UPDATE 2-CME Group seeks feedback on nearly non-stop grain trade

Tue Jan 22, 2013 2:50pm EST

By Tom Polansek

CHICAGO Jan 22 (Reuters) - The Chicago Board of Trade on Tuesday launched a survey asking customers whether it should shorten the nearly non-stop electronic trading cycle for grains and hinted that executives had grown less concerned about competition from rival IntercontinentalExchange.

The Board of Trade, which dominates agricultural trading with U.S. grain and oilseed futures and options contracts, in May expanded the trading session to 21 hours from 17 hours to fend off a challenge from upstart ICE.

Customers have already provided "significant feedback" about the controversial change, the Board of Trade said, without specifying whether the comments were primarily positive or negative.

"As we start a new year, we think the timing is right to review those changes and industry feedback more formally to ensure we're continually meeting our customers' needs," said Tim Andriesen, managing director for agricultural commodities and alternative investments at CME Group, which owns the Board of Trade.

Some grain traders have circulated a petition calling on the Board of Trade to reduce the trading day because they say the longer cycle has spread out volume, cutting liquidity and increasing volatility. They add that the threat of ICE poaching business has so far proven mostly hollow.

In October, Bunge Ltd, one of the world's largest agricultural trading houses, threw its weight behind the effort to reduce hours, telling Reuters that 21-hour trading was "too much" for traders and merchants to monitor.

The Board of Trade said on Tuesday that it will maintain the extended hours as long as it believes it needs to from a competitive standpoint.

"We do take all customer feedback seriously and have committed not to make any changes without first reaching out to our customers and the industry," CME spokesman Chris Grams said.

The stance was a shift from late last year, when CME Executive Chairman Terry Duffy told Reuters that nearly round-the-clock electronic trading would not change as long as ICE was in the picture.

"Just because the IntercontinentalExchange has not garnered a lot of market share... there is a competitive issue for us," Duffy said in an interview in October. "We need to remain competitive and we will keep our markets open as long as others are open at that time."

ICE, which launched U.S. grain contracts for the first time in May, declined to comment on the competition with CME.

POLARIZING ISSUE

The Board of Trade survey, available online at www.cmegroup.com/agsurvey, asks customers who say they are dissatisfied with trading hours whether the electronic cycle should be shortened with a pause in the U.S. morning hours and an earlier closing time.

Prior to implementing 21-hour trading, CME last spring proposed an increase to 22-hour trading. It pared back the plan in the face of opposition from some traders and grain elevator managers.

CME had not surveyed customers prior to announcing its initial plan last year.

In the historic open-outcry pits, the details of trading hours are "such a polarizing issue," said P.J. Quaid, an independent floor trader.

Longer trading hours increase volatility by reducing liquidity, he said, adding that "a lot of people down here want 23 hrs and 45 min [of electronic trading] because they want to live off the volatility."

Quaid, who works in the corn options pit, hopes the Board of Trade returns to a shorter, more liquid cycle, noting "ICE isn't really a competitor."

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