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CME Group Inc. CME will unveil cash-settled (Platts) South American Soybean futures contract, following the fulfillment of regulatory approval, on Sep 21, 2020.

CME Group and Brazil-based stock exchange B3 S.A. have teamed up to develop this new soybean futures contract, which marks an important step in their strategic relationship.

South American Soybean futures will offer a more precise tool to manage exposure to the Brazilian soybean market. This new contract will be listed on CBOT and have the backing of CME Clearing, mitigating counterparty risk. 

The Soybean futures contract will reflect Brazilian export prices at the port of Santos and provide new trading opportunities in combination with CME Group’s existing suite of soybean-based contracts.

The addition of the new Soybean futures contract will facilitate basis risk management that currently does not exist unless a market participant has access to the physical market in Brazil. Also, it will boost spread trading between CME Group Soybean contracts in North America and Brazil and will be available for trade on CME Globex or through block trades on CME ClearPort.

At 136 metric tons per contract, the South American Soybean futures contract is equivalent in size to the existing CBOT Soybean futures contract.  It will be traded in dollars and cents per metric ton, with a tick size of $0.20 per metric ton ($27.20/contract).  The contract months align with CBOT futures contract months, with the addition of a February contract month to address the South American new crop season. The contract hours match the legacy CBOT futures contract daytime (or RTH) hours and it will be available for trading on CME Globex and CME ClearPort.

CME Group exchange consists of designated contract markets for the trading of futures and options contracts. It enables clients to trade futures, options, cash and over-the-counter (OTC) markets and optimize portfolios. It focuses on maximizing futures and options growth globally, diversifying business and revenues, and delivering unparalleled customer efficiencies and operational excellence. Futures and options trading are offered across asset classes through the CME Globex platform, cash and repo fixed income trading via BrokerTec, and cash and OTC FX trading via EBS.

Shares of this largest futures exchange in the world in terms of trading volume as well as notional value traded has declined 18.8% in the past year against the industry’s increase of 1.1%. Nonetheless, the company’s policy to ramp up its growth profile and capital position should drive shares higher.

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The stock carries Zacks Rank #5 (Strong Sell).

Stocks That Warrant a Look

Some better-ranked stocks from the security and exchange sector include MarketAxess Holdings Inc. MKTX, OTC Markets Group Inc. OTCM and Equitable Holdings, Inc. EQH, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MarketAxess operates an electronic trading platform that enables fixed-income market participants to trade corporate bonds and other types of fixed-income instruments worldwide. It surpassed estimates in each of the last four quarters, with the average earnings surprise being 2.49%.

OTC Markets engages in the financial market business in the United States and internationally. It surpassed estimates in three of the last four quarters, with the average earnings surprise being 10.54%.

Equitable Holdings operates as a diversified financial services company worldwide. It surpassed estimates in three of the last four quarters, with the average earnings surprise being 13.79%.

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