On commodity derivatives and the Norwegian initiatives to create a fish derivatives market
by Gunnvald Grønvik
Hedging against future price movements can be important both for those producing goods and for those buying them. Commodity derivatives may be employed as a hedge against price risk, and this is one of the reasons behind several initiatives to establish fish derivatives markets in Norway. This article discusses the general terms for establishing commodity derivatives markets. There is seldom more than one derivatives market for a commodity. The success of a Norwegian fish derivatives market will depend on global competition between such marketplaces, and this competition will determine whether and what type of initiative that will succeed. Norwegian (and European) legislation for commodity derivatives appears to be adequate. The markets are well organised and Norwegian legislation ensures that transactions involving standardised products are settled in a clearing house and that netting rules apply. This contributes to ensuring financial security in the commodity derivatives markets. The market positions held by financial institutions are otherwise too small to threaten general financial stability.
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