Comment Text:
Innovative Livestock Services objects to the Feeder Cattle Limit being set at 1.25 times the Live Cattle Limit. The appropriate ratio is between 1.7 and 1.9 times the Live Cattle Limit as determined by the relative weights of the underlying commodities and as explained in greater detail in our comments for Industry Filing IF 20-002 on June 8th of this year. While the current ratio of 1.5 is imperfect, it is much preferred over this proposal.
While the larger nominal limits will reduce the frequency of limit moves, we fear the consequences of constraining the Feeder Cattle Contract’s ability to respond to Live Cattle price changes during major events which cause extreme moves over several days. Two such events have occurred in the past year. In scenarios like these, an unnecessarily low Feeder Cattle to Live Cattle limit ratio is likely to prevent users of the Feeder Cattle Contract from conducting business and cause inaccurate market signals to be reflected to the public at a time where this information may be most important.
