders of expiring futures. Melamed said Odessa would be one likely delivery point, with others also seen based along the Black Sea coastline.

-By Jacob Bunge, Dow Jones Newswires; 312 750 4117; jacob.bunge@dowjones.com

CME (NASDAQ:CME)
Historical Stock Chart
From May 2024 to Jun 2024