Comment Text:
I applaud the CME for recognizing arbitrary full carry levels have negatively affected cash market convergence. The current delivery premium charge dynamics have led to extended periods of non convergence for soybeans and sporadic non convergence for corn.
However, this development has taken several years for a change to be proposed and the proposed change is still more than 12 months before proposed implementation. I encourage a mechanism that not only allows this proposed change to occur (deliverable premium charges to increase to 8c/mo) but an additional mechanism that allows future changes to occur automatically when market conditions merit.
The Variable Storage Rate mechanism used for CME wheat contracts has greatly improved convergence between cash wheat values and wheat futures prices. A similar mechanism would benefit corn and soybean contracts. Arguments against the VSR largely center on complexity and frequently changing full carry levels. A hybrid process of annual adjustment (rather than each futures option month) would help mitigate the frequency of changing deliverable premium charge levels while still allowing automatic changes without a multi year process of implementing changes.
Thank you.
