Corn daily limits expanded

August 17, 2011 07:00 PM


After an extended review period, the CBOT proposal to increase daily price limits in CBOT corn futures, corn options, and mini-sized corn futures to $0.40 per bushel, expandable one-time to $0.60, has been approved by the Commodity Futures Trading Commission (CFTC) and is scheduled for implementation for trade date Monday, August 22, 2011.

Corn prices have risen significantly in 2011 due to supply concerns and growing world demand. Daily price limits in Corn futures and options have been fixed during this period, resulting in Corn price limits as a percentage of underlying prices falling to near historic lows during much of 2011. This, in turn, has resulted in a significant increase in the number of Corn futures contracts that have settled at or beyond the initial daily price limit – 70 contracts so far in 2011 compared to 36 contracts in all of 2010.

In order to reduce the number of contracts that cannot trade because they have reached their daily price limit, the CBOT initially proposed increasing the corn daily price limit to $0.50 per bushel expandable to $0.75 and then to $1.10 on April 26. The Exchange amended the proposal to increase the daily price limit to $0.40 per bushel expandable one-time to $0.60 on May 10. On June 16, the exchange extended the approval period for an additional 45 days in order to hold an industry meeting and solicit additional market feedback. The CFTC review period ended on Aug. 8, and the proposal to increase the daily price limit to $0.40 per bushel, expandable to $0.60 has been approved by the CFTC. In order to give all market participants sufficient time to plan for the price limit increase, implementation is scheduled for trade date Aug. 22.

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