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Tuesday, May 01, 2012

CME Expands Daily Trading Hours To 22 Beginning May 20.


Since the development of futures contracts for buying and selling farm commodities began in 1848—there have been several significant changes at the Chicago Board of Trade.  And one that was announced yesterday is among a handful with the greatest impact.

The new development expands the trading day to 22 hours.  It begins at 6 p.m. and ends at 4 p.m. the next afternoon.  That begins May 20—and is in response to a major challenge by the new InterContinental Exchange at Atlanta to take over the traditional grain and agricultural commodities traded in Chicago.

The open outcry trading in the iconic pits will remain 9:30 a.m. to 1:15 p.m.  However, the 22 hour per day trading will be on the electronic version of the Chicago Board of Trade—known as the CME Globex trading platform.  There is a lot of impact to this. 

First of all—farmers who call elevators to forward contract grain, place hedges, or buy options, will likely wait until the market closes at 4.  That means elevator merchandisers and managers will be working late every day.  Currently, it is easy to take care of that business between the 1:15 market close and when the elevator office closes at 5.  But not any more.

Secondly—the trading day will be underway when the USDA releases price-sensitive reports, typically at 7:30 a.m. and 3:00 p.m. when the market is not in operation.  Unless the USDA changes its schedule to release its commodity estimates between 4 p.m. and 6 p.m.—there will be some haves and have nots when a report is released during the trading.  Large trading groups will have the resources to get instant access, but a typical farmer will have to wait 15 or 20 minutes until his dial-up Internet modem taps into the information flow of the report.

Thirdly—Farmers who manage their price risk at the CME will have to be much more aware of the daily trading activity.  China may announce a major grain purchase during their business day, but that may be 1 a.m. here, and the markets could make major moves that the large brokerages follow, but can’t be followed easily by the typical producer.

It will take some time to get used to waiting until 4 p.m. to see how the market closed, or did it just temporarily stop so records could be updated, and margin calls made. Probably, more of the latter than the former.

Beginning with the trading on Sunday evening May 20, the CME Globex trading floor will be in operation 22 hours per day, with the official start at 6 p.m. and the market close at 4p.m. the following day.  The open outcry will remain its regular morning and early afternoon hours.  The change will have impact on farmers who closely follow the price action, and elevators who provide hedging services. 

UPDATE—May 3, 2012

There have been many new developments in this story since May 1.
1)  The CME had planned to begin the new schedule with the Sunday evening trading session on May 13.  Because of the necessity of a 10 day waiting period required by the Commodity Futures Trading Commission, the start has been postponed until May 20.

2)  The Minneapolis Grain Exchange has also announced a 22 hour trading period for its hard red spring wheat contract, beginning on May 20, also with the 6 p.m. to 4 p.m. trading period.

3)  The Kansas City Board of Trade has also announced plans for a 22 hour trading period for its hard red winter wheat futures contract and options, beginning the same day, and for the 6 p.m. to 4 p.m. trading period.

The process was set in motion by the InterContinental Exchange (ICE) which had previously numerous commodities on 24 hour or nearly 24 hour clocks, due to its relationships with the exchanges in London, New York, and Singapore.  However, when ICE moved to add corn, wheat, and soybean futures, along with soybean meal and oil, the US-based exchanges felt pressured to respond to the competition.

The National Grain and Feed Association—composed of grain elevators, grain handlers, and processors—has protested the action by the exchanges, contending it will create personnel problems for many elevators in having to serve clientele for much longer hours.

Additionally, the USDA is concerned about some of its data users being at a disadvantage when price-sensitve information is released during trading sessions.  The USDA says it will study the implications, but no decision has been announced.

Posted by Stu Ellis on 05/01 at 11:28 PM | Permalink


The grain markets were already open at 1 AM during China business hours. That has already happened. Ron: You make a valid observation. I was attempting to point out an increased need for vigilence in the management of risk. ~Stu

Posted by: Ronald Meyer at May 2, 2012 8:08AM

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