* Trading cycle to drop to 17.5 hours starting April 8
* Cut comes less than a year after exchange added hours
* Markets to remain open during key agricultural reports
By Tom Polansek
CHICAGO, March 28 The Chicago Board of Trade won
regulatory clearance to shorten the trading cycle for U.S. grain
markets after a move to extend activity hurt liquidity.
The Board of Trade, owned by CME Group Inc, said it
will cut futures and options trading for crops like wheat, corn
and soybeans to 17.5 hours per session from 21 hours starting on
The Commodity Futures Trading Commission said it did not
object to the plan, following a 10-day review.
The reduction will mark the second time in 20 years that
complaints from traders have derailed attempts by the exchange
to expand trading hours for the marketplace, used to set food
prices around the world.
It comes less than a year after the Board of Trade increased
the cycle to 21 hours a session from 17 hours in response to a
challenge from arch-rival IntercontinentalExchange Inc.
ICE in May began electronic trading on a 22-hour basis.
Trading commodities, including grains, is a
multibillion-dollar business that has grown increasingly
competitive as global demand for natural resources has surged.
The Board of Trade has been dominant in agricultural
commodities in the United States and, prior to ICE's launch,
operated the country's only exchange for corn and soy.
However, grain traders said the Board of Trade's expanded
hours spread out volume and reduced liquidity. The exchange last
week confirmed that "quantitative evidence" supported the
Agricultural markets are ill-suited to long trading cycles
because traditional participants, including farmers, exporters
and managers of grain elevators, need to spend significant time
growing, acquiring and transporting grain, said Bart Vance,
managing director for Atlas Physical Grains.
"We've got to line up trucks; we've got to line up rail
cars; we've got to line up barges; we've got to get bids and
offers; we've got to find out what customers are willing to pay;
those all take conversations," he said.
Most other major commodity exchanges, including the CME's
New York Mercantile Exchange, have already shifted to near
24-hour trading cycles as China's rise has spurred demand for
Asia-hours activity, while hedge funds and high-frequency
traders have clamored for greater access.
Under the reduced schedule, electronic trading will run from
7:00 p.m. CDT (2400 GMT) to 7:45 a.m. CDT (12:45 GMT) Sunday to
Friday. Trading will pause for 45 minutes before resuming on the
screen and in Chicago's historic open-outcry pits until 1:15 p.m
CDT (1815 GMT).
"Not every market is going to react to a 24-hour trade day
as well as another, and I think the grains are certainly an
example of that," said Jay Homan, a retired oat trader who spent
35 years working on the Board of Trade floor.
"It's a very traditional market," he said. "Traders are a
very independent lot. Farmers are a very independent lot. They
don't like people changing their routine."
The longer cycle at the Chicago Board of Trade, implemented
last May, kept grain markets open for the first time during the
release of key monthly reports from the U.S. Department of
Agriculture, which often cause sharp swings in prices.
Trading will still be open when the USDA releases major crop
reports at 11 a.m. CDT (1600 GMT).
ARBOR HOUR RESURRECTED
The Board of Trade in 1993 expanded the trading day by
opening its grain markets an hour earlier than normal at 8:30
a.m. CDT (1330 GMT) to capture business from overseas.
The change, nicknamed the "Arbor Hour" because it was backed
by then-Chairman Patrick Arbor, lasted only a few months before
being reversed due to an outcry from traders who did not want to
work longer days.
Arbor supported last year's extension of trading hours but
said this week that he was pleased the opening bell will ring at
8:30 a.m. CDT (1330 GMT) under the reduced cycle. The markets
traditionally opened at 9:30 a.m. CDT (1430 GMT) following a
pause in trading.
"It's a restoration of the Arbor Hour," he said in a phone
interview while on vacation in Mexico.