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Chicago climate exchange unveils futures contract on clean energy index


The Chicago Climate Futures Exchange will launch a futures contract on the WilderHill Clean Energy Index on July 13, representing the first time a stock index futures contract has been lis

The Chicago Climate Futures Exchange will launch a futures contract on the WilderHill Clean Energy Index on July 13, representing the first time a stock index futures contract has been listed on an environmental derivatives exchange.

The launch follows an agreement between WilderShares, a provider of indices for the clean energy and environmental sectors, and the Chicago Climate Exchange, the parent of the futures market.

‘The CCFE ECO-Index futures contract, the first stock index futures contract to be listed on the Chicago Climate Futures Exchange, will allow the financial community interested in clean energy to diversify their risks of investing in renewable companies while tapping into the growing popularity of this sector,’ says Dr Richard Sandor, chairman and chief executive of the Chicago Climate Exchange. ‘The launch of the ECO-Index also signals our continued commitment to creating new innovative markets in the environmental space.’

‘We’re delighted to bring this cutting-edge futures product to the environmental finance arena, one that allows investors to participate in emerging clean energy with new diversification and in ways unheard of even a few years ago,’ says Dr Rob Wilder, chief executive of WilderShares and manager of the index.

The WilderHill Clean Energy Index is the first US index comprising companies with a focus on clean energy and pollution prevention. The index, a modified equal dollar weighted index, tracks the clean energy sector through publicly-traded companies that stand to benefit substantially from a transition toward alternatives such as wind power, solar power, ethanol, energy efficiency and fuel cells.

Stocks and sector weightings within the index are based on their significance for clean energy, technological influence and relevance to preventing pollution, with an emphasis on ecological and economic sustainability.

At the end of March, the index consisted of 40 stocks of US listed companies, most of which have a market capitalisation greater than USD200m. The index is calculated by the American Stock Exchange and disseminated through the Network of the Consolidated Tape Association.

Wilder is also co-manager of the WilderHill New Energy Global Innovation Index, a benchmark of clean energy worldwide outside the US, and manager of the WilderHill Progressive Energy Index, which measures the stocks of companies for active in decarbonisation of fossil fuels and pollution reduction.

Since 2005 Chicago-based asset manager Powershares Capital Management has offered an Amex-listed exchange-traded fund based on the index, the Powershares WilderHill Clean Energy Portfolio.

The Chicago Climate Exchange seeks to apply financial innovation and incentives to advance social, environmental and economic goals. The exchange is the world’s first greenhouse gas emissions allowance trading system based on legally binding rules, and the only global system for emissions trading based on all six greenhouse gases. The system is the only one in North America to achieve greenhouse gas reductions through a legally binding compliance regime, with price transparency and independent third-party verification from the NASD.

The Chicago Climate Futures Exchange currently offers standardised and cleared Sulfur Financial Instrument futures and options contracts and Nitrogen Financial Instrument futures based on mandatory cap and trade programmes created under the US Clean Air Act Amendments of 1990.

The exchange has traded more than two million SO2 allowances in its futures market, making it the world’s largest exchange for trading criteria pollutants. Market participants can secure price-transparent, standardised futures and options contracts on an anonymous electronic trading platform. The availability of effective hedging tools, including prompt and deferred years for both futures and options, has increased liquidity and eased volatility in the SO2 market.

The Chicago Climate Exchange launched its US trading platform in 2003, followed in 2005 by the European Climate Exchange, which is now the leading exchange operating in the European Union’s emissions trading scheme. Since last year, both exchanges have been owned by Climate Exchange, a publicly-traded company listed on the London Stock Exchange’s Alternative Investment Market.

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