Markets are a wonderful creation and should be welcomed.
Regarding this contract, it is financially settled. So there is no actual delivery of water, and it merely offers you an exposure to already existing prices of water in California.
Meanwhile the reality of the average person on this planet doesn't have anything to do with the reasons for the largest trades on "the markets". So are those trades irrelevant for your general opinion or those people?
"The market" has become a sick abomination of capitalism. Trades are being made by people or machines which have nothing to do with the actual products. Absurdly complex products made even the trading process some sick meta-thing.
And you say this is reality? This is the reality the market CREATES not the reality it is supposed to reflect.
If people hold houses to speculate with the price of real state, that makes the price I pay for the necessity of a place to live way more expensive than it would be otherwise (this is something I empirically know to be true).
Why doesn't the same logic apply to water once it's possible to speculate with it?
Consider water. Say a speculator drives the price way up in the sky to the extent that ordinary people are affected. What will said speculator do with these contracts? Either she will sell them (and the price rebounds), or she will be stuck with tons of water which is burdensome and incurs costs to store. So clearly she will want to sell this water and at that point be subject to the market demand for it.
In other words, undue speculation drives you out of business.
Now, regarding this future contract it is financially settled based on the actual index value of what water costs. So it's not capable of being driven by silly speculation at all.
...isn't that one of the problems with housing? It already allows for speculation, and in addition to that, it's heavily biased towards people speculating in one direction: up. People can be leveraged up to 20x (aka. 5% down payment), whereas for stocks it's limited to 2x[1]. There's also no meaningful way to short housing prices. You can't short-sell a house, and there aren't derivatives for housing (futures/options). The latter would also help increase supply because speculators can speculate on housing without tying up the underlying asset (ie. stories of speculators buying houses and leaving them vacant because they don't want to deal with the hassle/risk of tenants).
[1] https://www.sec.gov/reportspubs/investor-publications/invest...
(Spoiler: there are no bubbles as they are commonly understood.)
Why are you so sceptical it won't do those things for water when it's done those things for other commodities? Ask a large scale farmer how worse off they'd be if they couldn't hedge their harvest risks with futures.
Just stop pretending like you give a shit about anything other than money. I'm sick of being gaslit by people like you. Talk about prices. Play your money games. But please stop pretending like you actually know anything about the real world, just because you play with money all day.
One thing that people don't tend to realize is that speculation happens anyway, it's just not made in a public manner and through other types of contracts. In fact, if futures do reduce volatility then they reduce speculation, since it's volatility what drives speculation profits.
Water is not onions. You cannot just talk about onions and pretend like you've said anything substantial about water futures.
By the way, the reason the US has a prohibition for onion futures is that someone did actually corner the market for onions. Off course that would be very hard to reproduce nowadays.
When you're done with the ad hominems, try reading and understanding what people are saying.
Anyway, regarding this contract. What happens if a bunch of random people bet on water scarcity? Well, if there is no water scarcity they will simply lose all their money.
If there is water scarcity, however, this will be a clear signal of trouble ahead several weeks (or even months) before the scarcity becomes a real problem for real people.
Yes, these greedy speculators will earn a lot of money (from people hedging and from other speculators); but it will not be because of losses of ordinary people using water on a day-to-day basis.
Those people, if water scarcity sets in, will have to ask their supplier (the state I suppose? or are there private companies in CA?) why this is happening and solve the problem.