There's a new commodity trading market opening later this month and as it nears there may be some interesting questions raised. Intercontinental Exchange Inc., or ICE, will begin trading grain futures contracts on May 14, pending regulatory review, with trading hours stretching from 8 pm to 6 pm Eastern Time and starting at 6 pm Eastern Time on Sundays. The contracts would be cash settled based on the settlement price of the corresponding futures contract at the Chicago Board of Trade.
The contracts would provide direct competition to the CME Group in Chicago. As a result, traders report that the CME Group is considering responding by expanding trading to 22 hours per day, reaching from 6 p.m. when the overnight session currently begins to 4 p.m. the next afternoon. How will the CME Group respond? There have been rumors that the trading cycle would expand to 22 hours on that platform too, but the organization issued a statement - through e-mail - indicating that may not be the case: "At CME Group, we regularly engage with industry participants to discuss ways to enhance our markets. We will keep our customers and industry participants abreast of any planned changes, but have nothing formal to announce at this time."
Traders are obviously worried about the impact if USDA releases reports during trading hours.
Bryce Knorr, Senior Editor, Farm Futures, notes that ICE plans to use the Chicago Board of Trade for its settlement, so prices would be identical. "ICE claims it has a superior execution technology that will make it cheaper," he says. "The CBOT will be under pressure to trade whatever hours the ICE does or else risk losing business."
He notes the only differentiation CME Group can offer to the market are its swaps, which only see volume on USDA report days, limit move days, etc. "And they are not easy to trade," Knorr says. "Orders must go through a swaps dealers with no screen quotes shown for reference for most traders."
With a nearly-full day market about to open, the grain trade could find itself with a whole new look at the market.