CME Group has several measures in place to ensure that our markets continue to work in an efficient and orderly manner during volatile market conditions. By establishing price fluctuation limits specific to each product, the Exchange can help restrict a market from moving too far or too fast in a specific period of time.
Grain and Oilseed price limits determine how far a futures trading price can move away from the prior day’s settlement. A futures contract cannot trade at a price more than the initial price limit above or below the previous day’s settlement price. Price limits are in place for trading on CME Globex and for submission for clearing via CME ClearPort.
Twice a year, prior to the resetting of price limits, daily futures settlement prices for each product are collected and averaged over a 45-day period, as stipulated in each product’s rulebook chapter. The average of those prices is multiplied by a specific percentage to get the effective price limit for the next six months.
There are different percentages depending on the product. For example, Corn is multiplied by 7%. These percentages were established by looking at historical daily percentage price changes by product to capture, on average, daily price movements 99 percent of the time. Second, some contracts round their price limits, while others do not.
It is important to consult each product’s rulebook chapter, linked in the bi-annual SER, to understand the specific rules around each product’s price limits.
In the case of Grain and Oilseed futures, price limits are updated twice a year. Price limits for each product are reset for the first trade date in May and the first trade date in November.
The variable price mechanism was put in place to allow price limits to increase when futures prices are high and retract when futures prices fall. The variable price mechanism is flexible, transparent, and market based.
Generally, expanded limits for grain and oilseed contracts are triggered when any contract month within the first five to eight (depending on the contract) listed non-spot contracts settle at limit. Expanded price limits are approximately 50 percent higher than daily price limits and remain in place until no futures contracts settle at limit.
Triggering of expanded limits in one Soybean Complex (Soybean, Soybean Meal, and Soybean Oil) futures triggers expanded limits in the others; triggering of expanded limits in either Chicago Wheat futures or KC HRW Wheat futures triggers expanded limits in the other.
Spot month contracts are not subject to price limits. In Grain and Oilseed contracts, price limits are removed on the business day prior to first notice day of an expiring contract month.
Additionally, trade at settlement (TAS) can trade at limit prices plus or minus the TAS trading range.
Options contracts are not subject to price limits.
The Exchange displays daily price limits here. In addition, the Exchange publishes an SER twice per year with the new price limits – in April for new price limits that go into effect in May and in October for new price limits that go into effect in November. Please subscribe to the SER distribution if you would like to receive these notifications.
Final expiration of an option will always use the official settlement value of the future for auto exercise even if the settlement value is at limit and synthetic futures are trading at a different value. Contrary instructions can be used to exercise or abandon an auto exercised option.
As the world’s leading derivatives marketplace, CME Group is where the world comes to manage risk. Comprised of four exchanges - CME, CBOT, NYMEX and COMEX - we offer the widest range of global benchmark products across all major asset classes, helping businesses everywhere mitigate the myriad of risks they face in today's uncertain global economy.
Follow us for global economic and financial news.