CME announces new trading hours

Mar 8, 2013
by DTN

—Trading hours shift due to feedback.

CME Group announced new grains and oilseeds electronic trading hours on Tuesday morning after hearing from more than 4,000 customers.

The new hours will be Sunday to Friday from 7 p.m. to 7:45 a.m. On Mondays through Fridays, there will be a break in electronic trading from 7:45 a.m. to 8:30 a.m. Trade will continue from 8:30 to 1:15 p.m. The change affects CBOT grains and KCBT wheat, and pending CFTC approval, the new hours will begin on April 8.

“Over the past several months, we have received significant customer feedback about the current CBOT grain trading hours,” said Tim Andriesen, managing director, Agricultural Commodities and Alternative Investments, CME Group. “As a result, we engaged our customers more formally through one-on-one conversations, focus groups and an online survey, which attracted more than 4,000 responses, to determine what hours best meet their needs. While there were varying opinions about what the modifications to hours should be, we believe these changes balance the needs of our diverse global customers based on their feedback.”

A CME spokesman told DTN there was very little consensus among customers about what the new hours should be. A number of the comments CME received made a strong argument for a morning break, suggesting it provides structure to the market and “creates potentially deeper liquidity on the open.” It also allows time for global trading companies to pass the book from trader to trader, he said, highlighting that feedback came from market participants all over the globe.

Moving the market closing time to 1:15 p.m. was in part due to European traders’ quality-of-life concerns, but also due to the commercial grain industry’s concerns about having enough time to complete back office tasks and prepare grain bids. In addition, the Sunday market open is now consistent with the rest of the week at 7 p.m.

“I don’t think there was any real clear consensus on what the start time should be on Globex in the evening, but there was overwhelming response that they needed to be shortened. Moving the open back to 7 would provide some relief,” he said.

The National Grain and Feed Association (NGFA) said they’ll be evaluating the new hours carefully while CFTC reviews the rule.

“While a portion of the NGFA’s members generally prefer shorter hours, a significant segment would prefer to maintain the current 5 p.m. Central Time restart to evening trading,” NGFA said in a statement. “Those customers make the point that the proposed change expands the period of time— currently 2 to 5 p.m. Central Time but proposed to expand to 1:15 to 7 p.m. Central Time—during which they cannot lay off price risk in futures markets.”

NGFA also noted the 7:45 to 8:30 a.m. break also exposes cash grain purchases and sales made during that time to added risk.

CME Group faced a backlash after expanding electronic trade to 21 hours per day last May as the grain industry complained it would make completing necessary back office tasks difficult and increase labor costs. Others expressed concern about liquidity during overnight hours and about open markets during major report releases CME conducted a survey of its customers in January and the results were clear: the new hours weren’t working. Before the survey was even complete, CME announced they would revise the hours again.

CME’s decision to expand trading hours was initially last May a response to Inter- Continental Exchange adding grain contracts to its platform, which would enable grains trading during the release of major statistical reports.

CME initially proposed a 22-hour trading day with a break from 4 to 6 p.m., but elevators pushed back, and CME eventually settled on a 21-hour trading day, with the market opening at 5 p.m. and closing at 2 p.m.

Many in the grain industry feel having the markets open during report releases doesn’t leave enough time to evaluate the report in its entirety, which could lead to more volatility. Many, including NGFA, have argued for a trading pause during reports, but CME has said it won’t halt trade unless its competitors do.

“NGFA will continue dialogue with CME and other parties about the possibility of instituting a brief pause in grains and oilseeds futures trading immediately before and after release of major statistical reports by the U.S. Department of Agriculture,” NGFA’s statement on the new trading hours noted.

USDA, in the meantime, decided to start releasing reports at 11 a.m. CT when market liquidity is highest, thereby maximizing the markets potential to absorb the information without locking limit up or down. USDA officials have stated in the past they won’t change the report release time again if market hours change. — Katie Micik, DTN