* New grain cycle cut to 17.5 hours from 21 hours
* CME reacts to complaints from traders
* Country grain elevators disappointed with change
By Tom Polansek
March 5 CME Group Inc said on Tuesday
that it plans to pare its nearly non-stop trading cycle for
grains and oilseeds to 17-1/2 hours per session after traders
complained a move to extend activity had hurt liquidity.
CME, owner of the Chicago Board of Trade, sought to shorten
the trading day less than a year after adding hours in response
to a challenge from arch-rival IntercontinentalExchange.
Many traders said the increase to 21 hours to 17 hours,
implemented last May, had spread out volume, reducing liquidity
and increasing volatility.
The longer cycle also kept futures and options markets for
crops like corn, wheat and soybeans 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
Traders formerly had two hours to analyze the reports before
trading resumed, and some have called on CME to pause trading so
they can digest such data.
Under CME's proposed hours, trading would still be open when
USDA releases major crop reports at 11 a.m. CST.
As proposed, electronic trading will run from 7:00 p.m. CST
to 7:45 a.m. CST Sunday to Friday. Trading will then pause for
45 minutes before resuming on the screen and in the historic
Board of Trade open-outcry pits until 1:15 p.m CST.
Currently, electronic trading runs non-stop from 5 p.m. CST
to 2 p.m. CST.
Traders applauded CME's decision to reinstate morning and
afternoon pauses, which were features of the trading day before
hours were extended last year.
The start of trading in the morning and close of trading in
the early afternoon "have been historically very deep and liquid
opportunities for trading volume, and customers are really
looking for that," said Austin Damiani, broker for Frontier
CME, which surveyed customers about reducing trading hours
last month, declined to say whether it expected the shorter
cycle to boost volume or liquidity.
"We heard pretty clearly that there was an interest in
reduced hours," Dave Lehman, CME's managing director of
commodity research and product development, said in an
interview. "The trick for us, if you will, was in balancing the
needs of those who were happy with the existing hours with those
who wanted shorter hours."
The new cycle will take effect April 8, pending approval
from the Commodity Futures Trading Commission.
Managers of country grain elevators are among those who want
to maintain longer hours.
The National Grain and Feed Association (NGFA), which
represents thousands of elevators and processors, said a
"significant segment" of its members prefer the current 5 p.m.
CST start time for overnight electronic trading to the planned 7
p.m. start time.
The shorter cycle reduces the period of time that cash grain
dealers can lay off price risks in the futures markets,
according to NGFA.
Topflight Grain, a cooperative in central Illinois, may cut
the hours it buys grain from farmers if the CFTC approves the
reduced trading cycle, said Derrick Bruhn, merchandising
manager. He worries he'll face more risk and plans to ask CFTC
to reject CME's proposal.
Bruhn said U.S. grain dealers will suffer a disadvantage to
European merchants because of the limited hours during the U.S.
European traders had asked CME to shorten hours because the
close of trading at 2 p.m. CST, which is 9 p.m. in Paris, hurt
their quality of life, Lehman said.
AGAINST THE GRAIN
Most other major commodity exchanges, including the CME's
New York Mercantile Exchange (NYMEX), 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.
CME's livestock markets trade electronically for 23 hours a
But denizens of CME's hallowed CBOT trading floor fought
against nearly around-the-clock trading. More than 600 traders,
analysts and grain handlers last year signed an online petition
calling on the exchange to shorten the trading day.
Floor traders were largely pleased with CME's plan,
long-time Chicago Board of Trade member Jerome Love said in a
phone interview from the exchange's wheat-futures trading pit.
"Clearly it's an improvement," said Love. "But the floor
population is generally dissatisfied with the 8:30 a.m.
opening," preferring a day that begins an hour later.
The day trading session began at 9:30 a.m. CST before CME
extended hours last year.
Love noted that he did not expect CME to reduce hours