GFI Group has set up a weather derivatives desk in New York to broker plain-vanilla and exotic weather derivatives. Donald Fewer, president and ceo of GFI North America, said the desk started brokering plain-vanilla derivatives, such as heating degree-day and cooling degree-day contracts at the beginning of the month, and plans to add exotics within a year. The exotics would include correlation trades, such as options, which have a temperature trigger but pay out in natural gas, and knock-out and knock-in options.
As part of the effort GFI has hired Andrew Freeman as head of weather derivatives brokering and new product development, and Bill Silverstein, as a broker, according to Fewer. Both were previously at Worldwide Weather Trading, which closed last year after defaulting on weather contracts.
Rival brokers questioned the wisdom of hiring officials associated with the Worldwide Weather debacle, but noted that neither Freeman nor Silverstein were personally implicated. However, one end user--who lost money through exposure to Worldwide Weather--said he would be happy to deal with GFI. "In my view if they bring liquidity to the market, God bless them," he added.
Freeman said he is not paying attention to his competitors and he has gotten a warm welcome from customers. Silverstein declined comment.
