Participants in grains, oilseeds, and ethanol markets will be able to trade futures for 22 to 23 hours per day on exchanges in Chicago, Minneapolis, and Atlanta. This week, both the Chicago-based CME Group and the Minneapolis-based MGEX announced expanded trading hours in an effort to not be outdone by the fledgling exchange ICE Futures U.S., based in Altanta.
Beginning May 14, the CME Group will expand trading hours in its Chicago Board of Trade (CBOT) grain and oilseed futures and options markets on the CME Globex platform. Beginning May 20, expanded hours will also apply to denatured fuel ethanol. The changes expand trading to 22 hours per day for corn, soybeans, wheat, soybean meal, soybean oil, oats, rough rice, and denatured fuel ethanol.
"As we’ve grown our customer base in agricultural commodities around the globe, we’ve received increased interest in expanding market access by providing longer trading hours," said Tim Andriesen, managing director of agricultural commodities and alternative investments for the CME Group. "In particular, customers are looking to manage their price risk in our deep, liquid markets during market-moving events like USDA crop reports."
Beginning, May 13 for trade date May 14, the new trading hours for the affected CBOT commodities will be from Sunday 5 p.m. to Monday 4 p.m., CT, and Monday to Friday from 6 p.m. to 4 p.m., CT. Open-outcry trading hours will continue to be 9:30 a.m. to 1:15 p.m., CT, Monday through Friday.
Several days following the CME Group’s announcement, MGEX announced it also will expand trading hours for all futures and options contracts, including its hard red winter wheat contract, beginning May 20 for trade date May 21. "Market participants will now have the ability to manage price risk using the Exchange's flagship contract for 22 hours per trading day Monday through Friday and 23 hours per trading day Sunday to Monday," MGEX said in its release.
While expanded hours were inevitable due to a growing number of market participants from outside the United States wanting to trade U.S. futures and options, there are consequences to the changes, says Rich Nelson, director of research for Allendale, McHenry, Ill.
"It lessens the importance of market advisors, who instead of having two hours to digest a major USDA report, will now have to react immediately because trading will be instantaneous," says Nelson. He’s less concerned that the expanded hours will increase price volatility. "Prices will go where they are supposed to go," he says. "It just might take longer.
Others have expressed concern, however, that expanded hours could dramatically alter trading on days when USDA releases important agricultural reports at 7:30, CT, which used to give traders and advisors two hours to digest the numbers and prepare for the market open.
Expanded hours on both the CBOT and MGEX coincide with the launch of grain contracts by the U.K.-based IntercontinentalExchange (ICE). On April 12, ICE announced that it would begin trading corn, wheat, soybeans, soybean meal, and soybean oil on ICE Futures U.S.
Nelson agrees with others that the CME Group’s move to expand hours was the direct result of the launch of grain and oilseed futures with expanded hours on the ICE Futures U.S. exchange, but it is unclear whether large trading volumes would have moved from the CBOT to ICE Futures U.S. had the CME Group not expanded trading hours. "Ice is a fledgling exchange that has had poor results," says Nelson.
Michael Krueger, president of the Money Farm, based in Casselton, North Dakota, also doubts price volatility will increase much as a result of expanded hours, and says the change was long in the making. "The people I’ve talked to don’t plan to make significant changes. We don’t plan to expand office hours," says Krueger. "Everyone wants to trade 24 hours a day whether it’s in financial markets or commodity markets."
Krueger thinks the new trading hours between about 1:15 p.m. and 4 p.m. could see good volume, but doubts the overnight sessions will be heavily traded.
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