CME Group declares victory over cattle market volatility

CME Group Inc plans no further moves to reduce volatility in its cattle futures market, after making a series of changes to rein in wild price swings that drove away hedgers, a managing director said on Wednesday.

Over the past two years, the exchange operator, which owns the Chicago Mercantile Exchange and other markets, has cut trading hours, implemented new rules on order messaging and taken other steps to limit volatility in its cattle market.

Last year, U.S. cattle producers called on CME and federal legislators to reduce volatility after cattle futures prices fell sharply in 2015 from record levels in 2014. Ranchers said big price swings had rendered the market ineffective, and some cut back on hedging strategies used to manage the risk of owning livestock.

More recently, the percentage of hedgers in the market has increased, Andriesen said, without providing specific data.

However, some traders said price swings continue to make it difficult to enter or exit futures positions at times.

An online U.S. cattle auction, launched last year, has helped limit volatility by improving transparency in what meat packers pay for market-ready, or cash, cattle, traders said. Those transactions give direction to the futures market.

Source: Reuters (via Drovers)