CBOT, grain traders face off in court over settlement rules
* CBOT changed grain settlement rules, sparking lawsuit
* Traders fear new procedures will put them out of business
* Judge admonishes traders for last-minute lawsuit
By Tom Polansek
CHICAGO, June 26 (Reuters) - CME Group faced off with a group of traders in federal court o n T uesday over new rules for settling end-of-day grain prices that the traders fear will put them out of business.
The traders, who work in the open-outcry pits at CME's Chicago Board of Trade, are fighting to preserve a century-old tradition of settling futures prices for crops like corn and soybeans based on transactions executed on the historic trading floor.
They sued the exchange on Friday to reverse its decision to incorporate electronic activity into settlement prices, worried the change will shift volume away from the pits. The new settlement rules took effect on Monday.
As a result of the change, floor traders "are going to sustain serious, irreparable injury," Richard Goldwasser, a lawyer for the traders, told U.S. District Judge John Darrah.
Lawyers for the traders, who had submitted an emergency motion for a hearing, are seeking to move the case to state court from federal court. They argue that CME violated the traders' contractual rights because the exchange knew the new settlement rules would eliminate demand for the traditional open-outcry system.
CME says the new rules better capture prices, as the majority of volume in grain futures is electronic.
The exchange wants to keep the matter in federal court because it involves the U.S. Commodity Futures Trading Commission, which "pushed" the exchange to make the changes, CME's lawyer Jerrold Salzman said.
Darrah said the issue was complex and admonished the traders for waiting until the last minute to file their lawsuit.
CME submitted details on the new rules to the CFTC on May 24.
"I acknowledge that there is an emergency," Darrah said. "The question is, who caused the emergency?"
The court scheduled another hearing for Aug. 14.
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