Comment Text:
I very much appreciate the opportunity to submit comments on the proposed increase in speculative position limits to the CME Live Cattle Contract.
The CFTC has among its Core Principles that exchanges promote fair and equitable markets for all participants. Over the last decade, there has been a predictable and persistent distortion against the speculative long in the CME Live Cattle Contract. Specifically, the attached research clearly shows that in the period between first notice day and the last trading day, there is a clear tendency for the spot contract to 1) go up in price and 2) outperform the next contract month. These facts should HARDLY be surprising when the comedown requirement on the speculative long is in many cases larger than those imposed on the short hedger which causes a negative price bias into first notice day. Why else would there be a clear and persistent profit opportunity of being long and/or bull/front spread following first notice day?
Clearly larger speculative limits on first notice day that are more in balance with those of the hedge short would help alleviate the negative price/spread bias faced by the spec long. Therefore, I fully support the CME proposed amendment and would hope the CFTC will approve it.
