CME changes, again

CME Group, the world’s leading and most diverse derivatives marketplace, announced measures to help market participants prepare to transition to expanded electronic trading hours for CBOT grain and oilseed futures and options on CME Globex. CME Group will now offer expanded market access to a variety of CBOT futures and options 21 hours per day, pending CFTC certification.

“What sets CME Group apart is our close working relationship with the grain industry, who have made our grain and oilseed futures the benchmark risk management products,” said Tim Andriesen, Managing Director, Agricultural Commodities and Alternative Investments, CME Group. “That’s why, in response to significant feedback for this customer segment, we’re further amending CBOT grain and oilseed trading hours to 5 p.m. to 2 p.m. CT Sunday through Friday. They have clearly communicated that these hours best meet their risk management needs.”

These measures are in part the result of collaboration between CME Group, the National Grain and Feed Association (NGFA) and the North American Export Grain Association (NAEGA) to address these changes and help the grain industry prepare for the transition.

“This action by the CME Group demonstrates the value of collaboration between the exchange and users of futures and options markets who rely heavily on the CBOT contracts to hedge marketplace risk,” said Randall C. Gordon, acting president of the National Grain and Feed Association. “This important change will provide time during normal business hours for grain, feed and grain processing operations and other merchants to reconcile their trading accounts and perform other required accounting and back-office operations without incurring the significant additional expense of hiring or providing overtime to employees performing these important functions.”

The change was welcomed by agriculture.

“We commend the CME Group for making this change before implementing its expanded electronic trading hours,” Gordon added. “We look forward to continuing to discuss with the CME Group, other exchanges and other parties possible ways to address industry concerns about USDA reports being released during market hours.”

Electronic trading hours for CBOT Corn, Mini-Sized Corn, Soybeans, Mini-Sized Soybeans, Wheat, Mini- Sized Wheat, Soybean Meal, Soybean Oil, Rough Rice, Oats, and Ethanol futures and options plus all related calendar spread options and inter-commodity spread options will be extended to Sunday to Friday, 5:00 p.m. to 2:00 p.m. CT.

Daily settlements will continue to be based on market activity at or around 1:15 p.m. CT each day. Additionally, open-outcry trading hours will continue to operate from 9:30 a.m. to 1:15 p.m. CT Monday to Friday.

In addition, the Kansas City Board of Trade had submitted a new proposal in which electronic trade would open at 5 p.m. and close at 2 p.m. starting May 31. The cme and KCBOT initially coordinated the May 3 announcement of a 4 p.m. to 6 p.m. trading day. CME announced its original plan to expand its trading hours after rival IntercontinentalExchange (ICE) announced a similar set of grain trading contracts would be available on its 22-hour-a-day electronic platform on May 14.

“What a mess,” said Doug Tenney, with Leist Mercantile in Circleville. “The concern is the wild volatility one could see if the USDA report is wildly bearish or bullish, and trading straight through reports. At times, I know we can see corn have 20-30 cents and soybeans at least a 40-cent range in the first 30 minutes of trading. Pre-opening calls on report days currently can change dramatically in the two hours from the 8:30 a.m. report releases until the 10:30 a.m. opening. One thought being floated around is to suspend trading on report days.”

The changes will also have a number of other implications.

“There will be one casualty in all of this hours expansion. There is an over the counter market (OTC) that trades in the hours when the exchange, pit or electronic is not trading,” Tenney said. “With more hours, this OTC would not be needed. Trades in the OTC can be thin, and all over the board. Basically, it is a market that if you need to really do something, it can be done. It is for someone badly out of position. It can be ugly.”

Though no one seems to be quite sure about what the near future holding for the grain markets and trading, it seems that change is certain.

“Times are changing but the details are not yet sorted out. I think the CME decision to pull back was a good one,” Tenney said. “They need to sort things out rather than be a ‘me-too crowd’ just following ICE exchange.”