Water trading set to move to Wall Street

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Water has always been held sacred in India, home to one of the oldest riverside civilisations. In a sign of times, now even Wall Street is starting to recognise its importance and starting this week it will start trading in California water futures.

Trading in the resource comes even as wildfires have razed swathes of California, uprooting hundreds of people and destroying flora and fauna. Tied to the California water market, the futures contract will launch late this year, subject to regulatory approvals.

“With nearly two-thirds of the world’s population expected to face water shortages by 2025, water scarcity presents a growing risk for businesses and communities around the world, and particularly for the $1.1 billion California water market,” said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products. 

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“Developing risk management tools that address growing environmental concerns is increasingly important to CME Group,” he said, adding that the new contract will help widen the scope for hedging risks on natural resources that already includes agriculture, energy, and metals.

“The Nasdaq Veles California Water Index helps drive better outcomes for water market participants through verifiable price discovery,” said Lauren Dillard, Executive Vice President and Head of Nasdaq Global Information Services. 

Around 40% of water currently consumed in California is used to irrigate its nine million acres of crops. The new contracts will enable an agricultural producer to plan ahead for changing costs of the water they need for large-scale irrigation. It would also allow a commercial end user, like a manufacturer, to better navigate business and financial risks when water prices fluctuate

Climate activists have for long that the next era of global war will be over sharing of water resources and not land. Tensions have already risen between Ethiopia, Sudan and Egypt over the building of a dam across the River Nile this year.

India also faces grave challenges to providing sufficient water to its majority agriculture dependent population as seasonal monsoon rainfall distribution has become uneven due to climate risks.

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