CME Group says reduced grain cycle not "perfect" for all clients

Thu Mar 21, 2013 7:26pm EDT

* CME customers clashed over morning pause in trading

* Exchange operator has proposed 45-minute halt

* CFTC set to finish review of plan on March 27

By Tom Polansek

CHICAGO, March 21 (Reuters) - CME Group Inc said its plan to reduce grain trading hours is not the "perfect answer" for all its customers and for the first time detailed a clash over the proposed new schedule.

CME, owner of the Chicago Board of Trade, said in a statement on its website that customers, ranging from farmers and managers of country grain elevators to market makers, disagreed over whether trading should halt during weekday mornings.

The exchange operator announced this month that it plans to reduce the trading cycle for its grain markets, which are used to set food prices around the world, to 17.5 hours a day from 21 hours a day starting on April 8.

According to the plan, electronic trading will run from 7:00 p.m. CST to 7:45 a.m. CST Sunday to Friday. Trading will then pause for 45 minutes before resuming on the screen and in the historic Board of Trade open-outcry pits until 1:15 p.m CST.

However, a "good number" of traders surveyed about trading hours pushed the exchange operator to reinstate a longer pause of 2 hours and 15 minutes, CME said.

Independent market makers and open-outcry traders wanted a shorter break, while some country elevators opposed any break because they wanted access to the market during the morning, according to the statement.

"Our decision-making process must involve tradeoffs between diverse client points of view," CME said.

The plan to cut trading hours comes after CME in May increased the cycle to 21 hours a session from 17 hours in response to a challenge from arch-rival IntercontinentalExchange Inc.

Market makers said the increase spread out volume, reducing liquidity and CME had "quantitative evidence" that supported the complaints, according to the statement.

The proposed reduction "strikes a reasonable balance" among the differing objectives of customers, CME said.

A 10-day review of the proposal by the Commodity Futures Trading Commission is set to end on March 27 and CME has not requested an expedited review, according to the agency.

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