U.S. lawmakers repeal archaic settlement restriction
The U.S. Congress has repealed a law dating back to World War One that prevents futures exchanges from listing contracts based on cotton grown outside the U.S. The move paves the way for ICE Futures U.S. to introduce a “world cotton contract” this fall.
The legislation, H.R. 2620, was introduced in June by Representative David Scott, a Georgia Democrat, with support from three other lawmakers from cotton-growing states. It passed the House later that month and the Senate in July, becoming law on July 20.
The legislation removes a restriction dating to 1916 that prevents the delivery of cotton at settlement unless it has been sampled and graded by the U.S. Department of Agriculture. That restriction effectively prevented U.S. exchanges from accepting cotton grown outside the U.S. to settle futures contracts and limits the value of the U.S. futures market as a benchmark for global market conditions.
In August ICE Futures US indicated that it expects to list its new world cotton contract in November, pending regulatory approval. The new contract, which has been under development since 2013, will allow users to deliver cotton from multiple origins, including India, Brazil and Australia, at multiple locations around the world.
