CHICAGO, Aug. 5, 2016 /PRNewswire/ -- CME Group, the
world's leading and most diverse derivatives marketplace, today
announced it will take a number of actions designed to enhance Live
Cattle futures markets. These new measures are based on continued
collaboration with and feedback from the cattle industry as well as
the results from an independent study conducted by Informa
Economics.
"We greatly value our relationship with the cattle community and
are committed to helping producers and commercial firms manage
their price risk," said Tim
Andriesen, CME Group Managing Director of Agricultural
Products. "Since the start of the year, we have been working with
the NCBA and the broader industry to enhance our cattle futures
markets. While we are announcing these changes and will continue
our ongoing work with the industry, we have concerns about the lack
of transparency of cash cattle markets."
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 its Worthing, South Dakota
delivery location for the October contract only. The new discount
will be effective with the October
2017 contract, which will be listed for trading on
Monday, 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 full Informa 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
the October 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 the U.S. today with less than five percent in major
producing states like Texas and
Oklahoma. As a result, CME Group
will delay listing any additional contract months beyond
October 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 CME Group
to address cattle market performance visit
www.cmegroup.com/livestock updates.
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 Group (www.cmegroup.com) is where the world comes to manage
risk. CME Group exchanges offer the widest range of global
benchmark products across all major asset classes, including
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Around the world, CME Group brings buyers and sellers together
through its CME Globex® electronic trading platform and its
exchanges based in Chicago,
New York and London. CME
Group also operates one of the world's leading central counterparty
clearing providers through CME Clearing and CME Clearing Europe,
which offer clearing and settlement services across asset classes
for exchange-traded and over-the-counter derivatives. CME
Group's products and services ensure that businesses around the
world can effectively manage risk and achieve growth.
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CME-G
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SOURCE CME Group