CME Group (CME.O) told Iowa farmers, Chicago brokers and global hedge funds to brace for a longer, more intense trading day, announcing plans for nearly round-the-clock grains trading to fend off pressure from arch-rival IntercontinentalExchange.
The Chicago Board of Trade, a bastion of trading tradition and center of the global grain world, will move all of its grain and soybean complex futures and options contracts to a 22-hour trading day starting May 14, it said, confirming a Reuters report and trade rumors that circulated on Monday.
With electronic trading now running continuously from 6 p.m. to 4 p.m. CST the next day, Monday to Friday, dealers will for the first time have the opportunity to trade immediately after some of the market's most important data: U.S. Agriculture Department export figures and monthly fundamental reports.
Until now, CME had abided by the long-standing desire among many of the industry's veterans to keep the market shut during the early morning hours, giving traders the opportunity to consider the often complex reports at some leisure.
But many of the market's newer entrants such as hedge funds have quietly pressed to end some of those traditions, anxious for more trading opportunities, while even some large commercial users have rued the fact that late-day cargo deals cannot be hedged. An over-the-counter swaps market offered limited access.
"We welcome the extended trading hours at the CME," said Jackie Anderson, spokeswoman for Archer Daniels Midland Co (ADM.N), one of the world's largest grain traders. "We trade in cash markets all over the world, all hours of the day, so the extension will allow us additional opportunity to manage our risk."
Atlanta-based ICE may have provided the final push last month, when it announced plans to challenge the CME's iron grip on grains markets by listing look-alike wheat, corn and soy contracts -- on a 22-hour basis.
Most other major commodity exchanges, including the CME's New York Mercantile Exchange (NYMEX), had already shifted to near 24-hour trading cycles as China's rise spurred demand for Asia-hours activity, while hedge funds and high-frequency traders clamored for greater access.
But the denizens of CME's hallowed CBOT trading floor -- which will continue to trade during the same open outcry hours of 9:30 a.m. to 1:15 p.m. CST -- have largely resisted the move.
They have said it will give a leg-up to large, speculative traders off the floor who have deep pockets to trade and advanced computer systems to rapidly place orders.
"I don't think it's a win for anybody," said Roy Huckabay, a veteran of the Chicago markets and analyst for the Linn Group. "It's a defensive move by the CME. That's all it is."
ICE has declined to comment on CME's plan for expanded hours.