Speaking to ConfectioneryNews.com, Andreas Christiansen, chairman of the German Cocoa Trade Association, one of the signatories of a letter sent to Liffe last week railing against the distortion of the market by financial institutions and out dated regulation, said that Liffe had signalled it was ready to initiate dialogue in relation to their concerns.
Dealers reportedly felt that fund buying had pushed London cocoa futures LCCc2 to a 32-year high of €2,461 last week.
The cocoa producers, in their communication, threatened to reconsider their hedging policy and move to the Intercontinental Exchange cocoa contract in New York where they said such market distortion is blocked unless Liffe introduced controls such as position limits.
Christiansen, whose association represents cocoa trader, brokers, processors and warehousing firms, said that the signatories are also investigating the possibility of trading on the Deutsche Terminbörse - the German Derivatives Exchange - or setting up a new cocoa futures market in frustration at the lack of transparency in Liffe.
And he called on the London exchange to revert to being an accurate hedging instrument to allow a sufficient time between expiry of options and expiry of futures contract to allow cocoa companies set a hedging month and organise inventories accordingly.
Christiansen said the signatories are demanding that rules are amended to so that it becomes clear what proportion of the open positions held on the London market are from speculators, in order to clearly determine what their influence is on prices.
"There has been a huge increase in fund activity in cocoa since the financial crisis but Liffe market regulation is outdated and does not reflect these changes, and it suits certain parties to maintain that situation,” argues Christiansen.