Confidential and Embargoed until 6/9/2021

VOTING DRAFT FOR COMMITTEE CONSIDERATION ONLY

Report

Efficient and Effective Oversight of 

Changes to Agricultural Futures 

Contracts with Open Interest

Subcommittee to Evaluate Commission Policy with Respect to Implementation 

of Amendments to Enumerated Agricultural Futures Contracts with Open 

Interest (Ag-OI)

Agricultural Advisory Committee 

US Commodity Futures Trading Commission

Commissioner Dawn D. Stump, AAC Sponsor

Joseph Janzen, Subcommittee Chair

Christa Lachenmayr, Ag-OI Subcommittee Designated Federal Officer

Summer Mersinger, AAC Designated Federal Officer

June 9, 2021
Disclaimer

This report is the voting draft for the Agricultural Advisory Committee (AAC) as voted on by 

the Subcommittee to Evaluate Commission Policy with Respect to Implementation of 

Amendments to Enumerated Agricultural Futures Contracts with Open Interest (Ag-OI)

(Subcommittee). The views, analyses, and conclusions expressed herein reflect the work of the 

Subcommittee, and do not necessarily reflect the views of the AAC, the Commodity Futures 

Trading Commission or its staff, or the U.S. government. Reference to any products, services, 

websites, organizations, or enterprises, or the use of any, organization, trade, firm, or 

corporation name is for informational purposes only and does not constitute endorsement, 

recommendation, or favoring by the U.S. Government.
Contents

Foreward .............................................................................................................................................................i

Executive Summary .........................................................................................................................................iii

Introduction .......................................................................................................................................................1

Issue Statement.................................................................................................................................................1

Trade-offs in Amending Futures Contracts................................................................................................2

The Process for Amending Futures Contracts with Open Interest .....................................................7

Historical Contract Amendments.................................................................................................................9

Scope and Activities of the Subcommittee .............................................................................................. 12

Findings and Recommendations................................................................................................................. 13

Transparency in Market Oversight ............................................................................................................ 13

Public Engagement ...................................................................................................................................... 14

Effective Evaluation of Proposed Changes................................................................................................. 16

References....................................................................................................................................................... 18

Members of the Ag-OI Subcommittee...................................................................................................... 19
Foreward

I have long viewed the role of the Commodity Futures Trading Commission (CFTC) as a 

partnership with our regulated entities and market participants. The best policies emerge only 

after bringing all stakeholders to the table and finding a mutually beneficial path forward. All 

too often the federal government decides to address a problem facing an industry through topdown, prescriptive laws and regulations. However, doing so often creates new problems and 

challenges not foreseen by those making the decisions. Working hand-in-hand with people on 

the ground and active in our markets is truly the only way to create sound regulation that is 

effective in the real world.

This coordinated approach not only produces the best functioning regulatory environment, it 

also creates a culture of compliance where those involved in the markets know and understand 

the rationale applied to the rules because their input was considered in creating the policy. 

Compliance is always the goal in regulation. Compliance is best achieved through mutual 

respect and a common understanding. If those efforts fail, and clearly understood rules are 

disrespected, then enforcement, should always be the Commission’s last resort in obtaining 

compliance. 

These views on policymaking and regulatory compliance inform my robust support of the 

formation of the Subcommittee to Evaluate Commission Policy with Respect to Implementation 

of Amendments to Enumerated Agricultural Futures Contracts with Open Interest (Ag-OI) and 

the process through which it carried out its mandate. A team of diverse stakeholders and 

thought-leaders in the agricultural markets created a blueprint for how to make adjustment to 

agricultural contracts with open interest. This report reflects a consensus among those 

involved from those responsible for contract design, to intermediaries, to those using the 

contract to hedge their risks and even those who do not necessarily participate in the markets 

directly but are impacted by the prices discovered. 

I am pleased at the work done to create this report and the effort made to find common 

ground. I want to express my sincere thanks to all participants on the AG-OI Subcommittee 

for their input and participation. These meetings are not easy to squeeze into already busy 

schedules, and I know there were members who literally stopped their tractors in the middle of 

their field, or pulled their work trucks to the side of the road in order to join the 

Subcommittee meetings over the last six months. Your commitment and sacrifices to this 

project have not gone unnoticed and I know I speak for those on the Agricultural Advisory 

Committee (AAC) when I tell you how much I appreciate your hard work.

A very special thank you goes out to Assistant Professor Joseph Janzen of the Department of 

Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. 

Professor Janzen chaired this Subcommittee, while also being a full-time professor, a father and 

becoming a father once again during the process of completing this report. To say that 

Professor Janzen went above and beyond the call of duty is an understatement. Without Joe’s 

leadership and guidance, this report would not exist, let alone come together with unanimous 
support from the Subcommittee members. Professor Janzen – your service to the CFTC and 

to the agricultural sector generally is greatly appreciated and is clearly memorialized in this 

report.

Additionally, I want to thank Christa Lachenmayr from the CFTC’s Division of Market 

Oversight (DMO) for lending her expertise and guidance to the Subcommittee and facilitating 

the subcommittee’s work on this report from start to finish. I know Christa has put countless 

hours into assisting the Subcommittee with this product and she did so because she feels very 

strongly about the importance of having a consensus-based approach to managing contract 

changes in the agricultural markets with open interest. Christa’s years of invaluable work in the 

ag futures markets in DMO, as well as her hard work in assuring the AAC’s utility is maximized 

in our work at the CFTC, is a testament to her passion for agriculture and agricultural markets.

