NYSE Liffe Plans Warehouse Delivery Time Limits After ICE Deal

Jan 28, 2014 10:46 am ET

Jan. 28 (Bloomberg) -- NYSE Liffe will introduce a time limit for warehouses to move out cocoa and coffee supplies, after commodity traders faced a possible supply squeeze with stockpiles concentrating in fewer depots.

Warehouses will have 60 days to finish loading out of cocoa and robusta coffee against the bourse’s futures contracts, London-based Liffe said in a notice dated yesterday. If load- outs exceed that time, warehouse operators won’t be allowed to charge rent. The changes, which take effect April 1, also require warehouse keepers to disclose rent and loading charges for similar services provided to customers storing goods not intended to be delivered on the exchange.

Withdrawals in cocoa were mostly limited to 200 metric tons a day per warehouse, according to three people in July with direct knowledge of the deliveries, who asked not to be identified because the matter was private. A buyer taking 75,000 tons, the maximum allowed by NYSE Liffe, might have had to wait about 18 months if the beans were in the same depot. NYSE Liffe increased required delivery rates to 250-500 tons as of December.

“I’m very pleased that the new ICE regime has followed through on what they said they were going to do,” Jonathan Parkman, the co-head of agriculture at Marex Spectron Group in London, said by phone today. IntercontinentalExchange Group Inc., based in Atlanta, agreed in December 2012 to acquire NYSE Euronext for cash and stock totaling $8.2 billion at the time, a deal that included Liffe, the bourse’s derivatives arm.

The new rules are “very good, and I would say a little overdue as well,” Parkman said.

‘Harmonizing’ Procedures

The changes are aimed at “harmonizing” procedures at Liffe and ICE Futures U.S., which offers contracts on products including arabica coffee and cocoa, Liffe said. Some traders had complained about long waits for commodities at Liffe’s network of warehouses.

Liffe will require warehouse keepers seeking approval or a renewal of their license with the exchange to submit maximum loading-in, weighing, sampling and re-bagging rates for stored goods. Liffe will have a final say on granting or rejecting the application, it said. The bourse may reject such requests if it judges proposed rates to be unreasonable, it said. Warehouse operators can store goods for customers both within and outside of exchange-monitored networks.

“We are still evaluating some of the legal issues” and are seeking advice from lawyers, said Enrico Antonj, chairman of the European Warehousekeepers Federation, which represents about 60 warehouse keepers. He declined to comment on details of the Liffe plan by phone from Trieste, Italy today.

Warehouse Deliveries

Liffe extended rules implemented to accelerate warehouse deliveries of robusta coffee to its cocoa contract in December. It first set robusta coffee rates in 2012, after companies including London-based Armajaro Trading Ltd. complained depots were too slow in loading out goods. NYSE Liffe’s existing rule requiring a minimum load-out rate by tonnage was considered ineffective, Marex’s Parkman said.

The London Metal Exchange, the world’s biggest metals bourse with a network of more than 700 warehouses, first introduced delivery rates in 2004. The bourse, acquired by Hong Kong Exchanges & Clearing Ltd. in 2012, in April will link load- out requirements to the amount of metal taken in for those warehouse companies with waiting times that exceed 50 days.

--Editors: John Deane, Claudia Carpenter