CME to change how it determines settlement price

Futures prices for live cattle, feeder cattle and lean hog impacted by change.

Pending all relevant Commodity Futures Trading Commission regulatory review periods, the Chicago Mercantile Exchange (CME) will modify the manner in which settlement prices are determined in CME live cattle futures, CME feeder cattle futures and CME lean hog futures in an effort to incorporate all relevant bid, offer and trade prices in the calculation of the daily settlement price.

Effective on the Dec. 15, 2014, trading date, daily settlement prices in those products will be determined pursuant to the following methodology: a volume-weighted average price (VWAP) of the outright trades executed in the pit as well as on CME Globex for each contract month from 12:59:30 to 13:00:00 Central time will be calculated, and the two VWAPs will be combined to produce a single VWAP settlement price for each contract month, which will then be rounded to the nearest tradable tick.

In the absence of any trade activity in a given contract month, the bid that is higher than the last sale or prior day's settlement price or the offer that is lower than the last sale or prior day's settlement price in either trading venue from 12:59:30 to 13:00:00 (CT) will determine the daily settlement price for that contract month. In the absence of any trade activity or bid/ask in a given contract month during the current trading day, the daily settlement price will be determined by applying the net change from the preceding contract month to the given contract month's prior daily settlement price.

Notwithstanding the foregoing, in the event that the aforementioned calculations cannot be made or if CME Group staff determines that anomalous activity yields a result that is not representative of the fair value of the contract, CME Group staff may determine an alternative settlement price based on other available market information.

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