CME to allow talks on some grain options trades before execution

CHICAGO Mon Oct 7, 2013 12:12pm EDT

CHICAGO Oct 7 (Reuters) - Exchange-operator CME Group Inc on Monday said it will begin allowing customers to discuss the details of electronic grain and oilseed options trades during certain times before the orders are executed.

CME said it will permit "pre-execution communications" in Chicago Board of Trade and Kansas City Board of Trade grain and oilseed options from 7 p.m. CDT (0000 GMT) to 7:45 a.m. CDT (1245 GMT) each business day starting on Nov. 11. The change must be approved by U.S. regulators.

It allows "communications between market participants for the purpose of discerning interest in the execution of a transaction prior to the exposure of the order to the market," CME said in a notice.

"Any communication that involves discussion of the size, side of market or price of an order, or a potentially forthcoming order, constitutes a pre-execution communication," the notice said.

CME representatives were not immediately available for further comment.

The exchange operator prohibits pre-execution communications in grain and oilseed options during other trading hours and at all times in grain and oilseed futures. Such communications also are banned in connection with transactions executed in open-outcry grain and oilseed pits.

The change could give overnight electronic traders an advantage over pit traders, said P.J. Quaid, an open-outcry corn options trader.

"I don't understand how they can make the rules different for one venue and give them such an upper hand for the way they do business," he said.

CME allows pre-execution communications in other markets it owns, including electronically traded products at NYMEX and Comex and in electronically traded CBOT interest rate products.