(Adds comments from CME, broker)
By Tom Polansek
CHICAGO, April 22 CME Group Inc, the
world's largest futures market operator, said on Tuesday it will
overhaul the system for setting daily price limits for U.S.
grain and oilseed futures to reflect fluctuations in crop
Starting on May 1, CME, owner of the Chicago Board of Trade
and other exchanges, will apply limits to markets including
corn, soybeans and wheat that reset twice a year based on
underlying price levels, according to a notice from the exchange
CME said it also will remove price limits for all grain and
oilseed options. Both changes were approved by the U.S.
Commodity Futures Trading Commission, according to the notice.
The revised system for futures limits offers traders more
flexibility and transparency by allowing price limits to expand
under higher prices or retract when prices fall, CME spokesman
Chris Grams said.
The limits will be reset on the first trading day in May
and the first trading day in November.
On May 1, the initial daily limit for corn will drop to 35
cents a bushel from 40 cents. The initial daily limit will rise
to $1.00 from 70 cents for soybeans and drop to 45 cents a
bushel from 60 cents for CBOT wheat, the notice said.
To determine the adjusted limits, CME collected daily
settlement prices for July futures contracts over 45 consecutive
trading days before April 16. Average prices for each contract
were calculated based on the collected settlement prices and
then multiplied by seven percent. The November limit will be
determined in a similar fashion.
The markets currently have daily price limits that remain
unchanged throughout the year. CME had sought feedback from
market participants on the changes.
The new system could hurt participation in the markets by
exposing traders to greater risks when crop prices are high and
by sedating low-priced markets where risk is already muted, said
Terry Linn, broker for the Linn Group.
"It seems counterintuitive," he said about the variable
limits. "I personally just wish they would set it and leave it."
(Reporting by Tom Polansek; Editing by Meredith Mazzilli and W