CHICAGO, Oct 21 (Reuters) - A top U.S. Agriculture Department official said key monthly U.S. crop reports will continue to be released during CME Group Inc trading hours, despite complaints from the grain industry that high-speed traders have access to the data before it becomes available on public websites.
“This business of the markets being open during the release of the reports is not going away and will stay with us for a while,” Gerald Bange, chairman of the U.S. Department of Agriculture’s World Agricultural Outlook Board, told a group of agricultural economists and traders at a meeting in Chicago on Monday.
Since last year, when the USDA began releasing its key monthly crop reports while the CME grain markets were open, hedgers have complained bitterly that high-speed traders armed with algorithms and super-fast data feeds have distorted the price discovery function of the markets. Previously, the reports were released when the markets were closed.
On the sidelines of the industry meeting between USDA government officials and market analysts, Bange told Reuters that USDA made the change at the request of CME more than a year ago.
“We are in an era of 24/7 trading. I don’t see how you can pick a time which is not going to affect someone when you release the report,” said Bange, noting markets are always open given around-the-clock global trading.
Bange said the outlook board was aware of rapid trading methods that have developed over the last few years and gets complaints about its release of the crop report during trading hours every month. But the agency has tried diligently to get its data to the public website in about 2 seconds after the data is issued.
“We may be able to go less than 2 seconds. I don’t see zero in the offing at the moment,” he said, adding that the data is released in the USDA lockup in Washington, D.C., but posted by servers in Kansas City.
In contrast, high-frequency traders get the government data in thousandths of a second - and their algorithms are able to dart in and out of markets in lightening speed, creating market liquidity.
High-frequency trading is more common in financial and equity markets with traditionally bigger volumes. But high-speed trading practices are expanding in the traditional grain markets and are especially prevalent on USDA crop report days, traders say.
Big agricultural trade organizations, including the National Grain and Feed Association, want CME to suspend trading for a “pause” during monthly USDA crop reports, citing erratic CBOT prices during releases of USDA data.
Bange said the Commodity Futures Trading Commission, the futures regulator, also cannot dictate when the commodity markets are open. Trading hours, he said, are up to the exchanges.
“The basic issue is we have no control over when the commodity markets are open or closed,” Bange said. “If we change the release time, the commodity markets could always change their market times.”