Implied Functionality for CBOT Corn Futures

Dear Valued Customer,

CME Group is committed to providing our customers with highly liquid and transparent markets. One tool we have used to ensure this is the implied spreading functionality used on the CME Globex electronic trading platform. The functionality allows a bid or offer in one contract month to be used to generate a bid or offer in another contract through implied spreads.

Our analysis has shown that the implied spreading functionality has tightened bid/ask spreads across multiple markets, particularly in more thinly traded contracts. This same analysis has suggested that in a few select, highly liquid markets, greater liquidity might be obtained without using the implied spreading functionality.

While this analysis provides significant insight into market dynamics, it is static and only an observation of live and current markets can confirm this analysis. In an effort to determine if more robust markets in highly liquid contracts can be improved without the implied spreads, from August 29, 2010, through December 31, 2010, CME Group will disable the functionality in the electronically traded CBOT corn futures contract. We will monitor the market during this period for signs of market quality degradation and, if observed, we will reinstate the implied functionality. Based on the assessment over this period, a decision on the use of the implied spreading functionality for corn futures going forward will be made.

Please let us know if you have any questions.

Sincerely,

Bryan Durkin
Chief Operating Office and Managing Director, Products & Services