The Chicago Mercantile Exchange, operator of the Chicago Board of Trade, said this week that beginning May 1 it intends to make the daily price limits the same for Chicago soft red winter wheat and Kansas City hard red winter.
The change was done to avoid potential disruption, which could develop in inter-commodity spread trade. Last year, the CME began using initial price limits that are reset every six months based on market fluctuations. Starting May 1, when the initial limits are reset for the two markets, the higher limit will apply to both wheat markets.
Currently, the daily limit is 35 cents for soft red winter wheat and 40 for hard red winter.
In addition, if expanded limits are triggered in one of those wheat markets, the exchange would expand the daily trading limit the same amount in both markets for the next trading day. If neither wheat contract settles at the expanded limit that next day, then the wheat markets will revert back to their initial limits the following trading day.
The changes are pending CFTC approval.