Market News & Headlines >> CME Seeks to Lower Hog Market Volatility
After this year’s extreme price moves, the CME Group is looking to make changes to its lean hog contract with the intention of reducing market volatility. Three changes are proposed:
- Move the expiration date from mid-month to the last business day of the month, matching live cattle expiration and more easily allowing spread trades.
- Add contracts in the four months not currently traded.
- Lengthen the lean hog index expiration date from two business days to 10 to allow more cash prices to be averaged.
Some traders have concerns that adding the four months might reduce volume in some existing months. Another criticism is that if these changes do, indeed, reduce volatility, it could make the hog market less attractive to speculators and reduce volume in general. Of course, since margin requirements are based on volatility, it would lower those cash needs and perhaps allow some smaller players to participate.