CME Group Revamps Grain Daily Price Limits for More Flexibility

CME Group Inc. is overhauling the way it calculates daily price limits for grains and oilseed trading.

“The new methodology is a more flexible, transparent, and market based” mechanism, the exchange said in a report to clients that was posted on the website of the National Grain and Feed Association. “It would allow price limits to expand under high prices, but also allow price limits to retract when prices fall.”

The changes will take place starting May 1, and will mean lower limits for corn and wheat futures, while the maximum will climb for soybeans and for animal feed and cooking oil made from the oilseed, the CME said in a statement today. The next “reset” day for the limits, which will change twice a year, will be the first trading day in November, the exchange said.

“We are supportive of the change,” Todd Kemp, vice president and treasurer for the Washington-based National Grain and Feed Association, said in an e-mailed response to questions. “Intuitively and quantitatively, it makes sense to have price limits better correlated with underlying commodity values.”

The changes were approved by the U.S. Commodity Trading Commission on April 18, the exchange said. CME will eliminate price limits for grain and oilseed options.

The variable limits will be determined by a calculation using settlement prices for July futures in the 45 trading sessions through April 16, and the November “reset” will be determined in a similar manner against post-harvest delivery futures, the exchange said.

The limit for corn futures will fall to 35 cents a bushel on May 1 from 40 cents currently, CME said. The limit for soybeans will expand to $1 a bushel from 70 cents.

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