Pending CFTC review, the Exchange plans to change the daily settlement procedures in CME U.S. Dollar Cash-Settled Crude Palm Oil futures (“Palm Oil Futures”) effective July 1, 2013. Specifically, daily settlement in Palm Oil Futures will be the settlement price for the corresponding Bursa Malaysia Crude Palm Oil (“BM CPO”) futures contract converted to U.S. dollars.
Final settlement in Palm Oil Futures is based on a five-day average of settlement prices from the second-forward BM CPO futures contract. However, daily settlement depends on whether there is trading activity during the settlement period in the Palm Oil Futures contract. If there is trade during the settlement period, daily settlement in Palm Oil Futures is the Volume Weighted Average Price (VWAP) during the settlement period. If there is no trade during the settlement period in Palm Oil Futures, then daily settlement is the midpoint of the bid / ask market. If there is no bid / ask market, then daily settlement is consistent with the procedures used in final settlement: daily settlement is the settlement price for the corresponding BM CPO futures contract converted to U.S. dollars. The BM CPO contract is the global benchmark for price discovery and price risk management in palm oil. Thus, this change in daily settlement procedures assures that all CME Palm Oil futures daily settlement prices reference their benchmark underlying BM CPO contracts.
Questions may be directed to Dave Bixby in the CME Global Command Center (312-456-2391 or David.Bixby@CMEGroup.com) or to Fred Seamon in Research and Product Development (312-634-1587 or Fred.Seamon@CMEGroup.com).