UPDATE 4-ICE to study cutting soft commodities trading hours

Fri Mar 22, 2013 9:09pm EDT

By Marcy Nicholson

SAN FRANCISCO, March 22 (Reuters) - IntercontinentalExchange Inc will consider cutting trading hours for soft commodities in a bid to improve liquidity, president and chief operating officer of ICE Futures U.S. Ben Jackson said on Friday.

The Atlanta-based exchange will put forward a proposal to reduce hours in sugar, coffee and cocoa contracts listed on Liffe in London and ICE Futures U.S. in New York once it has completed its $8 billion acquisition of NYSE Euronext, he told delegates at the National Coffee Association USA conference.

Committees dedicated to each commodity will be responsible for making a recommendation on the hours to the exchange.

"In recognition that there are periods of time when there are very illiquid hours ... We're going to work with the (product) committees and shorten them (the hours)," Jackson said.

Speaking to reporters, Jackson said: "In most instances it's probably going to be that we shorten them. We think it's at a point and time where we should shorten the hours but we need to get input from the trade."

FIRST MOVE TO CHANGE HOURS

This is the exchange's first move to change U.S. trading hours after complaints from traders that the long hours of trading in cocoa, arabica coffee and raw sugar futures and options in New York reduces liquidity.

"While we're seeing an increase in participation from people in Asia, when they're participating is in the normal New York/London hours of trade. You're not seeing a lot of it in overnight trade," Jackson told reporters.

ICE will acquire the robusta coffee, white sugar and cocoa futures and options contracts listed on Liffe in London as part of its NYSE takeover. Those contracts are open for a shorter period and within the ICE soft commodity hours.

It also comes after ICE started a review earlier this month of its trading hours in Canada, where it has the world's largest futures and options market for canola.

Customers of the U.S. exchange from growers and coffee roasters to sugar traders say they see little benefit from the early U.S. opening.

"(The long trading day) just creates pockets of a lack of liquidity in the market, and it gives the market exaggerated moves," said Nick Gentile, senior partner of commodity trading consultancy Atlantic Capital Advisors.

ICE is not considering a change for the trading hours in its electronic U.S. grain market, a spokeswoman said on Friday.

Its Chicago rival CME Group Inc. announced plans to ditch its longer trading day for its grain contracts less than a year after adding hours after trader complained it reduced liquidity.

ICE's soft contracts all trade electronically and close at 2:00 p.m. EDT (1800 GMT).

Pre-open, which allows operators to place orders pending the start of trading, starts at 8:00 p.m. EDT (0000 GMT) for all softs, while actual trading in the individual contracts starts at different times in the morning.

Raw sugar, its largest soft contract by open interest and volume, trades for 11.5 hours starting at 2:30 a.m. EDT (0630 GMT) from Monday to Friday.

Cocoa is open for 10 hours starting at 4:00 a.m. EDT (0800 GMT) while arabica coffee starts at 3:30 a.m. EDT (0730 GMT).

In London, white sugar opens at 0845 GMT and closes at 1830 GMT, cocoa starts at 0930 GMT and shuts at 1650 GMT and robusta coffee opens at 0900 GMT and shuts at 1730 GMT.

NEW LIFFE COCOA CURRENCY?

Jackson also told reporters that ICE would ask the Liffe cocoa committee, which will be formed upon completion of the acquisition, to consider changing the currency that the market trades in in the future to the euro, from Sterling.

"From the number of conversations I've had with commercial market participants that use the Liffe contract, I've received pretty consistent feedback that the euro would be a much better reflection how the actual global cocoa trade happens for that contract," Jackson said.

"To facilitate that hedging and those transfers back and between West Africa and Europe and London, the feeling is that the euro is a more reflective currency."

The ICE cocoa futures and options will continue to trade in U.S. dollars, he said, noting that people have consistently said this is the appropriate currency.