Cantor Fitzgerald Expands Weather Derivatives on Tradewx
- To date, trading on weather derivatives was dominated by institutional players to diversify their underlying risks

CX Futures Exchange, a subsidiary of global financial services group Cantor Fitzgerald, L.P. has expanded its offerings by launching a new regulated marketplace for weather derivatives, dubbed ‘Tradewx,’ which allows a wide spectrum of users to either hedge financial risk based upon weather events or speculate on the weather.
To date, trading on weather derivatives was dominated by institutional players such as utility companies, insurers, and reinsurers thanks to their interest in diversifying underlying risks across their portfolios and business deals. Most of these OTC transactions are usually based on historical averages which make any short term coverage prohibitively expensive.
“This market provides an opportunity to hedge the financial impact of short term weather as well as speculation. There is no leverage, but the contracts feature limited risk and limited payout. The minimum contract size is $1.00 so a participant can engage with very little funds and potentially get a good multiple on payout if successful,” the company says.
Expanded list of weather products
TradeWx is preparing to launch three additional weather segments relevant to individuals and small businesses, including Daily Aggregate Rainfall, Maximum Daily Temperature, and Minimum Daily Temperature.
Catering to traders, speculators, hedgers and those looking for climate protection, exchange-traded weather derivatives are still struggling to make headway across retail markets.
In theory, this asset class should thrive in regions with seasonal changes, but the experience saw little demand, suggesting a need for further sector education and innovation.
“This is a 24/7 market with daily settlements. The contracts traded are exchange traded swaps and any US individual or legal entity can engage without the need of a broker or an intermediary. They would be dealing directly with the CFTC authorized exchange and their funds are kept at the CFTC authorized Clearing House Clearing House A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the execution of trades. Consequently, as a third party, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of any transaction. Clearing houses are integral in helping reduce the cost, settlement or operational risk of clearing as well as settling multiple transactions across multiple entities.Role of Clearing Houses Across ExchangesFinancial exchanges such as commodities and stock exchanges have relied on clearing houses for over a century. Today, the futures market is often associated with a clearing house, as its financial products are leveraged and necessitate a stable intermediary. Every reputable exchange possesses its own clearing house. This requires all members of an exchange to effectively clear their trades via a clearing house at the terminus of each trading session.Additionally, exchange members are obligated to reconcile clearing house's margin requirements, sufficient to cover the member's debit balance.This is a crucial stopgap to help prevent risk to individual traders. For example, if a trader doesn't meet a margin call, any and all trades will be closed. This is to prevent against any additional losses. This process helps reduce the risk to individual traders, ensuring sufficient funds in the account to cover any losses which may occur. A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the execution of trades. Consequently, as a third party, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of any transaction. Clearing houses are integral in helping reduce the cost, settlement or operational risk of clearing as well as settling multiple transactions across multiple entities.Role of Clearing Houses Across ExchangesFinancial exchanges such as commodities and stock exchanges have relied on clearing houses for over a century. Today, the futures market is often associated with a clearing house, as its financial products are leveraged and necessitate a stable intermediary. Every reputable exchange possesses its own clearing house. This requires all members of an exchange to effectively clear their trades via a clearing house at the terminus of each trading session.Additionally, exchange members are obligated to reconcile clearing house's margin requirements, sufficient to cover the member's debit balance.This is a crucial stopgap to help prevent risk to individual traders. For example, if a trader doesn't meet a margin call, any and all trades will be closed. This is to prevent against any additional losses. This process helps reduce the risk to individual traders, ensuring sufficient funds in the account to cover any losses which may occur. Read this Term,” Cantor Fitzgerald further states.
CX Futures Exchange, a subsidiary of global financial services group Cantor Fitzgerald, L.P. has expanded its offerings by launching a new regulated marketplace for weather derivatives, dubbed ‘Tradewx,’ which allows a wide spectrum of users to either hedge financial risk based upon weather events or speculate on the weather.
To date, trading on weather derivatives was dominated by institutional players such as utility companies, insurers, and reinsurers thanks to their interest in diversifying underlying risks across their portfolios and business deals. Most of these OTC transactions are usually based on historical averages which make any short term coverage prohibitively expensive.
“This market provides an opportunity to hedge the financial impact of short term weather as well as speculation. There is no leverage, but the contracts feature limited risk and limited payout. The minimum contract size is $1.00 so a participant can engage with very little funds and potentially get a good multiple on payout if successful,” the company says.
Expanded list of weather products
TradeWx is preparing to launch three additional weather segments relevant to individuals and small businesses, including Daily Aggregate Rainfall, Maximum Daily Temperature, and Minimum Daily Temperature.
Catering to traders, speculators, hedgers and those looking for climate protection, exchange-traded weather derivatives are still struggling to make headway across retail markets.
In theory, this asset class should thrive in regions with seasonal changes, but the experience saw little demand, suggesting a need for further sector education and innovation.
“This is a 24/7 market with daily settlements. The contracts traded are exchange traded swaps and any US individual or legal entity can engage without the need of a broker or an intermediary. They would be dealing directly with the CFTC authorized exchange and their funds are kept at the CFTC authorized Clearing House Clearing House A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the execution of trades. Consequently, as a third party, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of any transaction. Clearing houses are integral in helping reduce the cost, settlement or operational risk of clearing as well as settling multiple transactions across multiple entities.Role of Clearing Houses Across ExchangesFinancial exchanges such as commodities and stock exchanges have relied on clearing houses for over a century. Today, the futures market is often associated with a clearing house, as its financial products are leveraged and necessitate a stable intermediary. Every reputable exchange possesses its own clearing house. This requires all members of an exchange to effectively clear their trades via a clearing house at the terminus of each trading session.Additionally, exchange members are obligated to reconcile clearing house's margin requirements, sufficient to cover the member's debit balance.This is a crucial stopgap to help prevent risk to individual traders. For example, if a trader doesn't meet a margin call, any and all trades will be closed. This is to prevent against any additional losses. This process helps reduce the risk to individual traders, ensuring sufficient funds in the account to cover any losses which may occur. A clearing house is defined as an intermediary between two parties, a buyer and seller, which helps facilitate the overall process from trade inception to settlement. Clearing houses streamline the exchange of payments, securities, or derivatives transactions.The clearing house is situated between two clearing firms who also helps reduce the risk of either member firm failing to honor their respective trade settlement obligations.Buyers and sellers enter into legally binding agreements for the execution of trades. Consequently, as a third party, the role of the clearing house is to centralize and standardize all of the steps leading up to the settlement of any transaction. Clearing houses are integral in helping reduce the cost, settlement or operational risk of clearing as well as settling multiple transactions across multiple entities.Role of Clearing Houses Across ExchangesFinancial exchanges such as commodities and stock exchanges have relied on clearing houses for over a century. Today, the futures market is often associated with a clearing house, as its financial products are leveraged and necessitate a stable intermediary. Every reputable exchange possesses its own clearing house. This requires all members of an exchange to effectively clear their trades via a clearing house at the terminus of each trading session.Additionally, exchange members are obligated to reconcile clearing house's margin requirements, sufficient to cover the member's debit balance.This is a crucial stopgap to help prevent risk to individual traders. For example, if a trader doesn't meet a margin call, any and all trades will be closed. This is to prevent against any additional losses. This process helps reduce the risk to individual traders, ensuring sufficient funds in the account to cover any losses which may occur. Read this Term,” Cantor Fitzgerald further states.