| CHICAGO, March 22
CHICAGO, March 22 CME Group's plan to
scale back its trading day for grain contracts will likely
provide a boost to volume and liquidity, but traders said it
will take time for investors to return to the market.
"I think if they compress the hours again ... it serves the
needs of the customers that actually use this market," said
Chris Robinson, senior trader at Top Third Ag Marketing. "I
think it is going to be good for the markets."
CME announced this month that it plans to reduce the trading
cycle for the grain markets on its Chicago Board of Trade, which
are used to set food prices around the world, to 17.5 hours a
day from 21 hours a day starting on April 8.
The exchange operator lengthened its trading day to 21 hours
in May 2012 to compete with arch-rival IntercontinentalExchange
, which last year launched look-alike grain contracts and
nearly round-the-clock trading.
The new schedule irked many long-time customers who
complained that liquidity quickly dried up as trades were spread
out across the long day. Overall volume also dropped off as
investors cut back their exposure to the volatile market.
"It was kind of out of control," said Jason Britt, president
of Central States Commodities. "I had some long-time customers
... who really scaled their volumes back because you did not
know if you were going to wake up in the middle of the night and
see that beans were down 30 or 40 cents."
CME, which surveyed its customers about the effects of the
expanded trading session, said earlier this week it had
"quantitative evidence" that supported the customer complaints.
So far this year, CBOT corn, soy and wheat futures volume
has totaled 3.16 million contracts, down 4.6 percent from the
same period in 2012.
Volume for CBOT corn futures, the heaviest traded
agricultural contract, have fallen the most, dropping 14 percent
in the first three months of 2013 compared to a year earlier.
"You make a knee-jerk reaction to things that may or may
not be an issue, you open Pandora's box," said Garrett Toay,
risk management consultant at Toay Commodities Futures Group in
Des Moines, Iowa.
Traders said that many investors will be carefully
monitoring the liquidity pools, particularly at the opening and
closing when activity is the heaviest, before deciding if they
want to bring business back to the grains market.
Investors also will test the waters on days when there is
big fundamental news, such as a crop conditions report, and
heavy trading is expected.
CME's willingness to change will boost the confidence that
investors have in the grains market, which could also make some
investors more willing to come back, Central States' Britt said.