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Agricultural News

CME Group Chairman Terry Duffy Offers to NCBA Measure Designed to Dampen Live Cattle Futures Market Volatility

Mon, 01 Feb 2016 09:21:17 CST

CME Group Chairman Terry Duffy Offers to NCBA Measure Designed to Dampen Live Cattle Futures Market Volatility

It was November 1964 when the Chicago Mercantile Exchange commenced the trading of Live Cattle futures. There have been many times over the years when the cattle industry has been upset over the pricing of their cattle on the futures market- and after the market crash of cattle prices this past fall, cattlemen once again wondered if the cattle futures were doing more harm than good. This past Friday, Terry Duffy, Chairman of the CME Group, met face to face with cattlemen and responding to criticism over price volatility in the cattle futures market and announced measures to help curb price swings while denying that high-frequency traders are to blame.

Cattle futures will be added to an existing CME system that caps how many order updates traders can send in relation to the number of trades they actually execute. The change starts Monday, February first, according to Chairman Duffy speaking at the NCBA Cattle Marketing and International Trade Committee Meeting held by the National Cattlemen’s Beef Association in San Diego during the Cattle Industry Convention. The Chicago exchange, the world’s largest futures market, is also examining five-to-six-second trading delays that would act as circuit-breakers.

In his Committee presentation, Duffy told cattlemen that he thinks that the trading hours for Cattle Futures are too long and pledges to look at shortening cattle futures trading sessions. He also expressed concerned about the continuing loss of cash trade in the industry, which is what the futures market is based upon. That loss of a benchmark is something that the futures market cannot address, according to the CME Chairman.

Along those lines, there was talk of ways to deal with the demise of the cash market that has been a negotiated private treaty transaction for many years. One idea that was discussed at the San Diego meeting was an online auction.

Jordan Levi, managing partner for Arcadia Asset Management in Oklahoma City, reported that he organized a trial run of an online auction on January 18 to improve price transparency.

Representatives of the four major meat packers - JBS, Cargill Inc, Tyson Foods Inc and National Beef Packing Company- took part. Levi aims to host a live auction within 60 days.

Reuters reports that Arcadia organized the trial with Mike Thoren, chief executive officer of feedyard JBS Five Rivers.

Earlier in January, the NCBA sent a letter to Chairman Duffy outlining their concerns about high frequency trading. Click here to read the letter sent by NCBA. Today’s Beef Buzz looks at this issue that was at the heart of the standing room only Committee Session last Friday afternoon.

The Beef Buzz is a regular feature heard on radio stations around the region on the Radio Oklahoma Network- but is also a regular audio feature found on this website as well. Click on the LISTEN BAR below for today's show- and check out our archives for older Beef Buzz shows covering the gamut of the beef cattle industry today.


Ron Hays Beef Buzzes on the Live Cattle Marketing Committee Meeting in San Diego.
right-click to download mp3


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