I would be remiss if I did not take this opportunity to also thank former CFTC Chairman Heath 

Tarbert for his leadership of the AAC. I am fortunate to follow in Heath’s footsteps as a 

sponsor of the AAC. I know he was very committed to getting this report completed and I am 

thankful that we have reached that goal. I know former Chairman Tarbert is proud of the work 

that went into this report.

As I stated earlier, a coordinated approach where all stakeholders are viewed as partners is the 

best way to achieve success in any regulation. This report is a glowing example of how that 

success is achieved and I am honored to be a part of this success. Thank you to everyone who 

helped achieve this success.

Commissioner Dawn D. Stump, Sponsor

CFTC Agricultural Advisory Committee
Executive Summary 

The Ag-OI Subcommittee was established to make recommendations to the Agricultural 

Advisory Committee of the Commodity Futures Trading Commission regarding evaluation of 

amendments to enumerated agricultural futures contracts with open interest. This report 

summarizes information reviewed by the Subcommittee about the rationale and process for 

amending agricultural commodity futures contracts when market participants have existing long 

and short positions. These contracts are subject to specific oversight under relevant statute and 

regulation not required of all futures contracts. 

The Subcommittee considered the situation faced by exchanges when proposing to amend 

contract terms and conditions. Exchanges seek the timely implementation of contract changes 

intended to ensure futures contracts comply with regulation and best serve a diverse set of 

market participants. These goals must be balanced against the possible material impact on the 

value of existing positions. The report documents the growing share of open interest held in 

long-dated contracts which exacerbates this tradeoff. 

The Subcommittee considered possible improvements to the Commission’s procedures for 

oversight of contract amendments. The Subcommittee found that Commission oversight cannot 

avoid tradeoffs between timely implementation of necessary changes and material impacts on 

open interest. It is an unavoidable consequence of the requirement that contracts fulfill their 

statutorily mandated purpose. However, Commission oversight can play an important role in 

the amendment process by promoting awareness among market participants and ensuring the 

consideration of a broad swath of viewpoints. 

The Subcommittee does finds that the current process for amending agricultural futures 

contracts works well to foster compliance with core principles, align contract terms to 

common commercial trading practices, and weigh interests of exchanges and market 

participants. The Subcommittee found that the Commission may be able to improve its 

oversight of contract changes by facilitating information flows and maintaining channels for 

public engagement and open dialogue. This would fulfill the stated desire of market participants 

to inform and be informed about the contract amendment process. It also found that the 

Commission should continually improve staff policy and guidance to reflect an up-to-date 

understanding of contract terms and market conditions and focus its oversight on contracts, 

terms, and conditions which are most likely to have material impact on positions held by 

market participants.

Through its deliberations, the Subcommittee generated a set of six findings and 

recommendations. In brief, the Subcommittee recommends the Commission should:

1. Provide enhanced information to the public on which markets are subject to CFTC 

approval processes and on the results of past approvals.

2. Develop a robust system of public comment on submitted amendments that enables 

participation by all market participants when such input is needed.
3. Consider means to formalize procedures for dialogue with exchanges and market 

participants on contract changes before and after the formal submission of an 

amendment by an exchange.

4. Improve existing risk disclosures required of market participants to clearly indicate the 

possibility of changes to contracts with open interest.

5. Maintain a principles-based approach to market oversight that avoids prescriptive 

evaluation of proposed contract changes and concentrates attention on contract 

changes that are more likely to have a material impact on the contract’s value. 

6. Continually improve staff policy and guidance to reflect current market conditions and 

contract specifications, such as the use of self-adjusting contract terms. 

Through these proposed actions, the Commission will provide additional clarity to exchanges 

and market participants which should enhance the benefits of futures markets in facilitating 

price discovery and hedging effectiveness and reduce risks to exchanges and market 

participants. 

At a meeting on April 21, 2021, the Subcommittee voted 20-0 to adopt the report, its finding 

and recommendations.
Introduction

Agricultural futures markets have a history that spans more than 150 years in the United States. 

These markets have witnessed dramatic changes in production, consumption, and trade of 

agricultural commodities, advances in communication and transportation systems, and many 

other shifts in the global economy. To maintain relevance in such a dynamic environment, 

futures markets have adapted. New futures contracts have been developed and existing futures 

contracts have periodically been reviewed and their terms and conditions revised when 

appropriate. 

This report of the Subcommittee to Evaluate Commission Policy with Respect to 

Implementation of Amendments to Enumerated Agricultural Futures Contracts with Open 

Interest (Ag-OI) (hereafter, referred to as Subcommittee), considers the role of the 

Commodity Futures Trading Commission (hereafter, the Commission or CFTC) in the process 

by which agricultural futures contracts are amended. 

Based on input from a diverse membership, the report makes findings and recommendations to 

improve the efficiency and effectiveness of the Commission in its regulatory role. The report

acknowledges the important and beneficial roles played by futures exchanges and market 

participants in this process but does not make prescriptive recommendations for these entities. 

Similarly, while the report draws upon historical CFTC approvals of exchange-proposed futures 

contract amendments, it does not review the specific details of those changes. It is forwardlooking and makes findings and recommendations related to future changes. 

