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Russia's weather service, RTS agree on weather futures

MOSCOW, February 6 (RIA Novosti) - The Russian Trading System (RTS) stock exchange and Russia's weather service have signed a cooperation agreement on establishing a weather derivatives market to provide companies with a means of insuring against bad weather, the service said in a statement Monday.

The Federal Service for Hydrometeorology and Environmental Monitoring said, "the parties have concluded this agreement to coordinate activities and carry out joint work within their competence to create a weather futures market in Russia."

The extreme cold spells that have hit the country recently have taxed the country's heating and power network, forcing the authorities to introduce power restrictions on many industrial producers to avoid blackouts.

Under the cooperation agreement, the weather service will set up a task force with the RTS to prepare the launch of futures contracts for temperature indices, the weather service said.

The RTS announced its plans to launch trade in weather derivatives in January, and explained in its statement that the futures contracts were intended as a means of insuring risks of financial losses resulting from unfavorable weather conditions.

"Weather changes are a major factor affecting the economic activity of sectors such as agriculture, transport, construction, electricity, the coal industry, oil and gas, and others," the RTS said.

The company said the launch may take place before the end of the year.

"The launch of the futures will allow an increase in the efficiency of spending plans and the use of resources, enabling business units to operate even in unfavorable weather conditions," RTS Vice President Roman Goryunov said.

Weather derivatives were first traded on the Chicago Stock Exchange in 1999.

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