- What product is being launched and when?
- What is the tick size for this new contract?
- What is the product code?
- What is the rulebook chapter?
- Is this contract physically or financially settled?
- How can I transfer my existing positions in the current contract to the new contract?
- What will happen to the existing Lumber contract?
- Are there price limits? How do they work?
- How can these contracts be traded?
- What are the hours for trading on CME ClearPort and on CME Globex?
- The futures contracts are available to trade as a block. How does it work?
- What are the requirements for block trades?
- Is crossing permitted?
- What are the position limits for Lumber futures?
- What is the listing cycle?
- Can I utilize Exchange for Physical (EFP) order types in this new lumber contract?
- What species of Lumber is deliverable?
- Who can I contact with more questions?
1. What product is being launched and when?
CME Group is launching Lumber futures and options on futures on the CME Designated Contract Market (DCM).
The Lumber futures contract is 27,500 board feet and physically deliverable to the Chicago Switching District.
The first trade date is August 8, 2022. September 2022 will be the first listed month available for trading and clearing.
2. What is the tick size for this new contract?
Futures: The tick size for futures will be $0.50 per mbf ($13.75 per contract).
Options: The tick size for options will be $0.10 per mbf ($2.75 per contract).
3. What is the product code?
The product code is LBR for futures and options.
4. What is the rulebook chapter?
Lumber futures are CME Rulebook chapter 63 and options on Lumber futures are CME Rulebook chapter 63A.
5. Is this contract physically or financially settled?
This contract is physically settled, deliverable to the Chicago Switching District. Deliveries must be made from a producing mill via rail in increments of four contracts.
6. How can I transfer my existing positions in the current contract to the new contract?
CME Group will list an inter commodity spread between the existing Random Length Lumber contract (LBS) and the new Lumber futures contract (LBR) to help facilitate the transition to the new contract.
The inter-commodity spread will utilize the AE spread type (Fixed Price Ratio inter-commodity spread), which allows you to simultaneously buy/sell the two lumber contracts in a notional equivalent.
If you buy 1 AE inter-commodity spread, you will be buying four new Lumber contracts (LBR) and selling one existing Random Length Lumber contract (LBS). This strategy will allow customers to roll their position into LBR on a notional equivalent to LBS.
While the spread will be priced as a 1x1 leg1(LBR) – leg2(LBS), the outcome in clearing will be four LBR vs. one LBS.
7. What will happen to the existing Lumber contract?
The existing Random Length Lumber contract (LBS) will be delisted following a defined sunsetting period and replaced by the new Lumber futures contract (LBR). Please see SER 9017 for more information.
8. Are there price limits? How do they work?
Yes, price limits will be adjusted daily and based on 10% up or down of the prior day’s settlement price for each contract month.
Circuit breakers will also be established at 5% and determined by looking at a percent move during a rolling 60-minute window. If the market moves 5% within that window, the market will pause for two minutes before trading is resumed.
9. How can these contracts be traded?
The contracts are available for trading on the CME Globex electronic trading platform and for submission for clearing via CME ClearPort.
10. What are the hours for trading on CME ClearPort and on CME Globex?
Trades may be entered on CME ClearPort starting Sunday 5:00 p.m. – Friday 5:45 p.m. CT with no reporting Monday – Thursday from 5:45 p.m. – 6:00 p.m. CT.
Trades may be entered on CME Globex Monday – Friday: 9:00 a.m. – 3:05 p.m. CT.
11. The futures contracts are available to trade as a block. How does it work?
Subject to certain requirements such as eligibility and minimum size, the futures and options contracts can be privately negotiated via brokers as a block trade and submitted into CME ClearPort for clearing.
12. What are the requirements for block trades?
There are minimum quantity and reporting time requirements. The minimum block size for futures is 20 lots and for options is 40 lots. Trades must be reported within 15 minutes of execution for futures and options.
Firms need to be classified as Eligible Contract Participants (ECP) to engage in block trades. The definition of ECP can be found in Section 1a(18) of the Commodity Exchange Act.
13. Is crossing permitted?
Yes, committed cross (C-Cross) and Globex cross (G-cross) are permitted futures crossing protocols for participants who engage in pre-execution communications pursuant to Rule 539. Pre-execution communications allow for size, price, and direction to be discussed prior to the entry of orders into CME Globex.
14. What are the position limits for Lumber futures?
Lumber spot month position limits are 2,000 contracts. The spot month is the first business day of the contract month.
Single month position limits and all month accountability levels are 4,000 contracts. The reportable level is 25 contracts.
15. What is the listing cycle?
The futures listing cycle will include expiries in January, March, May, July, September, and November, listed for seven months.
The options listing cycle will include five listed contracts in the January, March, May, July, September, and November cycle and one month of February, April, June, August, October, and December.
16. Can I utilize Exchange for Physical (EFP) order types in this new lumber contract?
Yes, you can EFP up to two business days prior to the 26th calendar day of the contract month.
17. What species of Lumber is deliverable?
The deliverable species for the Lumber futures contract include SPF (stamped SPF), Douglas Fir, Fir Larch, and Hem Fir.
18. Who can I contact with more questions?
Contact us with questions at Lumber@cmegroup.com.
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All examples in this report are hypothetical interpretations of situations and are used for explanation purposes only. The views in this report reflect solely those of the author and not necessarily those of CME Group or its affiliated institutions. This report and the information herein should not be considered investment advice or the results of actual market experience.