Livestock Market Enhancements

CME Group is taking a number of steps designed to further enhance its livestock markets.

Latest Updates

August 2020: Amendments to the Daily Price Limits Rule of the Live Cattle and Feeder Cattle Futures Contracts

Pending Commodity Futures Trading Commission (“CFTC” or “Commission”) approval, Chicago Mercantile Exchange, Inc. (“CME” or “Exchange”) will amend the Live Cattle and Feeder Cattle Futures contracts (the “Contracts”) effective on trade date Monday, October 5, 2020 as more specifically summarized below. Summary of the Rule Amendments:

  1. Amend Rules 10102.D. and 10202.D. (“Daily Price Limits”) to adjust the current, initial daily price limit for Live Cattle futures from $0.03 to $0.040 per pound and for Feeder Cattle futures from $0.045 to $0.05 per pound. Maintain the existing practice of establishing expanded price limit levels at 150 percent of initial price limit levels, which will result in an increase in the expanded price limit for Live Cattle from $0.045 to $0.06 per pound and an increase in the expanded price limit for Feeder Cattle from $0.0675 to $0.075 per pound;
  2. Amend Rules 10102.D. and 10202.D. to replace the current fixed daily price limit regimes (consisting of a fixed price limit and expansion mechanism) with a variable price limit regime that will be price-based and reset annually. It will set the price limit levels for the Feeder Cattle futures contract at a ratio of 1.25 times the Live Cattle futures contract price limit levels. Lastly, it will establish a minimum initial price limit level of $0.04 per pound for Live Cattle futures and $0.05 per pound for Feeder Cattle futures. The mechanism herein is similar to the variable price limit mechanism that has been previously approved by the Commission and implemented by CME in April of 2020 for Lean Hog futures (see CME Submission No. 20-112);
  3. Amend Rules 10102.D. and 10202.D. to clarify the reversion back to initial daily price limits once they are expanded. Currently, the rulebook language states that expanded limits revert back to initial limit levels on the following business day when none of the front four (4) contracts in Live and Feeder Cattle settle at the expanded limit. Pursuant to the amendments to the Rule, daily price limits will remain at expanded levels until all the front four contracts in Live and Feeder Cattle settle below their respective initial levels;
  4. Make permanent the daily price limit expansion triggering mechanisms on the last trade of an expiring contract which were previously implemented on a temporary basis in June of 2020 (see CME Submission No. 20-212SSS); and
  5. Correction of a typographical error to the existing rulebook language in Rules 10102.D. and 10202.D. regarding the existing reversion to initial limits once they are expanded (replacing the word “or” with the word “and”) (collectively, the “Rule Amendments”).

Resources

SER-8642

May 2020: Reduction of the Pre-Open Time Period for all Livestock Futures and Options Contracts

Effective Sunday, May 31, 2020 for trade date Monday, June 1, 2020, and pending all relevant regulatory CFTC review periods, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will reduce the pre-open time period in connection with trading on the CME Globex electronic trading platform for all livestock futures and options contracts from 6:00 a.m. – 8:30 a.m. Central Time (CT) to 8:00 a.m. – 8:30 a.m. CT.

Resources

SER-8599


May 2020: Amendments to Daily Price Limit Rule of All Livestock Futures Contracts

Pending Commodity Futures Trading Commission (“CFTC” or “Commission”) approval, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will amend the Daily Price Limit Rule of all Livestock and Dairy contracts in the following table (the “Contracts”) as more specifically summarized further below (collectively, the “Rule Amendments”). The Exchange has requested the Commission’s expedited approval of the Rule Amendments.  Pending CFTC approval, the Exchange may implement the Rule Amendments effective on Sunday, June 21, 2020 for trade date Monday, June 22, 2020.

Summary of the Rule Amendments:

CME Livestock:

  • Link Live Cattle and Feeder Cattle futures regarding when the daily limits are expanded and when they revert so that both contracts are always at initial price limits together or at expanded price limits together.
  • Amend the methodology that triggers the expanded/reverted daily price limits from being based on the settlement from the front two (2) contract months in Live Cattle and Feeder Cattle futures to the front four (4) contract months of Live Cattle and Feeder Cattle futures.
  • Include a price limit floor of $3.00/cwt in Lean Hog futures.
  • Add a mechanism that allows for the triggering of an additional expanded daily price limit in the expiring contract for Live Cattle and Feeder Cattle futures for the last trade date.

Resources

SER-8600R


April 2020: Amendments to the Lean Hogs Futures Contract

Pending Commodity Futures Trading Commission (“CFTC” or “Commission”) approval, Chicago Mercantile Exchange, Inc. (“CME” or “Exchange”) will amend the Lean Hog Futures contract (the “Contract”) as more specifically summarized below.

