For the first time in history, the financial services industry may have a dedicated exchange to facilitate trade in forestry and paper products including pulp, recycled fibre and wood. A Norwegian company called Norexeco ASA plans to open its doors to traders before the end of 2014.
The Norwegian Ministry of Finance has given Norexeco authorization to set up the regulated market exchange. The granted license allows the company to offer financial derivatives within forestry and paper. The first product listed on Norexeco will be pulp (softwood and hardwood), according to an official statement from Norexeco.
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At least initially, transactions on Norexeco will be open for exchange members only as the exchange starts up operations. Compliance to EMIR and Dodd-Frank regulations is being promised from the outset by the exchange, with all transactions cleared by European Commodity Clearing AG (ECC) in Germany. The exchange will offer Deutsche Börse’s M7 trading platform to traders and plans to become a renewable commodities exchange.
“Despite the fact that the international pulp market is nearly the same size as the aluminum market, the pulp market does not have an established exchange for trading. We have been welcomed as a stabilizing factor, and we are very optimistic about the opportunity to move a large share of the trading from the bilateral and the OTC market to a fully regulated marketplace,” says Stein Ole Larsen, CEO of Norexeco.
According to RISI, a Japanese research company covering the pulp and paper industry, there is approximately 400 million tons of paper and paperboard products alone (not including pulp) manufactured globally with companies such as ‘International Paper’ (U.S), ‘Kimberly-Clark’ (U.S) and ‘Stora Enso’ (Finland) being the largest market players.
“It is about time that the forestry and paper industry gets the same opportunity for risk management as other mature industries, and we are very excited to soon open up for trading,” he added.