CME Group (>> CME Group Inc.) on Tuesday told Iowa farmers, Chicago brokers and huge global hedge funds to brace for a longer, more intense trading day, as it announced plans for nearly round-the-clock grains trading to fend off pressure from arch-rival IntercontinentalExchange (>> IntercontinentalExchange, Inc.).
The CME's Chicago Board of Trade, a bastion of trading tradition and center of the global grain world, will move all of its grain and soybean complex futures and options contracts to a 22-hour trading day starting May 14, it said, confirming a Reuters report and trade rumors that circulated on Monday.
With electronic trading now to run continuously from 6 p.m. to 4 p.m. central time the next day, Monday to Friday, dealers will for the first time have the opportunity to trade immediately after some of the market's most important data: U.S. Agriculture Department export figures and monthly fundamental reports.
"Customers are looking to manage their price risk in our deep, liquid markets during market-moving events like USDA crop reports," Tim Andriesen, managing director of CME's Agricultural Commodities and Alternative Investments, said in a statement.
Until now, CME had abided by the long-standing desire among many of the industry's veterans to keep the market shut during the early morning hours, giving traders the opportunity to consider the often complex reports at some leisure.
But many of the market's newer entrants, such as hedge funds, have quietly pressed to end some of those traditions, anxious for more trading opportunities, while even some large commercial users have rued the fact that late-day cargo deals cannot be hedged. An over-the-counter swaps market offered limited access.
Archer Daniels Midland Co (>> Archer Daniels Midland Company), one of the world's largest grain traders and processors, welcomed the longer trading day.
"We trade in cash markets all over the world, all hours of the day, so the extension will allow us additional opportunity to manage our risk," ADM spokeswoman Jackie Anderson said.
Atlanta-based ICE may have provided the final push to CME last month, when it announced plans to challenge Chicago's iron grip on grains markets by listing look-alike wheat, corn and soy contracts -- on a 22-hour basis.
Most other major commodity exchanges, including the CME's New York Mercantile Exchange (NYMEX), had already shifted to near 24-hour trading cycles as China's rise spurred demand for Asia-hours activity, while hedge funds and high-frequency traders clamored for greater access.
But denizens of CME's hallowed CBOT trading floor -- which will continue to trade during the same open outcry hours of 9:30 a.m. to 1:15 p.m. central time -- had resisted the move.
They said it will give a leg-up to large, speculative traders off the floor who have deep pockets to trade and advanced computer systems to rapidly place orders.
"I don't think it's a win for anybody," said Roy Huckabay, a veteran of the Chicago markets and analyst for the Linn Group, about the longer hours. "It's a defensive move by the CME. That's all it is."
ICE has declined to comment on CME's plan for expanded hours.
The overhaul comes as CME is approaching the end of a five-year period during which five people, including three CBOT directors, had veto rights over rule changes at the exchange.
The group was given the veto power in 2007 as part of revised terms for the CME-CBOT merger agreement to provide additional value to all CBOT Holdings shareholders.
(Writing by Jonathan Leff; Reporting by Tom Polansek, Karl Plume and Julie Ingwerson; Editing by Bob Burgdorfer)