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Tuesday, June 12, 2012

What Do You Think About All The Exchange Trading Hour Changes?


The USDA has opened up a 30 day comment period to hear from the public (YOU) about its best response to the changes in commodity trading hours and how the Acreage, Crop Production, Supply-Demand, and Intentions reports are released to the public.  The USDA is trying to play catch up with the commodity changes, and there is a lot at stake.  But what do you think about that?

To update you, it all began in April when Atlanta’s InterContinental Exchange (ICE) announced its intentions to offer corn, soybeans, and wheat commodity contracts.  Normally, that would not have made a ripple in the pond, except for the fact the ICE trades around the clock and planned to offer the commodity contracts for 22 of a 24 hour trading day. 

The “round the clock” trading caught the attention of the Chicago Mercantile Exchange (CME) which did not want to yield any of its volume because a relatively new exchange moved onto the block.  Should the CME have been worried?  Would you have managed any grain price risk with the tools on the ICE because it links to other exchanges in London, Singapore and New York?

When ICE made its announcement, the CME Group announced it would expand the trading hours of its Globex electronic trading platform, to offer risk management for 21 hours per day, from 5 p.m. to 2 p.m. the next day.  With its agreements with the Kansas City Board of Trade and the Minneapolis Grain Exchange, the KCBT and the MGEX announced similar hours.  Do you pay any attention to the Globex prices? 

Initially, the CME said the open outcry trading pits would remain on the same schedule of opening at 9:30 a.m. and closing at 1:15 p.m.  However, many users began to inquire what the actual closing price was; was it the 1:15 bid or was it the 2:00 p.m. bid?  Was that confusing to you? 

After two weeks of attempting to show how to reconcile the two closing prices and talking to industry users of the exchange, the CME announced it would extend its open outcry to close at 2 p.m. every day, to coincide with the closing of the Globex electronic system.  With the longer trading session in the pits, is that good or bad for your purposes?

In the meantime, many have realized that with the 21 hour trading cycle for the Globex and electronic systems on the other exchanges, that would mean trading would be underway when the USDA released its reports at 7:30 a.m. Central time.  What was your reaction when you first heard/realized that?

The CME said due to the release of the reports during the trading period of the Globex, it would open up the outcry trading pits at 7:20 a.m. on those days, and not wait for the 9:30 typical opening.  Was that a good or bad move by the CME? 

Subsequently, the USDA said it would continue the 7:30 a.m. release time for the June WASDE report, but take public comment through July 9 to determine what should be done.  The eventual decision impacts the World Agricultural Supply and Demand Estimates, Acreage, Cattle, Cattle on Feed, Crop Production, Grain Stocks, Prospective Plantings, Quarterly Hogs and Pigs, and Small Grain Summary reports, which are now scheduled for release during the trading periods of the exchanges.  Is it good to survey the public on what should be done, or just make a decision and implement it?

The USDA wants to know your input on several significant issues:
1. What is your preferred time of day (EDT) for report release?
2. Why is this time preferred?
3. Who are the data users impacted by this recommended time change?
4. How will this change impact these data users?
5. How are the data used when received at the current release time?
6. Other comments

By the way, how would you answer any or all of those questions?

The InterContinental Exchange moved to include grain commodities in its day long trading schedule, so the Chicago Mercantile Exchange expanded its electronic trading hours to be able to compete, but also had to adjust the open outcry hours to have just one closing time.  The USDA’s speculative reports would then be released during the trading period, so the USDA is currently asking the public what it should do about releasing its reports during the trading period.

Posted by Stu Ellis on 06/12 at 12:47 AM | Permalink

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