* Overnight trade to permit "pre-execution communications"
* European demand drives change, CME says
* Prearranged trading remains prohibited
By Tom Polansek
CHICAGO, Oct 7 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, the largest U.S. futures market operator, 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.
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 prohibits such communications in electronic grain and
oilseed options during other trading hours and at all times in
electronic grain and oilseed futures. They also are banned in
connection with transactions executed in open-outcry grain and
CME is making the change in overnight electronic options
because of demand from European customers, company spokesman
Damon Leavell said. Including electronic and pit trading, CME
"has deep and liquid options markets during the day and we don't
believe this is necessary" during other trading hours, he said.
Even with the communications, traders are not allowed to
prearrange or non-competitively execute transactions, Leavell
said. Participants can discuss trades that they want to execute
but the actual execution of orders is not guaranteed, he said.
Still, the change could give overnight electronic traders an
advantage over pit traders, said P.J. Quaid, an open-outcry corn
"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.