CME to Launch Block Cheese Futures and Options in 2020
Commentary by Bob Zwirb
The CME Group ("CME") will launch Block Cheese futures and options beginning in January 2020, pending regulatory review.
CME stated that the futures and options contracts will be cash-settled based on the monthly average price in the USDA's National Dairy Products Sales Report for a 40-pound block of cheddar cheese. CME noted that each contract will represent the equivalent of (i) 20,000 pounds of block cheddar cheese and (ii) the tick size of $0.0001 per pound.
Commentary
Due to its unique characteristics, the spot market for cheese historically has been viewed as vulnerable to manipulation. Presumably, these concerns have been met here. For exhaustive reviews of this issue and the history of trading in the cheese market, see:
Futures Trading in Cheese: How Will it Work?
Market Oversight Has Increased, but Concerns Remain about Potential Manipulation