CME Extends Review Period For Increased Corn Trading Limit
June 20 2011 - 12:28PM
Dow Jones News
CME Group Inc. (CME) wants more time to convince food companies
and farmers the daily trading limit for U.S. corn futures should be
increased.
The exchange is seeking to raise the daily limit for corn
futures at the Chicago Board of Trade to 40 cents from 30 cents. It
needs approval from the U.S. Commodity Futures Trading Commission
and asked regulators to extend a review period for the proposal by
45 days from Friday's deadline. The CFTC said Monday it had
approved the request.
"During the extended review period, which will begin on June 24
and continue through August 8, CME Group plans to hold an industry
meeting to explain the rationale for the proposal and its
relationship to volatility and the procedure used by CME Clearing
to set margin levels for corn and other grains," a notice from the
exchange said.
CME has already run into opposition to its proposal from
farmers, grain elevators and food companies. They have complained
that a larger limit would increase volatility in the corn market
and expose hedgers to bigger margin calls if prices surge.
CME has already adjusted its proposal once in response to
objections. It originally proposed to increase the daily limit to
50 cents.
The exchange last widened the limit for corn in March 2008 with
an increase to 30 cents from 20 cents. Corn futures at the time
were trading around $5.50 a bushel and ended up climbing to a
record high of $7.65 a bushel in June of that year. That record
fell this year, with the market reaching a new, all-time high of
$7.99 3/4 a bushel earlier this month. The nearby contract traded
Monday around $7.00 a bushel.
-By Tom Polansek, Dow Jones Newswires; 312-341-5780;
tom.polansek@dowjones.com
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