Shadow Trading Hurts Cattle Market



Bismarck Tribune reports:  

DICKINSON — The earthy smell of a livestock ring is perfume to cattlemen, unlike the odor of unseen money traded by guys in suits and ties a long ways from the sales barn.

It’s called high-frequency trading, driven by computer programs that capture vacillations in the market in milliseconds and can leave the hard-working rancher who brought in a load of cattle that day wondering what hit him.

Sen. Heidi Heitkamp, D-N.D., brought a panel of cattle and market experts into the Stockmen’s Livestock sales ring in Dickinson to talk about it Friday, attracting more folks in boots and cowboy hats than might show for a weekly sale.

The problem is that the industry went from an all-time high market a year ago to major slippage since, down by nearly half in months marked by extreme volatility and more than 30 occasions when the market hit its daily limit and trading came to a halt.

Larry Schnell, owner of the livestock barn, said ranchers can deal with the fundamentals of the industry, the droughts and the supply-demand equations that affect the cattle market. But the high-frequency trading that floats over the entire market is a force that has nothing to do with those basic fundamentals is something else altogether, he said.

“That’s why it’s so hard to accept the consequences for all the trading under the table and in the dark,” Schnell said. “They’re gaming the situation, and it’s about time we found out what to do.”

Fred Berger, a cattle buyer, told the audience about a sale last week at Herreid Livestock when futures trading that kicked in the daily limit cost sellers $20 a hundred-weight in three days.

“There was a $1 million loss on that sale,” Berger said.


CLICK HERE to read the full article

Notify of
Inline Feedbacks
View all comments
Would love your thoughts, please comment.x