ICE plans to launch first global cotton contract next year

Reuters

* Plans to launch follow long-running discussions withindustry

* Traders say U.S. contract vulnerable to price-distortingsqueezes

* No details yet on origins or delivery locations

By Josephine Mason

NEW YORK, Oct 2 (Reuters) - IntercontinentalExchange Inc plans to launch the first global cotton futures contractin early 2014, the Atlanta-based exchange said on Wednesday,giving merchants, mills and growers their first alternative topricing on the U.S.-only contract.

The new contract will be listed alongside ICE's existingU.S. contract and will accept foreign origins as well asU.S.-grown cotton for delivery in multiple locations, includingthe United States, an ICE spokeswoman said.

Other origins and locations are still to be finalized, shesaid.

"We will be working with cotton market participants tofinalize the details of this contract and hope that we canresolve outstanding issues and launch an international contractin early 2014," ICE Futures U.S. President and Chief OperatingOfficer Ben Jackson said in a statement on Wednesday.

The move may help dispel criticism from growers, mills andtraders across Africa, Asia and the Americas that the exchange'sexisting No. 2 contract is increasingly vulnerable toprice-distorting squeezes.

Some say it may be even harder to lure money away from adeeply entrenched benchmark that still enjoys the support of theU.S. industry's biggest players.

The contract is used as the global benchmark butaccepts only cotton grown in the United States.

The move also reflects the diminishing U.S. role in theglobal cotton market. The United States is the third-largestproducer behind China and India, and the world's No. 1 exporter.

Long-running discussions between the exchange and the globalcotton industry about the contract have stumbled overspecifications, dealers involved in the process have said.

While cotton from Brazil and Australia is the favoredforeign origin for the contract, growers, mills and traders havestruggled to agree on delivery locations, dealers familiar withthe discussions have said.

Dealers say the exchange is also under pressure to protectits stronghold in the niche fibers market as it finalizes its$8.2 billion takeover of NYSE Euronext, giving it anear-monopoly in global cocoa, coffee and sugar derivativestrading.

Last year, its Chicago rival CME Group Inc startedlooking at listing an alternative futures contract which wouldinclude foreign-grown fiber.

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