Issue Statement

To understand what is at issue, it is important to know why futures contracts are amended and 

the tradeoffs inherent in making such amendments. Futures contract specifications are critical 

to the market’s ability to discover prices and serve as a hedging instrument, objectives held in 

common by exchanges and the CFTC and fundamental to the Commodity Exchange Act (the 

Act). Exchanges seek to serve their customers, the market participants who buy and sell futures 

contracts, by providing a low-transaction-cost trading venue that attracts significant trading 

volume. The CFTC, as the exclusive regulator of futures trading, affirms these goals. The Act

states that futures trading is “affected with a national public interest by providing a means for 

managing and assuming price risks, discovering prices, or disseminating pricing information 

through trading in liquid, fair and financially secure trading facilities” (7 USC § 5). That is, price 

discovery and risk management benefit exchanges and market participants, and the broader 

public as well. 

To foster accurate price discovery and effective risk management, futures prices must be 

“representative of the value of the commodity generally so that the relationships with prices at 

other points of commerce are rational” (Hieronymus 1977). There must be a consistent

economic relationship between futures and cash markets. Futures contract specifications 

determine the value represented by the futures price, the connection to a diverse set of cash 
markets, and therefore the ability of the contract to discover prices and provide risk 

management. 

These broad goals of price discovery and risk management are related, but not the same as the 

specific compliance objectives put forward in federal statute and regulation. This is necessary

because price discovery and hedging effectiveness are not precisely defined, quantifiable

objectives. Moreover, no set of contract specifications is perfectly tailored to all market 

conditions, so optimal price discovery and hedging effectiveness in all conditions is an unrealistic 

standard.

Instead, the Act and the Commission’s regulations lay out a set of core principles for 

Designated Contract Markets (17 CFR § 38) to which exchanges must adhere.1Two of these 

principles focus on maintaining economic relationships between futures and cash markets and 

are closely related to the concept of price discovery. Core Principles 3 and 4 prohibit

exchanges from listing contracts that are readily susceptible to manipulation and place onus on 

exchanges to prevent manipulation, price distortion, and disruption to the delivery or cashsettlement process. In addition, the core principles place emphasis on transparency. For 

example, Core Principle 7 requires contract terms and conditions and other contract-related 

information to be made available to market participants and to the public. 

The regulations supporting Core Principle 4 also include a “good faith effort” standard used by 

the Commission to engage the exchanges on contract compliance issues. It requires exchanges 

to “when necessary, make a good-faith effort to resolve conditions that are, or threaten to be, 

disruptive to the market” (17 CFR § 38.251(c)). It often results in contract amendments 

intended to address compliance issues. The good faith effort standard infers that contract 

amendments may be necessary – even when those changes apply to open interest – in order to 

address contract performance issues such as a divergence in the cash and futures prices 

(convergence), the adequacy of deliverable supply, or the integrity of the delivery or cashsettlement process. 

Trade-offs in Amending Futures Contracts

Exchanges develop, propose, and implement contract amendments in consultation with market 

participants. The role of the CFTC in this process is defined in the Act: The Commission is 

tasked with evaluating and approving proposed changes to futures contracts for a set of 

enumerated agricultural commodities2

. The statute requires that:

 1 Part 38 of the Commission’s regulations governs the general obligations of DCMs under the core 

principle regime, including compliance obligations, as well as financial information and resource 

requirements, operational capabilities, surveillance obligations, and trading and products requirements.

2 Enumerated agricultural commodities are general and reference physical commodities rather than 

specific futures contracts. The term applies to: “the following commodities specifically enumerated in 

the definition of a “commodity” found in section 1a of the Act: wheat, cotton, rice, corn, oats, barley, 

rye, flaxseed, grain sorghums, mill feeds, butter, eggs, Solanum tuberosum (Irish potatoes), wool, wool 
“A designated contract market shall submit to the Commission for prior approval each 

rule amendment that materially changes the terms and conditions, as determined by the 

Commission, in any contract of sale for future delivery of a commodity specifically 

enumerated ... if the rule amendment applies to contracts and delivery months which 

have already been listed for trading and have open interest.” (7 USC § 7a–2 (c)(4)(B)) 

That is, the statute requires additional oversight of agricultural futures contract changes that i) 

are material in the sense that they affect the economic value of the contract and ii) apply to

existing open interest. 

Materiality is an important condition. The requirement for the CFTC to approve material 

changes is meant to protect market participants from changes in the value of existing positions 

due to contract amendments, particularly those changes predictably beneficial to either long or 

short open interest. It is important to note that statute and regulations do not define 

materiality. Within the Commission’s regulations, there is a limited set of contract amendments 

that are explicitly deemed non-material (17 CFR § 40.4) and can be implemented without CFTC 

approval, either by self-certification or notification. Exchanges may also make the case (under

the terms of 17 CFR § 40.4(b)(5)) that a given change is non-material and can be self-certified 

by the exchange, but in practice most changes proceed through the standard approval process. 

The essential objective when amending futures contract specifications is to ensure that the 

change achieves compliance with core principles found in the relevant statute while minimizing 

the adverse impact of material changes on existing position holders. The portion of the statute 

quoted above identifies the levers available to the exchange when amending contracts – it 

chooses the substance of the amendment and determines the timeline for implementation (by 

applying the change to specific contract months). Changes to contract months not yet listed or 

without open interest are likely to do no harm, because market participants have not yet made

any financial or performative obligations. Once aware of new contract specifications, market 

participants can freely choose to trade under those terms or not. 

The presence of open interest creates the possibility that the announcement and/or 

implementation of changes to the terms and conditions may move the price in a direction that 

adversely affects some existing position holders (while benefitting position holders on the other 

side of the market). That is, there is potential for market participants to experience profits and 

losses based solely on changes to contract specifications rather than any shift in underlying 

fundamentals.

