CME Group Announces New Steps to Enhance Live Cattle Futures Markets
"We greatly value our relationship with the cattle community and are committed to helping producers and commercial firms manage their price risk," said
The actions to be taken are as follows:
- Seasonal Discount at
Worthing, SD delivery location - Based on extensive customer feedback, internal review and Informa's independent research,CME Group will add a seasonal discount of$1.50 per hundredweight on live cattle tendered to itsWorthing, South Dakota delivery location for the October contract only. The new discount will be effective with theOctober 2017 contract, which will be listed for trading onMonday, August 22, 2016 , pending CFTC review. The extensive research supporting this decision concluded that this discount would better align delivery values with cash market prices and maintain compliance with CFTC's policy on location price differentials, while resulting in little or no impact on local cash cattle prices. The fullInforma Economics report, Regional Cattle Price Differences and Their Impact on CME Live Cattle Delivery Points, is available at www.cmegroup.com/livestockupdates. - Revised grading and quality specifications - Based on industry feedback and increasing quality grades seen in all major fed cattle regions,
CME Group will update par quality grades for both live and carcass-graded deliveries to 60 percent choice and 40 percent select, from 55 percent and 45 percent respectively. Pending regulatory reviews, these changes will be effective with theOctober 2017 contract month. - Delayed listing of additional contracts -
CME Group applauds the efforts of the industry to create additional market transparency, particularly through efforts like the recently introduced cash cattle auctions. Transparent, negotiated or auction-based cash markets are a prerequisite for effective futures markets, particularly those with physical delivery. However, only approximately 20 percent of cattle sales are negotiated in cash markets across theU.S. today with less than five percent in major producing states likeTexas andOklahoma . As a result,CME Group will delay listing any additional contract months beyondOctober 2017 as we continue working with the industry to evaluate ways to improve cash market transparency, review cash market developments and consider the introduction of cash-settled products if transparency does not improve.
For more information on these and other steps taken by
Live Cattle futures contracts are listed with and subject to the rules and regulations of CME.
As the world's leading and most diverse derivatives marketplace,
CME-G
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