Specifically, the Exchange is requesting approval to:

  1. Amend Rule 15202.D. (“Daily Price Limits”) of the Contract to replace the current fixed daily price limit regime (consisting of a fixed price limit and expansion mechanism) with a variable price limit regime which will be price-based and reset annually. The mechanism herein is similar to the variable price limit mechanism, which has been previously approved by the Commission and implemented by The Board of Trade of the City of Chicago, Inc. (“CBOT”) in 2014 on grain and oilseed futures (see SER 7075 dated April 22, 2014);
  2. Amend Rule 15202.D. to adjust the current daily price limits of the Contract to $3.75/cwt., expandable to $5.50/cwt. from $3.00/$4.50 initial and expanded limit based on the price-based methodology and observation from 2019;
  3. Amend Rule 15202.D. regarding the triggering of expanded daily limits and the reversion back to initial limits. Currently, expanded limits are triggered if any of the front three (3) contract months settle at the initial daily limit. Pursuant to the amendments to the Rule, an expansion will be triggered should any of the front eight (8) contract months settle at limit. (Note: according the listing schedule of the Contract, the front eight (8) contract months of the Contract encompass one (1) calendar year); and
  4. Amend Rule 15202.D. regarding the reversion back to the initial daily price limit from the expanded limit. Currently, daily price limits revert from the expanded limit back to the initial limit on the following business day when none of the front three (3) contracts settle at the expanded limit. Pursuant to the amendments to the Rule, daily price limits will remain expanded until all of the front eight (8) contract months settle below the initial level (collectively, the “Rule Amendments”).

Pending CFTC approval, the Exchange intends to implement the Rule Amendments effective on Sunday, April 12, 2020 for trade date Monday, April 13, 2020.

Resources

SER-8540


January 2020: Amendment to the Spot Month Position Limits for Live Cattle Futures Contract

Pending Commodity Futures Trading Commission (“CFTC” or “Commission”) approval, the Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) will increase the initial spot month speculative position limit from 450 contracts to 600 for Live Cattle Futures (Rule Chapter 101, Commodity Code 48) effective on trade date Monday, March 2, 2020 and commencing with the April 2020 contract month and beyond. The second and third spot month limits of 300 and 200 contracts remain unchanged.

Resources

MSN01-07-20


Second Industry Survey Regarding Amendments to the Choice/Select Percentage of the CME Live Cattle Futures Contract - PART II

Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) is soliciting additional feedback from market participants regarding potential amendments to the Live Cattle Futures contract (CME Rulebook Chapter 101; CME Globex Code: LE; Clearing Code: 48) (the “Contract”).

The deadline for the Exchange to receive such feedback is Friday, March 22, 2019.

Resources

SER 8341


September 2018: Industry Survey Regarding Amendments to Choice/Select Quality of CME Live Cattle Futures Contract

Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) is soliciting feedback from market participants regarding potential amendments to the Live Cattle Futures contract (CME Rulebook Chapter 101; CME Globex Code:  LE; Clearing Code:  48) (the “Contract”). Specifically, the Exchange is in the process of determining the potential benefits of implementing a mechanism to periodically update the Choice/Select quality percentage for the par value of the Contract using a public report published by the United States Department of Agriculture (“USDA”).

The deadline for the Exchange to receive such feedback is Friday, October 12, 2018.

Resources

SER 8243


May 2018: Amendments to the Feeder Cattle Futures and Options Contracts - Inclusion of Commented Cattle in the CME Feeder Cattle Index and Temporary Listing Delay of the May 2019 Feeder Cattle Futures and Options Contract

Effective Friday, May 25, 2018, and pending all relevant CFTC regulatory review periods, Chicago Mercantile Exchange Inc. ("CME" or "Exchange") will amend the Rule 10203.A.1. ("The Sample") of the Feeder Cattle Futures contract (CME Rulebook Chapter 102; CME Globex Code GF; Clearing Code: 62) to include commented cattle in the calculation of the Feeder Cattle Index ("Index") price. Rule 10203.A.1. shall no longer exclude cattle identified on USDA-AMS reports as being fancy, thin, fleshy, gaunt or full. CME Rule 10203.A.1 is provided below in blackline format. Amendments to Rule 10203.A.1. shall be effective with the May 2019 contract and all subsequent contract months.

Resources

SER-8154


March 2018: Industry Survey Regarding Amendments to the Calculation of the CME Feeder Cattle Index and the Feeder Cattle Futures Contract

Chicago Mercantile Exchange Inc. ("CME" or "Exchange") is soliciting feedback from market participants regarding amendments to the calculation of the CME Feeder Cattle Index® (the "Index") in connection with the Feeder Cattle Futures contract (Rulebook Chapter 102; CME Globex Code: GF/Clearing Code: 62) (the "Contract"). The deadline for the Exchange to receive such feedback is Monday, April 9, 2018. Specifically, the Exchange is in the process of determining the potential benefits of including fancy, thin, fleshy, gaunt, or fill feeder cattle from the sample of transactions used to calculate the Index.

