CHICAGO — In response to continuing controversy about the CME Group’s current extended trading hours and trading when U.S. Department of Agriculture reports are issued, the CME Group notified its membership on Jan. 29 that it has decided to reduce trading hours for grain and oilseed markets.
The CME Group said the change in trading hours, the specifics of which have not yet been decided upon, would require the approval of the Commodity Futures Trading Commission. The CME Group said “we are continuing to vet alternatives with our customer base” and more specifics would be detailed in coming weeks. The CME Group said it had received “significant customer feedback,” including its own formal survey that began a week ago and still was under way.
The main issue leading to pressure to alter trading was the change in May 2012 that extended the trading day to 22 hours. The longer hours meant that market participants would have to trade on the basis of U.S.D.A. data that they would have little time to evaluate. In the past, trading hours were sufficiently abbreviated that many reports issued early in the morning came out before the day’s market action had begun.
The change to longer hours led to a large amount of dissension in the agriculture futures community, including recent comments in the press.
The CME Group in a letter to customers suggested that shorter trading hours were in the offing and that the futures exchange would be “open to considering a market pause allowing participants to evaluate the data if all exchanges and trading venues would do the same. We would support a halt, as long as it was unified for all venues, as that would best benefit all customers by ensuring the necessary market liquidity needed for effective price discovery during this time.”
On Jan. 30, The National Grain and Feed Association responded to the CME letter by calling the decision to reduce trading hours for its grain and oilseed futures and options contracts “a positive first step.”
The N.G.F.A. added that it remained involved in finding a solution to the problem of continued electronic trading when U.S.D.A. reports were released. It said it advocated changing the practice because it unfairly favored traders with fast bandwidth speeds and may be creating excessive volatility in the market.
Todd Kemp, vice-president for marketing and treasurer of NGFA, noted that the CME group said it would institute a trading pause if all agricultural futures markets went along. “One might believe that would be unlikely because ICE (Intercontinental Exchange) has no intention of instituting a pause,” he said.