Thus, there is a trade-off between timeliness and potential material price impacts in the optimal 

implementation of amendments to futures contracts with existing open interest. Near-term 

contract months typically have greater open interest and therefore the magnitude of any 

 

tops, fats and oils (including lard, tallow, cottonseed oil, peanut oil, soybean oil and all other fats and 

oils), cottonseed meal, cottonseed, peanuts, soybeans, soybean meal, livestock, livestock products, and 

frozen concentrated orange juice, but not onions;” (17 CFR § 1.3).
amendments would be greater simply by the number of market participants affected. 

Additionally, near-term contract months are closer to the delivery period and expiration, so 

any amendments to contract terms such as quality or delivery specifications could change the 

economics of making or taking delivery, thereby disrupting convergence. 

Lengthening listing cycles has complicated the process of amending contracts. Twenty years 

ago, when the listing cycle for most agricultural futures contracts may only have extended 12 to 

24 months into the future, an exchange could apply amendments to contract months without 

open interest within the next crop year or two at the most. Now, implementing a contract 

change beyond open interest would occur much further in the future. In the case of corn, the 

most actively traded agricultural commodity, contracts for delivery over 48 months hence are 

listed at any given time. There is frequently open interest in these distant months. In such cases, 

contract amendments will almost always apply to existing open interest if compliance is to be 

achieved on a reasonable timeline. 

The share of open interest in deferred contract months can be substantial. Figure 1 displays the 

concentration of open interest in contract months further than one year (twelve months) from 

delivery for enumerated agricultural futures contracts. It shows deferred open interest in major 

grain markets is greater than in livestock, minor grains like rice and oats, butter, or frozen 

concentrated orange juice. Figure 1 also shows that the share of open interest in deferred 

contract months varies considerably over time. In corn, the largest agricultural futures market 

by open interest, the median share of open interest in contracts more than 12 months to 

delivery is approximately 8%, but the interquartile range is 5 to 11% and the 95% percentile 

value is 17% Wheat, soybean, and cotton futures have smaller but similarly substantial shares of 

open interest in deferred contract-months. Other enumerated commodity contracts have much 

smaller shares of open interest beyond one year from delivery. 

Note the concentration of open interest in deferred-month contracts shown in Figure 1 

considers aggregate open interest. Positions held by individual market participants may be 

significantly more concentrated in deferred months. Contract changes that affect only a small 

share of overall open interest may affect an individual trader’s entire position. 
Figure 1. Boxplots describing the distribution of the share of open interest in contract-months more than 

12 months from delivery by contract market, 2007-2020.

Note: Data on open interest at month-end from Bloomberg. Bars indicate median and interquartile 

range. Whiskers indicate 5th and 95th percentiles. Contracts are ranked by median share of deferred 

months open interest.

There is an additional complication inherent in amending futures contracts: the specific 

consequences of any change are uncertain a priori. Given their experience and knowledge of the 

underlying and futures markets, exchanges are generally able to design contract amendments 

that will address performance issues, but no party can observe price discovery and hedging 

effectiveness in a given circumstance under an alternative set of contract specifications. It is not 

possible to prove that manipulation or price distortion are impossible under a given set of 

contract specifications or that a set of proposed amendments will precisely address contract 

performance issues. Moreover, market participants all else equal prefer stable contract terms. 

Exchanges have historically been reticent to make changes when the conditions generating a 

disruption are thought to be temporary. The nature of the process favors incremental changes 

over singular, sweeping ones. 

0% 2% 4% 6% 8% 10% 12% 14% 16% 18%

Oats

Rough Rice

FC Orange Juice

Butter

Lean Hogs

Feeder Cattle

Live Cattle

KC HRW Wheat

HRS Wheat

Cotton

Soybean Oil

Soybean Meal

Soybeans

SRW Wheat

Corn

Share of Open Interest Greater Than 12 Months to Delivery
Uncertainty about the ability of a contract change to provably deter market disruption or 

address other regulatory compliance issues implies change is unlikely in the case of de minimis

or temporary issues. Additionally, while the underlying agricultural markets on which futures 

markets are based tend to be dynamic, that evolution happens over time. As a result, contract 

amendments are relatively infrequent. Table 1 shows that the median contract for an 

enumerated agricultural commodity has been amended seven times since 2007, or once every 

two years. This period includes the volatile market conditions of 2008 which saw a relative 

flurry of contract amendments. Changes have been rarer since that time.

Table 1. Number of Approved Amendments to Futures Contracts for Enumerated Agricultural 

Commodities, 2007-2020. Source: CFTC Filings and Actions Database

Designated 

Contract Market Contract

No. of Approved 

Amendments

KCBT/CBOT KC HRW Wheat 16

CME Live Cattle 15

ICE Cotton No. 2 14

CBOT SRW Wheat 10

CBOT Corn 8

MGEX HRS Wheat 8

CME Feeder Cattle 7

CBOT Rough Rice 7

CBOT Soybeans 6

CME Lean Hogs 6

CBOT Oats 5

CBOT Soybean Oil 3

CBOT Soybean Meal 3

ICE FC Orange Juice 3

CME Butter 1

Since contract specifications are amended infrequently, a given change should be deliberate in 

its design and significantly improve regulatory compliance and/or market performance. The 

“good faith effort” standard discussed above is intended to encourage such changes. This report 

explores other mechanisms available to the Commission to foster transparent, efficient, and 

effective contract changes to improve market performance. 
The Process for Amending Futures Contracts with Open Interest

To describe how the CFTC can enhance the efficiency and effectiveness of its processes related 

to amending contracts, consider its role in the existing process. The role of the CFTC in 

amending contracts, including enumerated contracts with open interest is limited in the Act by 

design. The Commission ensures exchanges meet the good faith effort standard discussed 

above. Figure 2 outlines six general steps involved in amending a futures contract with open 

interest. The exchange, market participants, and the CFTC each have input at different points in 

the process, with the exchange involved at all points. 