Resources

Feeder Cattle Index Survey


March 2018: Live Cattle Futures - Interactive Delivery Map

View the location and contact information for all CME-approved Live Cattle stockyards and slaughter plants.

Resources

Livestock Delivery Map


January 2018: U.S. Government Shutdown Livestock and Dairy Futures and Options Contingency Plans

In the event of a U.S. federal government shutdown in January 2018 and in an effort to ensure orderly markets, Chicago Mercantile Exchange Inc. (“CME” or “Exchange”) is advising market participants of its contingency plans in connection with a number of livestock and dairy products.

Resources

SER-8081


November 2017: Live Cattle Delivery Manual

General outline of the procedures for delivery of live cattle against the Live Cattle futures contract at CME.

Resources

Live Cattle Delivery Manual


August 2017: Amendment to the Single Month Position Limits for Lean Hog Futures and Option Contracts

Pending Commodity Futures Trading Commission ("CFTC" or "Commission") approval, the Chicago Mercantile Exchange Inc. ("CME" or "Exchange") will implement an increase in the single month speculative position limit from 4,575 contracts to 6,000 contracts for Lean Hog Futures and Options on Lean Hog Futures (Rule Chapters 152 and 152A, Commodity Code LN) effective on trade date Monday, October 16, 2017 and commencing with the December 2017 contract month and beyond. The spot month limit of 950 contracts remains unchanged.

Resources

SER-7987 (Amended August 29, 2017)


August 2017: Livestock Daily Price Limits Survey

CME Group is soliciting feedback from a wide range of market participants on the potential for changing price limits in CME Live Cattle, Feeder Cattle, and Lean Hog futures. If you wish to voice your opinion on this topic, please complete the following survey no later than Friday, August 25, 2017.

Resources

CME Livestock Daily Price Limits Survey


June 2017: Amendments to Live Cattle Futures and Options Contract Specifications

Based on its May request for industry feedback, CME Group notified customers of plans to amend Live Cattle futures and options contract specifications.

Resources

SER-7915RR (Amended September 5, 2017) – amends live-graded delivery and times associated with tender, demand, retender and assignment of Certificates of Delivery.

SER-7937R – resumes regular contract listing schedule, amends quality and grade specifications for Live Cattle, and clarifies penalty for failure to pre-sort cattle for live-graded delivery.


May 2017: Planned Changes to Live Cattle Futures Contract Specifications

Based on discussions with market participants and the USDA, CME Group recent requested industry feedback regarding plans to implement possible changes to Live Cattle futures that expand delivery capacity, update the choice/select spread, revise the penalty structure, and return to a normal contract listing cycle. Click below for more information and to comment.

Resources

Planned Changes to Live Cattle Futures Contract Specifications


September 2016: Listing of December 2017 CME Live Cattle Contracts

Based on feedback from customers, CME Group will list the December 2017 Live Cattle futures and options contract months effective Monday, October 3, pending all relevant regulatory periods.

Resources

Customer Letter, Sept. 20, 2016

SER 7747


August 2016: New Steps to Enhance Cattle Futures Markets

Based on continued collaboration with the cattle industry and results from an independent study conducted by Informa Economics, CME Group recently announced it will take additional actions to enhance Live Cattle futures markets and address cattle market performance.

Resources

News Release: CME Group Announces New Steps to Enhance Live Cattle Futures Markets

Informa Economics study

Customer Letter, Aug. 5, 2016

SER 7716

Seasonal Discount to Worthing, South Dakota Delivery Point

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.

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.  


February 2016: Reduction of CME Livestock Trading Hours

Based on customer requests, CME Livestock futures and options trading hours were reduced to align with the period of greatest liquidity in these markets. During 2015, roughly 87% of daily Livestock futures and options trades occurred during the proposed hours.

Effective Monday, 29 February, the proposed trading hours for Live Cattle, Feeder Cattle and Lean Hog futures and options were as follows:

  • CME Globex futures and options: 8:30 a.m. to 1:05 p.m. Central Time (CT) Monday to Friday
  • Open outcry options: 8:30 a.m. to 1:02 p.m. CT Monday to Friday

The daily settlement period and procedures for CME Livestock contracts remain unchanged.


February 2016: Formation of cattle market joint working group

CME Group formed a working group with the National Cattlemen’s Beef Association to discuss other possible enhancements to its cattle markets, including, but not limited to, circuit breakers and other measures to further heighten market quality.


Other Resources


Contact Us

Sarah Calhoun
Director, Agricultural Products
+1 312-338-2888

Jim Sullivan
Director, Commodity Research & Product Development
+1 312 930 2308