UPDATE 1-ICE plans to cap Liffe soft commodity trading fees

Fri Mar 8, 2013 4:18pm EST

* Softs dealers concerned ICE will dominate softs derivatives

* ICE says screen trading fee to be capped at 82 cents

NEW YORK, March 8 (Reuters) - IntercontinentalExchange Inc's will place a five-year cap on trading fees for Liffe soft commodities if the potential merger with NYSE Euronext goes through, and could change the trading currency for cocoa, a senior executive said in a presentation this week.

Atlanta-based ICE announced in December it had agreed to buy NYSE Euronext for $8.2 billion. The deal is currently undergoing the European and U.S. regulatory approvals necessary for the completion of the merger.

Robusta coffee, white sugar and cocoa futures and options currently trade on Liffe, and market participants have expressed concern that ICE's acquisition of NYSE Euronext could give ICE a role that is too dominant in the small cocoa, sugar and coffee derivatives.

Speaking at the Cocoa Merchants Association of America conference in the Dominican Republic on Thursday, ICE Futures U.S. President Ben Jackson said the exchange is committed to capping its screen trading fees on Liffe soft commodities at 82 cents for five years. This is the current fee for ICE Brent crude oil and up 2 cents from the current Liffe fees.

"ICE is very interested in seeing this merger go through so they're going to cap fees and do things like that just to show they're being good corporate citizens," said Jack Scoville, vice-president of brokerage Price Futures Group in Chicago.

"I don't know if, at the end of the day, it changes a whole lot about how people work one way or the other."

The capped fees will make the trade happy, Scoville said, as they pay the trading fee when they make a transaction but it is not as significant for brokers as they do not pay the fee as they pass it along to their clients.

The fee for against actual and exchange-for-physical trades will fall to $1.32, from the current $1.56, the presentation, which was first reported by the Wall Street Journal, showed.

Earlier this year, traders and brokers on NYSE Liffe soft agricultural commodities markets met to discuss fears that ICE's planned takeover of their contracts may create a near monopoly and hike trading fees, sources who were present said.

The exchange further committed to establish product committees for Liffe robusta coffee, white sugar and cocoa, which do not currently exist, which will be similar to those that are operated by ICE Futures U.S.

ICE currently has product committees made up of market participants for its arabica coffee, raw sugar, cocoa, cotton and frozen concentrated orange juice commodities.

The U.S.-based exchange will also look at either shortening or aligning trading hours, according to Jackson's presentation. The Liffe softs trading hours are currently shorter than those on ICE and trade within the ICE soft commodity hours, according to the presentation.

ICE will further "identify (an) appropriate trading currency for cocoa," the presentation stated.

Liffe cocoa currently trades in the British pound whereas ICE cocoa trades in U.S. dollar, and currency moves often a play significant role in the market, adding pressure or support to one market according to its value. Arbitrage dealing, which is when a trader simultaneously buys one commodity and sells in order to make a profit from the price difference, between the two markets is common practice due to the currency play.

In the presentation, ICE also stated it will address issues revolving around cash futures convergence such as quality terms, grading and warehousing provisions, as well as to develop new contracts and "efficient arbitrage vehicles".

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