One of the leading exchange and clearing house networks, the Intercontinental Exchange (ICE), issued a company announcement outlining changes in trading conditions for the mini gold futures and options instruments traded on ICE Futures U.S.
As conspiracy theorists have been voicing their opinion that there is not enough gold supply to back the futures contracts which are changing hands all over the globe, ICE has taken an important decision dissipating conspiracy theories and responding to customer requests, who have been calling for changes in the gold contract’s delivery options, size and quality.
Mini gold futures and options contracts have been previously traded on the Liffe U.S. exchange, with the company transferring them to ICE Futures U.S. in June.
Physical delivery is not the only specification which the company changed – starting from the trade of the February 2015, contract size of the contract is being revised from the current 33.20 to 32.15 troy ounces, which is exactly one kilo. These changes will result in the minimum tick for the contracts to drop by $0.105 to $3.21.
In addition, the minimum fineness of the deliverable one kilo gold bar has been raised to 0.9999 from the current 0.995 requirement.
The use of Warehouse Depository Receipts for gold delivery is being phased out, with the last contract using the old specifications being the futures for January 2015. The company chose to skip options trading for January 2015 in order to avoid confusion.
ICE Futures, US President Ben Jackson, stated in the company announcement, “We have been working closely with market participants to ensure that our metals complex meets their trading and risk management needs while evolving with the current market conventions.”
He added, “These changes make the ICE mini gold contract the most effective physically delivered futures contract in terms of accurately representing the underlying market, while enabling efficient hedging or exposure to gold prices.”
Since the February 2015, as well as subsequent contracts have already been listed for trading on the exchange, the change to the Mini Gold futures and options contract size will require changes to ICE’s trading platform and clearing system. The changes have already been made with the start of trading on Monday, September the 15th.
According to the exchange a variety of market participants, including smaller institutional and the majority of retail investors, have adopted the kilo as the physical bar size of preference, and .9999 fineness has become the predominant quality standard for kilo bars with more than 90% of kilo-sized bullion in circulation meeting the new fineness standard.