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Comment for Industry Filing IF 20-01

  • From: Thomas Warnock
    Thomas Warnock LLC

    Comment No: 62280
    Date: 1/21/2020

    Comment Text:

    To whom it may concern - First, thank you for what you do for the business of agriculture. I know myself and many others value the function of the CFTC in our marketplace. Increasing spot position limits is concerning to me. There are many ways to look at this and evaluate its legitimacy and the implications it may or may not have. As a commercial user of the CME livestock and grain products, it seems unnecessary to increase these limits. Liquidity in the spot as we near expiration will likely not increase as a result of this but volatility and extreme moves very well may. Those individuals that need larger position limits for a legitimate reason typically can qualify for increased position limits.The CME live cattle contract serves as a crucial risk management and price discovery tool for the cattle and beef industries. It is very important that contract facilitates sound risk mitigation and allows for reasonable basis estimation.Finally, in the letter the CME submitted to the CFTC it seemed as if there was little to no concern over this within our industry. I find that materially different that what I anecdotally pick up through casual conversation. I realize that the CME provided data suggesting daily grading capacity to support this increase. I would argue that until those grading capacities have been consistently tested through delivery against CME futures, then this is a slightly misleading comparison. So, for these reasons and more I would personally not be in favor of increasing position limits at this time. I do however understand the contract should be monitored and tweaked to positively and accurately reflect standard operating procedures within the industry.

    Best Regards

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