In the first step, the exchange, whether through a standing contract committee or staff 

outreach, regularly reviews contract terms and conditions and scrutinizes their compliance with 

the Act and adherence to common cash market practice which can change over time. Through 

this process, the exchange, market participants, and/or CFTC identify any issues with existing 

contract terms and conditions. At this point, whether through public or private 

communication, the exchange acknowledges the issue and considers whether it merits further 

internal inquiry. For the issue to rise to the level that justifies further consideration and an 

eventual contract amendment, there is likely some agreement among all parties even at this 

early stage that there is an issue that requires resolution or that there has been a fundamental 

change in the underlying market that needs to be reflected in the contract terms and conditions

(e.g., Pirrong, Haddock, and Kormendi 1993). 

Second, the exchange solicits more specific feedback from market participants. There are 

different venues in which this feedback may occur: focus group, survey, and/or standing 

contract committee. These groups maintain a diverse composition of commercial and noncommercial market participants, though the exact composition of feedback may depend on the 

nature of the issue. For example, issues with the delivery process for contracts with physical 

delivery may focus on those who participate in the physical delivery process. 

1. Identify issue 2. Solicit feedback

3. Propose 

amendment(s) and 

timeline

4. Garner internal 

approval 

5. Submit for CFTC 

approval

6. Implement 

amendment(s)

Figure 2. Process for Amending Futures Contracts for Enumerated Commodities with Open Interest
Third, the exchange develops amendments to address the issue, proposes implementation 

timeline, and internally approves proposed amendments. The implementation timeline considers 

whether a proposed amendment is likely to have a material impact on contract’s pricing and the 

trade-off between timely compliance and effects on existing open interest discussed above. At 

this stage, the exchange is generally in communication with the CFTC regarding a forthcoming 

submission for approval. Simultaneously, it is also considering internal implications of the 

amendment with respect to its own potential legal liability and garnering internal approvals for 

the proposed amendment.

Fifth, the exchange publicizes the forthcoming change coincident with its request to CFTC for 

approval. Upon receipt, CFTC conducts its due diligence review. The CFTC may (or may not)

note objections or concerns, solicit public comment, and/or issue notice of non-approval.

Amendments can be affirmatively approved by the full Commission, approved by the Director 

of the Division of Market Oversight in some circumstances, or approved by the passage of time 

at the end of the 45-day approval period in the absence of further action by the Commission. 

Finally, the amendment is implemented on the contracts so designated. This may leave a period 

where nearer to delivery contracts trade under prior terms and deferred contracts trade on 

older terms. As noted earlier, the Commission’s regulations do provide a fast track to 

implement changes to futures contracts that are not material.

Review of this process shows the importance of exchanges and market participants in selfregulation and initiating necessary change, which is consistent with the status of exchanges as 

self-regulatory organizations subject to a principle-based regulatory regime. It also reveals that 

the Commission plays an informal, consultative role at points where the Act does not describe 

or reserve any formal role for the Commission up to the point where an amendment is 

submitted to the Commission for approval. There is in practice on-going communication among 

exchanges, market participants, and the Commission at nearly all points in this process. 

Full public transparency is not always possible throughout the process and is not required until 

the formal submission is made to the CFTC. Exchanges and the Commission must be judicious 

in signaling forthcoming changes that may affect market participants decision to enter or exit a 

given position. In particular, the exchange and the Commission strive to avoid communications 

that provide an informational advantage to any subset of market participants. 

Formal public comment may be a part of the review process, but the Commission must initiate 

the public comment process on a case-by-case basis. The advantage of public comment is that it

democratizes input and provides all interested parties with a common means to express their 

concerns. However, it may be superfluous or unnecessary in instances where all market 

participants with a significant interest can express their views through other mechanisms, 

particularly because the Commission may not begin collecting public comments until after a 

request for approval has been made. 
Historical Contract Amendments

The Subcommittee reviewed the historical record of contract amendments in the 14 years 

from 2007 to 2020 for which there is complete documentation in CFTC’s electronic records. 

For this report, past amendments to contract specifications were grouped into one of four 

general categories: delivery rules, position limits, risk controls, or other trading rules. 

Delivery rules are terms and conditions related to the delivery process for physically delivered

futures contracts or specification of the index to which a cash-settled contract is settled. These 

include but are not limited to the grade and quality specifications, delivery locations, delivery 

procedures, and specification of the delivery instrument including storage rates. Position limits 

are any restrictions on who can hold positions of a particular size, and may apply to single 

contract months, all months combined, or to the spot month specifically. Risk controls refer to 

price limits and trading halts that may be imposed as a response to market volatility. Other 

trading rules are any other contract specifications that do not fit into one of the above 

categories. In the past, such changes include daily settlement procedures, changes to the listing 

cycle, and changes to expiration dates. 

