* ICE lists U.S. grain contracts "at very low cost"-CEO
* Newly launched contracts "changed the game board"-CEO
* Some traders upset about extended grain cycle at rival CME
By Tom Polansek
CHICAGO, Oct 31 IntercontinentalExchange's
newly launched U.S. grain futures are "good business"
for the exchange, despite upsetting members of the agricultural
industry, ICE's chief executive said on Wednesday.
ICE surprised the farm sector this spring when it announced
it would challenge rival CME Group's iron grip on grain
trading by launching lookalike grain and soy contracts on a
CME, owner of the Chicago Board of Trade, responded by
extending the trading cycle for its benchmark grain and soy
contracts to 21 hours per session from 17 hours.
ICE has attracted low volume for its contracts since their
launch in May, but they are "good business" because the exchange
lists them "at very low cost", Chief Executive Officer Jeffrey
Sprecher said on the sidelines of a futures conference in
"It caused our competitors to react and in doing so it
changed the game board, which is part of being competitive," he
ICE's five U.S. grain contracts saw a total of 35,632 lots
change hands in September, the lowest volume since they began
trading. Activity peaked in July, with 84,024 contracts traded.
The five equivalent contracts traded 13 million lots on CME
Some grain traders, merchants and processors are unhappy
with the ICE's entry into U.S. grain markets. They blame ICE for
forcing CME to extend its trading session to remain competitive,
reducing liquidity and increasing volatility in the primary
market by spreading out volume.
Traders have gathered more than 600 signatures on an
electronic petition calling on CME to reduce trading hours,
noting ICE has turned out to be a mostly hollow threat.
And last week Bunge Ltd, one of the world's top
agricultural trading houses, told Reuters it supported a shorter
However, CME will not reduce electronic trading hours "just
because the IntercontinentalExchange has not garnered a lot of
market share," CME Executive Chairman Terrence Duffy told
Reuters this week.
CME needs to stay competitive with exchanges listing
lookalike contracts, he said.
CME cemented its dominance in world grain futures markets
this month by striking a deal to buy the Kansas City Board of
Trade, which trades U.S. wheat futures.
ICE's Sprecher declined to say whether he wants to acquire
the Minneapolis Grain Exchange, the last independently owned
U.S. agricultural marketplace.