The Hagstrom Report

Agriculture News As It Happens


CME Group proposes schedule changes

The CME Group’s announcement that it will expand its Globex electronic trading hours and close from 2 to 5 p.m. Central time each afternoon won mixed reaction today. The announcement said CME wanted to allow time during business hours to reconcile trading accounts and perform other required administrative functions that occur following the daily market close for grain and oilseed futures and options contracts.

The National Grain and Feed Association (NGFA) and North American Export Grain Association (NAEGA) praised the move and submitted a joint letter to the Commodity Futures Trading Commission withdrawing their petition requesting a 30-day comment period on the exchange’s planned expansion of electronic trading. The National Farmers Union said there should be a comment period.

The NGFA and NAEGA commended the Kansas City Board of Trade (KCBT) for amending its expanded electronic trading to close between 2 to 5 p.m. central time, mirroring the CME Group’s action.

The two groups said they expect the MGEX (formerly the Minneapolis Grain Exchange) to do likewise soon.

Previously, each of the exchanges had planned to close electronic trading from 4 to 6 p.m. Central time.

The result of the change will be a 21-hour electronic trading day that runs from 5 p.m. to 2 p.m. Central time, Sunday through Friday.

NGFA and NAEGA stressed they would continue working with the CME Group and others to address a still-unresolved industry concern – the release of key USDA statistical and economic reports during electronic trading hours.

Currently, electronic and open-outcry trading does not begin until 9:30 a.m. central time, two hours after the release of crop production, crop progress, grain stocks, planted acreage and other potentially market-moving USDA reports.

The NGFA and NAEGA noted there is concern from many market participants that the release of such USDA reports during electronic trading hours could increase market volatility and disadvantage some market participants because of unequal access to USDA report data in a timely manner because of such factors as lower Internet bandwidth speeds in rural areas.

“This action by the CME Group (to amend its electronic trading hours) demonstrates the value of the ongoing collaboration between the exchange and users of grain and oilseed futures and options markets who rely heavily on the CBOT contracts to hedge market risk,” said NGFA Acting President Randall C. Gordon.

“This important change will provide time during normal business hours for grain, feed, grain processors and other merchants using grain and oilseed futures and options to reconcile their trading accounts and perform other required accounting and back-office operations,” he said, adding, “thereby hopefully reducing the need to incur significant additional expense associated with hiring more staff or paying overtime to perform these important, necessary functions."

NAEGA President and Chief Executive Officer Gary C. Martin said today, “NAEGA and the NGFA strongly commend the CME Group for its willingness to listen to customer concerns and to respond to them in a positive way.”

The NGFA and NAEGA, when originally notifying the CFTC on May 10 of their request for a 30-day public comment period, had stressed they did not oppose “some reasonable and properly constructed expansion” of electronic trading hours, noting that some member companies believe doing so would enable hedging of cash grain and oilseed transactions over a longer period of the day.

National Farmers Union President Roger Johnson sent a letter to CFTC Chairman Gary Gensler today urging him to establish a 30-day public comment period to discuss the extension of electronic commodity trading up to 22 hours per day.

“The decision of the Intercontinental Exchange (ICE) to expand trading to 22 hours daily and the announcement of the CME Group’s plan to do the same have alarmed many of NFU’s members, many of whom are involved in the cash grains market,” said Johnson. “Concerns regarding the volatile price swings that occur when U.S. Department of Agriculture reports are released have been voiced. Additionally, NFU members are uncertain about the availability of accurate and updated bids from grain purchasers after the open outcry trading day has closed with an established settlement price but electronic markets remain open. Farmers need an explanation and answers to these reasonable questions.”

The electronic market currently trades for 17 hours each day, Johnson said. He added that it is his view the expanded trading would allow for nearly-around-the-clock trading, often for those without a commercial interest in the market, while doing little to benefit farmers and ranchers.

“The public, especially farmers and others with an interest in fair and functional markets, would be well-served if the CFTC were to allow for further dialog,” said Johnson. “Given these concerns, along with the very recent introduction of a 21-hour trading day by CME Group at the end of the most recent CFTC review period, NFU asks that a 30-day comment period be opened. Stakeholders in the grain and oilseeds markets need further opportunity to understand and provide input about the proposed changes.”