Groups Want Slow Move to 22-Hour Trade Day


by Chris Clayton, DTN Ag Policy Editor

OMAHA (DTN) — A pair of major grain organizations have asked federal regulators for a 30-day public comment period before allowing major commodity exchanges to expand to 22-hour electronic trading hours.

In a letter to the Commodity Futures Trading Commission, the National Grain and Feed Association, along with its sister group, the Northern American Export Grain Association, asked the CFTC to provide more time to assess the various issues sparked by CME Group and other boards of trade expanding their trading hours on grain and oilseed contracts.

NGFA and NAEGA stated that there was “inadequate advance consideration” given to stakeholders over the effect of a 22-hour trading day, which justifies the CFTC stepping in.

“Neither the ICE contracts nor the CME Group’s plan to expand electronic trading hours were vetted properly with appropriate market participants” prior to their respective announcements, the NGFA and NAEGA said. “It is safe to say there are significant and substantive opposing views as to whether these plans, as currently constituted, are of net benefit” to those using the futures markets for hedging and risk-management.

Neither the CME Group nor CFTC responded immediately to DTN’s questions about the grain industry groups’ request.

But, CME issued a statement saying the exchange supports measures that would offer market participants additional time to prepare for expanded trading hours, provided all futures exchanges are subject to the same schedule and delay.

“We understand that expanding grain trading hours to 22 hours per day represents a significant change for industry participants,” CME officials stated. “Since we announced expanded CBOT grain trading hours last week, we’ve been working closely with the NGFA, other organizations and our customers to address these changes and help them prepare for the transition.”

The InterContinental Exchange announced in April the group would begin a foray into U.S. agricultural contracts with a 22-hour electronic trading platform starting May 14. CME Group responded by announcing earlier this month it would follow suit and is set for a May 21 start. The Kansas City and Minneapolis boards of trade then announced they too would offer 22-hour electronic trading.

Grain elevators and others have raised questions about settlement times if CME closes its outcry pit at 1:15 p.m. CDT, but electronic trade continues. Moreover, questions have been raised about how 22-hour trading would affect USDA reports that are now released at 7:30 a.m. Central time, well before the markets open at 9:30 a.m. Central time.

USDA’s National Agricultural Statistics Service and World Agricultural Outlook Board met earlier this week to discuss the possibility of changing release times for market-sensitive reports. Spokespeople for NASS and WAOB have declined to comment on whether such a change will occur.

If the CFTC finds it is not feasible to institute a public comment period, the two groups urged the agency to approach both ICE and CME Group to encourage them to self-initiate a delay in their respective scheduled implementation dates.

NGFA and NEAGE stated the groups do not oppose expansion, but believe the announcements by ICE and CME “raise serious issues that could lead to competitive inequalities and impose significant additional costs” such as more trading personnel, computer and accounting changes.


© Copyright 2012 DTN/The Progressive Farmer, A Telvent Brand. All rights reserved.

Posted with DTN Permission by Haylie Shipp


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