Effective trade date Monday, August 3, 2009, implied Soybean Crush spreads will be listed on CME Globex.

Soybean Crush Spreads: What They Are and How They Are Used
Soybean Crush spreads allow traders to better manage risk using combined components of the Soybean, Soybean Oil and Soybean Meal futures markets in a single instrument. The board crush spread is often used by processors to hedge the margin between the purchase price of Soybean futures and the combined selling price of the Soybean Meal and Soybean Oil futures. It also offers opportunities for other traders, as the spread relationship between soybeans and the soybean by-products varies over time.

How Soybean Crush Spreads Are Traded
The crush spread is quoted as the difference between the combined sales value of soybean meal and soybean oil and the price of soybeans. Soybean futures are traded in cents per bushel, Soybean Meal futures in dollars per short ton, and Soybean Oil futures in cents per pound. As a result of these differences in units, conversion of meal and oil prices to cents per bushel is necessary to determine the relationship of the three commodities and potential trading opportunities. When trading the Soybean Crush, the trader buys or sells the equivalent of 50,000 bushels of the Soybean Crush, or 10 Soybean futures contracts, 11 Soybean Meal futures contracts, and 9 Soybean Oil futures contracts. This is the smallest ratio of contracts that accurately represents the equivalent yields of the three commodities.

Therefore, the new implied Soybean Crush spread on CME Globex will be a fixed 3-legged spread consisting of:

• Leg 1: Soybean Meal futures – 11 contracts
• Leg 2: Soybean Oil futures – 9 contracts
• Leg 3: Soybean futures – 10 contracts

The Soybean Crush price will be calculated using the respective different fixed quantities as follows:

Soybean Crush = Leg 1 (Soybean Meal Price x 0.022) + Leg 2 (Soybean Oil Price x 11) - Leg 3 (Soybean Futures Price)

The spread price will be anchored by leg 1, Soybean Meal futures, based on current market conditions.

How the Implied Functionality Works
Outright orders in the Soybean, Soybean Meal and Soybean Oil futures will be used to create implied Soybean Crush orders. However, trades will only be matched in the specified fixed ratio of contracts. Implied bids are always rounded down to the nearest tick and implied offers are always rounded up to the nearest tick.

Explicit Soybean Crush spread orders entered into CME Globex, will be calculated as implied orders into the Soybean, Soybean Meal and Soybean Oil futures markets. These implied bids and offers become eligible quotes but they are not publicly disseminated.

The Soybean Crush will feature the Modified K algorithm, the same as all CME Group Commodity products.

November Soybeans are shared by October and December crush spreads

New strategy type: SI
Product Code: SOM
Crush Tick: ¼ of a cent

For more information, please contact: