Comment Text:
I strongly urge the commission to make an exemption to the proposed rule for MGEX Hard Red Spring Wheat futures.
It is critical to market integrity to maintain position limit parity between the three different contracts of wheat--Soft Red Winter and Hard Red Winter at the CME, and Hard Red Spring at the MGEX.
These are three different futures contracts but not entirely three different commodities.
Although there are unique characteristics to each, wheat is wheat. Farmers grow different varieties based on economic and agronomic considerations. Flour mills the world over blend different varieties of wheat based on economic considerations as well as milling characteristics. Unlike other commodities under the commission's purview, Hard Red Spring, Soft Red Winter, and Hard Red Winter are interchangeable to a degree.
Moreover, the method of calculating position limits is backwards looking when MGEX volume and open interest growth is growing at an unprecedented rate since the deregulation of the Canadian marketplace. The crop size technically deliverable against the MGEX contract is larger than either of the CME's other two wheat contracts, Soft Red Winter and Hard Red Winter. The proposed rule would impede that growth and thus the ability of producers, warehousement, and users to manage risk just when demand is at its highest.
Perhaps most importantly, price arbitrage between the different futures contracts mentioned above is essential to efficient price discovery and effective risk management for all market participants. Different position limits between these different contracts will upset this equilibrium and artificially disrupt price discovery.
Thank you for your time.
Austin Damiani