The specifications amended and the implementation timeline are important parameters that 

determine the magnitude and scope of any impact to the economic value of a contract. Figure 2

describes the number and proportion of amendments by category. Note these numbers apply 

to submissions which may include multiple, related contracts or one or more contract 

amendments. For example, 2018 changes to storage rates for Corn and Soybean futures 

contracts were filed as a single submission. The figure shows that no single category 

predominates, though delivery rules changes make up about 40% of filed amendments. Changes 

to price limits have historically been the most filed amendment type, although subsequent 

changes are expected to become rarer with the adoption of adjustable price limits in most grain 

and livestock futures contracts by 2020. While such dynamic contract specifications are used in 

limited circumstances, they are designed to regularly recalibrate terms and conditions that are 

known to vary and could potentially cause market disruptions, thus obviating the need for 

future amendment approvals.
The implementation timeline is an important decision made in the process to amend a futures 

contract. Lengthening this timeline can reduce or eliminate the scope of the material impact of 

the change on open interest. Figure 3 describes the implementation timeline by amendment 

category for the same set of contract amendments considered in figure 2. It bins 

implementation timelines into three groups depending on the time from when the amendment 

was submitted by the DCM for approval by the CFTC to the first affected contract month.

Most changes in the position limits, risk controls, and other trading rules categories are 

implemented on contracts for nearby delivery or relatively quickly – either immediately or 

within six months. Those types of amendments are typically considered to be at arms-length, 

i.e., increasing the position limit for a particular commodity does not necessarily mean that 

market participants will increase their position sizes, nor would there be an expected price 

impact associated with increases in position sizes so long as they meet the other criteria in the 

Act. Amendments to delivery specifications have the potential to impact prices more directly

and are therefore typically implemented on a longer timeline, generally more than six months 

and often more than one year. Changes to storage rates, delivery locations, and deliverable 

grades are in nearly all cases implemented on contracts for delivery more than six months 

hence. 

Figure 3. Contract amendments by type and sub-type, 2007-2020. Source: CFTC Filings and 

Actions Database
Figure 4. Contract amendments by type and implementation timeline, 2007-2020. Source: CFTC Filings 

and Actions Database

Notable among recent contract amendments summarized in Figure 2 and 3 are those 

establishing dynamic contract specifications that either continuously or periodically adjust other 

contract terms in response to contemporaneous or historical data, even if those contracts have 

existing open interest. Once initially approved by the Commission, subsequent contract changes 

occur without further approval or notification to the Commission. Exchange practice does 

currently involve notice of the changes to the marketplace. 

Dynamic specifications define an adjustment mechanism based on observable data. For example, 

adjustable price limits common to most CBOT/CME grain, oilseed, livestock, and dairy 

contracts set daily price limits based on a percentage of the average price level over a recent 

time period. The Variable Storage Rate (VSR) for the CBOT SRW Wheat and KC HRW Wheat 

contracts adjusts storage rates charged to the holders of the contract’s delivery instrument 

based on a measure of a futures calendar spread as percentage of financial full carry over the 

months preceding the expiration of the nearby leg of the spread. These dynamic contract 

specifications were approved by CFTC prior to implementation; however, the Commission has 

no guidance in 17 CFR 38 Appendix B or Appendix C specific to the evaluation of amendments 

that propose dynamic specifications. 

In adopting dynamic specifications, exchanges and market participants coalesce around clear 

expectations for what constitute necessary future changes. Given their permanence, dynamic 

contract specifications pose unique design challenges. Namely, they have the potential to

10 6 8 8

16

8

16

5

4

0

0.5

1

1.5

2

2.5

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Delivery Rules Risk Controls Position Limits Trading Rules

Immediate < 6 months 6-12 months <12 months
create uncertainty between the contract month to which existing specifications apply and the 

contract month when the new specifications are implemented, all of which typically have open 

interest. While position holders generally prefer stable contract terms, dynamic specifications 

may be beneficial in reducing the implementation timeline and regulatory burden for making 

routine changes , therefore lessening the potential for market disruptions when specifications 

that are known to vary are not appropriately calibrated.

Scope and Activities of the Subcommittee

The formation of the Subcommittee was approved unanimously by the Commission on 

September 23, 2020, followed by a call for nominations in the Federal Register closing on 

October 29, 2020. The Subcommittee was composed of 22 members representing a diverse 

cross-section of market participants plus all three designated contract markets for enumerated 

agricultural commodities. (A full list of Subcommittee members is given at the end of this 

report.)

The Subcommittee met three times in December 2020 to receive presentations by CFTC staff 

and representatives from exchanges that list enumerated agricultural futures contracts (CME 

Group, ICE Futures US, and the Minneapolis Grain Exchange) on the contract design and 

approval process and to define the scope of its deliberations. A draft report was circulated on 

January 19, 2021 and the committee met shortly thereafter to discuss the report’s proposed 

recommendations. The Subcommittee held two additional meetings to further refine the 

findings and recommendations, followed by a final meeting on April 21, 2021, at which time it 

voted 20-0 to adopt the report, its findings and recommendations.

3

 3 Subcommittee members Jim Fryer of the National Cattlemens Beef Association and Hayden Wands of the 

American Bakers Association were not able to be present for the vote; both subcommittee members are also 

members of the full Agricultural Advisory Committee.
Findings and Recommendations

The Ag-OI Subcommittee finds in this report that the current process for amending agricultural futures 

contracts works well to foster compliance with core principles, align contract terms to common 

commercial trading practices, and weigh interests of all market participants. As self-regulatory 

organizations, the Subcommittee recognizes that exchange-led mechanisms for soliciting and 

incorporating market participant feedback are the primary means for initiating amendments to

agricultural futures contracts.

