CME Group to set variable price limits for CBOT grains

Chicago | Reuters — CME Group, the parent of the Chicago Board of Trade, said on Wednesday it planned to set variable price limits on CBOT grain and oilseeds futures on May 1, pending approval by the U.S. futures regulator.

The exchange said it also planned to eliminate price limits on CBOT grain and oilseeds options beginning May 1.

The changes, which must be approved by the Commodity Futures Trading Commission, would affect CBOT corn, soybeans, soft red wheat, hard red wheat, soyoil, soymeal, oats and rough rice.

Currently, the exchange applies fixed daily price limits on all CBOT grain and oilseed futures and options.

“The new variable price limit mechanism will allow higher limits when prices are high and lower limits when prices are low,” CME said in a statement.

CME said the mechanism would reset price limits in each of the CBOT grain and oilseed futures contracts every six months, based on average prices for each contract in a given period.

The limits will be reset on the first trading days of May and November. To calculate the new limits for May, the exchange will take an average settlement price of the July futures contracts for each product over a roughly nine-week period ending on April 16.

CME will multiply the average by seven per cent and round the result to the nearest five-cent per bushel increment for corn, soybeans, wheat and oats, the nearest five cents per hundredweight for rice, the nearest $5 per ton for soymeal and the nearest 0.5 cent per pound for soyoil (all figures US$).

The exchange will repeat the process for November, using an average of the December contracts for corn, wheat, oats, soymeal and soyoil, and the November contracts for soybeans and rough rice. The nine-week calculation period will end on Oct. 16.

CME said it would establish minimum price limits at 20 cents per bushel for corn, 30 cents for wheat, 50 cents for soybeans, $20 per short ton for soymeal, two cents per pound for soyoil, 20 cents a bushel for oats and 50 cents per hundredweight for rough rice.

“The price limits implemented each May and November will be the higher of the 7 percent calculated values and these specified minimum limits,” the exchange said.

CME will continue its practice of widening the daily limits in the session following a limit move.

“If a settlement occurs at the established initial price limit, the limit will be expanded by 50 percent the next trading day… and remain at the expanded limit until no listed contracts settle at the expanded limit,” the exchange said.

For options, CME said the elimination of price limits would apply to all grain and oilseeds options, including standard, serial, weekly, short-dated new crop, calendar spread, and inter-commodity spread options.

— Reporting for Reuters by Julie Ingwersen in Chicago.

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