CME Group weighs overhaul for daily grain price limits

Fri Jan 24, 2014 1:37pm EST

By Tom Polansek
    CHICAGO, Jan 24 (Reuters) - CME Group Inc is
considering a proposal to reset daily price limits for U.S.
grain and oilseed futures every six months based on underlying
price levels in agricultural markets, documents distributed by
the exchange operator show.
    The proposal would allow higher price limits when market
prices are high and lower price limits when market prices are
low, according to a CME fact sheet sent to market participants
and obtained by Reuters. Limits would always be approximately
six percent of the underlying nearby contract price.
    CME is collecting feedback on the proposal and hopes to
complete any necessary submissions to regulators at the U.S.
Commodity Futures Trading Commission by the end of February, a
spokeswoman said.
    The exchange operator, which owns the Chicago Board of
Trade, currently has initial daily price limits for grains and
oilseeds that remain unchanged throughout the year.     
    Under the proposal being considered, the first reset date
for price limits would be the first trading day in May. The
newly calculated limits would remain in effect until the last
trading day in October.
    The limits would be based on daily settlement prices
collected for the July expirations for each of the CBOT grain
and oilseed futures products over 45 consecutive trading days
before and on the business day prior to April 16, according to
the fact sheet.
    Average prices for each contract would be calculated based
on the collected settlement prices and then multiplied by six
percent. The resulting numbers would be rounded off for each
contract.
    If a market settles up or down by the new limit during the
six-month period, the limit would be expanded by 50 percent the
next trading day, and remain at the expanded limit until no
listed contracts settle at the expanded limit, according to the
fact sheet.
    The second reset date would be the first trading day in
November. New limits would be calculated in a similar manner to
the May reset.
    Markets that would be impacted by the change include corn,
soybeans, soft red winter wheat, hard red winter wheat, soybean
oil, soybean meal, oats and rough rice futures.