Additionally, the Subcommittee recognizes the Commission’s unique role in the approving 

proposed changes and in ensuring that agricultural derivatives markets are performing their 

price discovery and risk management functions. 

The Subcommittee further recognizes the need for consistency, transparency, and dialogue as

contracts are amended. It notes that some existing processes are informal and based on 

working relationships between staff members at each institution. There is merit to formalizing 

effective practices. The Subcommittee also identifies areas where Commission processes are 

undefined or unclear. These findings and recommendations are intended to be forward-looking, 

principle-based, and adaptable to market conditions that will continue to change over time.

Per the mandate of the Subcommittee, it is important to note that these findings and 

recommendations relate only to the Commission’s oversight role and are not intended to 

impose any additional requirements on the exchanges. Each recommendation calls for specific 

action from the Commission only. 

Transparency in Market Oversight

Finding 1

The Subcommittee finds that future contracts amendments would be improved by a clearer 

understanding among all parties of the regulations governing the process and the standard for 

regulatory compliance. Market participants should understand that Commission approval is a 

statutory requirement when changes apply to open interest in contracts for enumerated 

agricultural commodities. However, exchanges generally lead and retain substantial control of 

the process. Core Principle 1 provides exchanges with reasonable discretion in how they 

comply with the Act and the regulatory “good faith effort” standard gives the exchange 

considerable flexibility in achieving compliance for specific contract terms. Historic data on 

contract changes confirms this point, so past approval and non-approval decisions from the 

Commission may serve as an important resource for all parties. 
Public Engagement

Finding 2

The Subcommittee affirms the usefulness of public comment as an effective means of dialogue between 

market participants and the Commission following submission of a contract change. Public comment 

may provide additional information beyond what is submitted for approval by an exchange 

useful to the Commission in evaluating a contract amendment. Public comment creates a 

durable record of existing opinion usable by all parties in the process of making subsequent 

changes to the same or related enumerated agricultural contracts. 

Recommendation 2a

The Commission should more consistently and systematically engage with market participants. More 

consistent engagement would build and reinforce trusted relationships with market participants, 

which are necessary when the CFTC has questions about market performance. Enhanced

engagement would also serve to raise CFTC’s awareness of market participants’ concerns and allow 

for more timely and informal resolution of issues. 

Recommendation 2b

To improve consistency in public engagement, the CFTC should define conditions in which it will call 

for public comment on an exchange filing. The subcommittee notes the utility of public comments to 

the Commission, exchanges, and market participants when the proposed changes apply to significant 

contract performance issues or are particularly controversial. 

Recommendation 1a

In order for market participants and the public to understand which products are subject to 

differing statutory requirements, the Commission should maintain a publicly available record of 

listed contracts where the underlying commodity is an enumerated agricultural commodity, and 

therefore subject to the approval process for amending such contracts. 

Recommendation 1b 

Given that past materiality and approval determinations made by the CFTC can be a relevant 

factor in future determinations, the Commission should maintain a publicly available record of its 

past materiality determinations and of past approval and non-approval decisions. 
Finding 3

The Subcommittee recognizes the benefit of

Commission engagement with exchanges and market 

participants before and after the formal submission 

of a contract change. The actions of the 

Commission in the amendment process prior to 

formal submission are not defined in regulation 

or guidance. Market participants expressed a 

desire to be informed about how the 

Commission responds to concerns about market 

performance expressed by market participants 

and industry groups and about the Commission’s 

process for acting on any concerns. Increasing 

the transparency around the procedures the

CFTC uses to identify and respond to market 

performance issues would further the objective 

of regulatory accountability. It would also 

provide clearer signals to market participants 

and exchanges about how the Commission is 

balancing regulatory compliance objectives with 

the need to mitigate adverse impacts on existing 

open interest. 

Finding 4

The Subcommittee finds futures contract specifications are subject to change, even when there is open 

interest, because there is a statutory imperative for futures contracts to comply with core principles

which supersedes the goal of minimizing the material impact of a change on any individual market 

participant. The Subcommittee further finds that risk disclosures play an integral part in informing the 

marketplace about the risks inherent in futures trading and that existing disclosures4 do not adequately 

inform market participants about the specific risks associated with changes in contract specifications 

that may affect the value of an existing position. The Subcommittee recognizes that contract 

changes may create concerns about and issues of legal liability. While the Subcommittee does 

not make findings or recommendations to impact legal liability, it asserts that greater 

transparency would increase awareness of the potential for contract amendments to be applied 

 4 Current regulations contain risk disclosure language used by Futures Commission Merchants that may 

be relevant to the case of contract changes that affect open interest. For example, 17 CFR § 1.55 

Appendix A(4) states market participants should be made aware that contract specifications may change 

“to reflect changes in the underlying interest.” 

Recommendation 3 

To promote accountable and 

transparent public engagement, the

CFTC should work with the 

exchanges and market participants to 

develop guidance or staff policy 

about dialogue regarding 

amendments to contracts for 

enumerated agricultural commodities 

prior to submission and seek further 

input as to whether public 

engagement prior to submission 

would be practical and beneficial in 

certain circumstances.
to open interest and therefore may mitigate the possibility of liability claims by market 

participants who perceive or experience harm from said changes.

