CME delays start of new ag swaps
(Updated 4:18 p.m.)
(Reuters) — The CME Group Inc said on Friday it would delay the launch of eight new grain and oilseeds swaps following a request by the U.S. futures markets regulator.
The swaps were set to be launched on Feb. 13.
A CME spokesman said the exchange learned the U.S. Commodity Futures Trading Commission (CFTC) was going to delay approval of the swaps, which were announced on Jan. 23.
The swaps were to be the first introduced following a new CFTC regulation allowing certification of agricultural swap products beginning in January 2012.
"Based on CFTC staff's interpretation of new rules, they have asked the exchange to withdraw its submission," CME spokesman Chris Grams said. "At this stage we're working closely with CFTC staff to understand their request and determine a new launch date for these products," Grams said.
The new products were to include calendar swaps on soymeal, soyoil and the soybean "board crush," and bullet swaps on corn, wheat, soybeans, soymeal and soyoil.
Bullet swaps are deals that reference the futures price but are marked to the futures price every day all the way to the swap's expiration.
Swaps are private, over-the-counter agreements between traders to exchange financial obligations. They are widely used in the currency and interest rate markets to supplement risk management positions taken by banks and other traders in futures and options contracts listed and cleared on exchanges like the CME.
Agricultural swaps are a much smaller market. CME listed its first clearing arrangements for the private deals in April 2009 to provide its customers with more flexibility to manage risk.
The clearing arrangement means that the biggest risk in the private deals - that the counter-party won't make good on the deal - is handled by the CME, which marks the deals to market and enforces compliance.
