Market Matters Blog

The CME announced the CBOT is amending Rule 1X104.D. effective Sunday, Aug. 28, 2022, for trade date Monday, Aug. 29, 2022, and pending CFTC approval. That rule deals with daily price limits for CBOT wheat, mini-sized wheat, KC hard red winter (HRW) wheat and mini-sized KC HRW wheat futures contracts. According to the notice, the rule is being amended so that expanded price limits are triggered when one contract within the first five non-spot contract months settles at the initial price limit rather than two contract months within the first five non-spot contract months.

There will be no price limits on the current month contract on or after the second business day preceding the first day of the delivery month.

Contract expirations become the spot month on the second business day preceding the first day of the delivery month, which is also first position day.

Currently, the contracts are subject to two levels of price limits, initial price limits and expanded price limits. The initial price limits trigger to expanded price limits on the next business day when two of the first five non-spot contract months or the last contract month in the crop year settles at the initial price limit.

With CBOT amending rule 1X104.D, expanded price limits will be triggered when one contract within the first five non-spot contract months settles at the initial price limit rather than two contract months within the first five non-spot contract months. The allowance for the last contract month in the crop year to trigger expanded limits shall remain unchanged as that's an example when a contract month within the first five non-spot contract months was already able to trigger expanded price limits, according to the CME notice.

The notice also stated that, currently, when expanded price limits are triggered in the Chicago wheat futures and KC HRW wheat futures contracts, at least one contract month must settle at the expanded price limit for expanded price limits to remain in place on the next business day. CBOT is now amending the rule so that at least one contract month must settle at a price change equal to or greater than the initial price limit for expanded price limits to remain in effect on the next business day.

Confused yet? Here is an example offered in the CME notice:

"For example, if current initial price limits in wheat and KC HRW wheat futures are $0.70 per bushel and expanded price limits are $1.05 per bushel, pursuant to current rules when the $1.05 expanded price limit is effective, at least one wheat or KC HRW wheat futures contract month must settle at the $1.05 expanded price limit for expanded limits to remain in place on the next business day. Pursuant to the rule amendments, at least one wheat or KC HRW wheat futures contract month shall be needed to settle at a price change of $0.70 or more for expanded price limits to remain in place on the next business day."

To be clear, this announcement is not changing price limits, rather it is amending the rule dealing with daily price limits.

I have only mentioned No. 1 and No. 2 of the summary in the CME notice. Here is the rest of the notice from the CME, including contacts who you can reach out to if you have any questions. https://www.cmegroup.com/…

Mary Kennedy can be reached at Mary.Kennedy@dtn.com

Follow her on Twitter @MaryCKenn

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