* CME to keep longer grain session to stay competitive-Duffy
* Extended hours to remain even though ICE threat is small
* CME is open to changing closing time for pit trading
(Adds interview tag, grain trader reaction)
By Tom Polansek and Ann Saphir
CHICAGO, Oct 29 CME Group Inc will
maintain the nearly round-the-clock electronic grain-trading
that it implemented in May despite criticism by some traders
that the new format is hurting market liquidity, a top executive
told Reuters on Monday.
The exchange expanded the grain trading session to fend off
a challenge from rival IntercontinentalExchange.
Grain traders have circulated a petition calling on CME,
owner of the Chicago Board of Trade, to reduce its 21-hour
trading day because they say the longer cycle has spread out
volume, cutting liquidity and increasing volatility.
They note the threat of ICE poaching business from CME has
so far proven mostly hollow.
"Just because the IntercontinentalExchange has not garnered
a lot of market share... there is a competitive issue for us,"
CME Executive Chairman Terrence Duffy said. "We need to remain
competitive and we will keep our markets open as long as others
are open at that time."
Until May, CME grains traded for 17 hours a day, with a
2-1/4 hour pause in electronic trading from 7:15 a.m. to 9:30
a.m. CDT, the start of open-outcry dealing, and another gap from
1:15 p.m. to 6 p.m. EDT.
But arch-rival ICE's surprise launch this spring of
look-alike wheat, corn and soy contracts - on a 22-hour basis -
forced CME's hand, spurring it to join other major commodity
markets that years ago moved to near round-the-clock trade to
cater to hedge funds and Asian traders.
On Thursday, 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.
Prior to Monday's interview, CME had said it was too early
to say what the impact of expanded hours was on the grain
markets. The hours were "something we continue to monitor and
talk with our customers about," the exchange had said.
CME FIRM DESPITE LOW VOLUME ON ICE
ICE's five U.S. grain contracts saw a total of 35,632 lots
traded in September, the lowest volume since they were launched
in May. Activity peaked in July, with 84,024 contracts traded.
The five equivalent contracts traded 13 million contracts
Still, Duffy said CME will not budge on electronic hours.
"If somebody else lists our products with those hours, we
will remain competitive no matter who it is or what product it
is," Duffy said.
FLEXIBLE ON PIT TRADING
Duffy said he would be open to an earlier close to
Some market participants who advocated for a 2 p.m. close to
open-outcry trading are "re-evaluating that," Duffy said.
After expanding electronic hours in May, CME initially kept
the closing time for open-outcry trading at the traditional time
of 1:15 p.m.
However, floor traders and grain elevator managers said the
closing times for pit and electronic trading should be
synchronized to avoid confusion about trading hours and
settlement prices, and CME decided both markets would close at 2
Yet, P.J. Quaid, an independent broker in the corn options
pit, said he would not support an earlier close for open-outcry
trading unless electronic hours were reduced too.
Floor traders will lose business, however big or small, if
electronic trading is open while the pits are closed, he said.
"If they're not going to change the screen, we're not going
to change the pit," Quaid said.
(Reporting by Ann Saphir; Editing by Bob Burgdorfer and Andrew