The Cotlook A Index Plus – an explanation
Cotlook A Index Plus
The introduction of electronic trading of cotton futures on ICE moved the goalposts for the trade, in that the luxury of putting out offers based on each day’s settlement and nothing then happening until open outcry re-opened became a thing of the past. Electronic trading now commences at 06.30 GMT each weekday and continues until 20.15 hours.
Cotlook has been compiling the Cotlook A Index for over 50 years, during which period its manner of calculation has been amended from time to time in order to accommodate changes in quality, countries of origin and the pattern of trade. The Index is published at 14.30 hours UK time each day, which allows for the price evidence on which the individual components of the Index are based to be gathered from around the world during the preceding 24 hours.
The price evidence reflects the influence of the preceding day’s ICE settlement values, for those growths for which offers have typically been based on New York. Indications suggest that the practice of the trade is still to reflect those settlement values in offers put to the market; however, account is taken of movements in futures in considering any bids received.
Cotlook considered the aforementioned developments and future prospects and decided in 2007 to introduce an ‘intra-day’ Index value, which adjusts the individual component values of the A Index by the extent of the movement in futures. The adjustments are based on the historic 12-month moving averages of the typical price relationship for each growth with the relevant ICE trading month, and the A is then re-calculated. This ‘intra-day’ value, which was given the title ‘Cotlook A Index Plus’ (AIP), therefore moves in sympathy with futures (using the publicly available delayed feed). For the time being, the movement is displayed only from the time each day’s Index value is published up to the close of that day’s futures trading. We will still compile and publish the substantive A Index as per usual at 14.30 hours UK time each day (or as soon thereafter as is technically feasible), and effectively therefore ‘re-set’ the starting value for the A Index Plus for the following period.
Cotlook’s principal aim is to attempt to provide a device that shows the potential influence of movements in futures on prospective offers to mills. Any comments about the Cotlook A Index Plus should be addressed to email@example.com