Regulators at odds over longer CME grain cycle

Reuters News
Posted: May 14, 2012 8:12 PM
Regulators at odds over longer CME grain cycle

By Tom Polansek

CHICAGO (Reuters) - Jill Sommers, a commissioner at the Commodity Futures Trading Commission, said CME Group should be allowed to increase trading of its grain futures and options to 22 hours a day.

In a Reuters interview, Sommers said the CME's request is similar to other markets that trade nearly around the clock.

"There are many other contracts that trade with those types of hours," she said in comments that put her at odds with fellow Commissioner Bart Chilton.

The planned shift to 22-hour trading at the CME's Chicago Board of Trade, which dominates agricultural markets, has become a contentious issue among grain traders as it will keep markets open during key U.S. Department of Agriculture crop reports that often cause sharp swings in prices.

CFTC staff is reviewing the CME's plans for increased trading hours. CME had to give the agency 10 business days' notice before implementing the change.

CFTC staff will likely decide whether to implement an extended review and comment period before Wednesday, when the 10-day wait ends.

CME is slated to increase trading hours on May 21.


Chilton said on Friday he supported a supplemental 30-day comment period on the increase to allow time for feedback from members of the grain industry.

Top U.S. grain groups have called on CFTC to require a 30-day comment period to give elevator managers, grain merchandisers and exporters more time to prepare for the change.

The groups asked CFTC to encourage CME to "self delay" the start of longer trading days if the agency did not have the authority to require an extended review.

Sommers said it was up to CME whether it wanted to postpone the increase.

"If the CME believes their customers have a legitimate concern and they want to be sensitive to that, that is CME's decision," she said.


Atlanta-based ICE launched new, electronically traded grain and soy contracts on Monday in the biggest challenge yet to CME's iron grip on the markets. The contracts trade on a 22-hour basis but attracted low volume on the first day.

CME's plan has come under scrutiny because it is well-established in the grain markets and seeking to increase the existing trading hours, while ICE was able to "self certify" its new contracts under CFTC rules.

Grain traders are the latest to be forced to adapt to the rigors of near round-the-clock trading. Many do not like it.

They worry that the shift to a 22-hour grain cycle will give a competitive advantage to large traders who can quickly access and analyze U.S. crop data that will be issued during active trading hours for the first time.

Oil traders have contended with volatile weekly inventory data released in the middle of trading for a decade; foreign exchange and Treasury brokers have long been required to digest growth data and jobless figures while punching trades.

Cash equity traders are among the few who still get some reprieve, with U.S. company earnings typically released before or after the bell - although the rise of alternative venues means their trading also runs beyond traditional market hours.

(Reporting By Tom Polansek; Editing by David Gregorio and Bob Burgdorfer)