Effective Evaluation of Proposed Changes

Finding 5a

The Subcommittee finds that a specific definition or methodology for determining the materiality of a 

contract change would be overly prescriptive and generally incompatible with a principles-based 

regulatory regime. The Subcommittee considered different methods for defining contract 

amendments as de minimis or nonmaterial in a way that such changes could be implemented via 

self-certification. While a specific definition of materiality could in theory simplify the regulatory 

approval process, it is difficult to formalize the complex interaction between the specific terms 

amended, the implementation timeline, and market-specific situational details that determine 

how the value of existing open interest will be impacted by a change. The Commission in its 

evaluation should be able to consider all these factors and how they assess an exchange’s 

implementation plan. For example, smaller or nascent markets may have special circumstances 

that require the Commission re-evaluate the importance of an amendment’s impact on 

individual market participants to preserve the viability of the market as a whole. A one-size-fitsall approach to market oversight in such situations is unlikely to promote price discovery and 

risk management objectives.

Finding 5b

While existing regulation and guidance treat all changes to contract terms as equivalent, the 

Subcommittee finds some terms tend to be more relevant to price formation and more likely to affect 

the economic value of existing futures positions. After reviewing historic changes, the 

Subcommittee finds that contract terms exist along a continuum of materiality. Amendments to 

delivery-related terms and conditions such as deliverable grades, quality differentials, locations, 

and storage rates tend to be more material. Other categories of contract changes identified 

above are more likely to be non-material. The Subcommittee also finds the implementation timeline

for a change is relevant to its materiality. Changes can have a larger or smaller impact on price 

depending on the location of existing open interest along the forward curve, both in terms of 

Recommendation 4

The Commission should work collaboratively with exchanges and market participants to 

increase awareness about the possibility of contract changes in all futures contracts for 

enumerated commodities. Specifically, the Commission should review its requirements for 

risk disclosures to market participants found in regulation and update them as necessary to 

inform market participants about the potential for an exchange to propose and implement 

contract changes affecting open interest even when those changes may affect the value of a 

position. 
time to delivery and relative to the marketing year for many seasonally driven commodities. 

Given the considerable variability across time and markets in the location and composition of 

open interest, specific definitions of materiality related to the level of open interest alone are 

unlikely to be optimal. 

Finding 6

The Subcommittee finds that existing CFTC guidance is practicable and useful but requires periodic 

updating to remain relevant. The Subcommittee recognizes a gap in existing Commission guidance 

regarding dynamic contract specifications. Current guidance does not describe how the 

Commission will evaluate proposed changes which include adjustable terms. The Subcommittee

finds that transparency with respect to data, timeframe, adjustment mechanism and notification 

of changes are all important components of a dynamic contract specification. Just as with the 

futures price itself, the adjustment mechanism should not be subject to manipulation or 

frequent market disruption. 

Recommendation 5

Commission review of proposed amendments and the guidance pertaining to such reviews 

should recognize certain types of contract amendments more likely to have a material 

effect on futures prices. Regulatory review by the Commission should be streamlined to 

prioritize analysis of the change’s relation to the underlying physical commodity market, 

particularly the delivery or cash-settlement process. Review should also incorporate 

information on the level of affected open interest. 

Recommendation 6

The Commission should establish guidance for its evaluation of contract changes that 

include dynamic contract specifications. This guidance should include criteria for evaluating 

the adjustment mechanism and should recognize the potential for interactions among

dynamic contract specifications in one market, other contract specifications in the same 

market, and prices and open interest in other markets. 
References

Commodity Exchange Act. 7 U.S.C. 2021.

Commodity Futures Trading Commission. 17 C.F.R. I. 2021. 

Hieronymus, T.A. 1977. The Economics of Commodity Futures Trading. Commodity Research 

Bureau: Chicago.

Pirrong, S.C., Haddock, D. and Kormendi, R.C., 1993. Grain Futures Contracts: An Economic 

Appraisal. Springer: Boston, MA.
Members of the Ag-OI Subcommittee 

Name Entity Representing Title

Joseph Janzen Subcommittee Chair Assistant Professor, 

Agricultural and Consumer 

Economics, University of Illinois

at Urbana-Champaign

Tim Andriesen CME Group Managing Director –

Agricultural Products

Joe Barker National Council of Farmer 

Cooperatives

Representative

Tim Barry ICE Futures U.S. Vice President of Product 

Development

Wayne Boseman Amcot Director

Layne Carlson Minneapolis Grain Exchange Corporate Secretary, 

Treasurer, and Chief 

Regulatory Officer

Patrick Coyle National Grain and Feed Association Representative

Brett Crosby U.S. Cattlemen’s Association Marketing & Competition 

Committee Member

Jim Fryer National Cattlemen’s Beef Association Representative

Matt Haraburda FIA/PTG Executive Committee Member

Kellee James Mercaris Founder and Chief Executive 

Officer

Andrew Keighin ADM Trade Manager, Export Grains, 

and SE Rail Markets

Joe Kovanda 4:10 Risk Strategies Co-Founder

Justin Lewis KIS Futures Vice President

Ed Prosser Commodity Markets Council Representative

Steve Strong North American Export Grain 

Association

Representative

Curt Strubhar Grain and Feed Association of Illinois Representative

Azeez Syed American Cotton Shippers 

Association

Representative

Tony Vojslavek The Gavilon Group Chief Risk Officer

Hayden Wands American Baker's Association Representative

Jason Wheeler USARice Rice Futures Contract Working 

Group Chair

Marcus Wilhelm CoBank Vice President