The Chicago Climate Exchange is planning a futures exchange for carbon dioxide emissions and creating a new cash market for sulfur dioxide allowances.
The new sulfur market could launch by the end of the year, said Richard Sandor, the exchange’s chairman and chief executive. It is being created to meet the demands of clients and members who want to trade sulfur emission allowances.
Sulfur dioxide is released from coal-powered electric power plants. Companies that reduce their emissions are able to sell unused credits, creating a financial incentive to cut sulfur output.
Allowances are now traded over the counter, but bringing them to a centralized market will “bring all the efficiencies and price discovery that comes with trading on an exchange,” Sandor said.
The addition of sulfur dioxide allowances also will bring new participants to an exchange that since its launch last year has focused on carbon dioxide emission credits.
Now, the exchange plans to add futures to that cash market. The launch of the Chicago Climate Futures Exchange needs approval from the Commodity Futures Trading Commission.
It would complement the European Climate Exchange, a London-based futures exchange that in January will begin regulating the emissions of carbon dioxide in the 25 European Union countries, Iceland and Norway. The Chicago exchange is teaming with the International Petroleum Exchange to create the new market.
Sandor said he expects that some investors would trade on both futures markets.
“There seems to be a latent demand for a worldwide carbon market … where corporations can create a solution to global warming,” he said.
Insurers weather attacks: The terrorist attacks on Sept. 11, 2001, strained the resources of the insurance industry, but no companies went out of business following the events, according to a new Ball State University study.
The study by John Fitzgerald, a finance and insurance professor, also found that the payouts by insurers following the attacks were $30 billion to $35 billion, about half of what some estimated the cost would be.
“There was this major fear that our insurance industry would be wiped out by these acts simply because of the enormous payouts,” Fitzgerald said in a statement. “However, the only business failures were actually normal exits from the industry.”
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The ultimate cost of the attacks to the insurance industry was lessened by the decisions of victims and their families to take part in federal compensation plans instead of suing for damages, Fitzgerald found.
CBOT, NU team up: The Chicago Board of Trade and Northwestern University have created a new, non-credit course in the economics of trading. Designed for current traders or those considering the profession, the six-week class will include sessions on options, futures and different asset classes. The goal is to provide students with an understanding of the “dynamics between the markets and various financial products,” the school and exchange said in a joint announcement.