CME expanding daily trading hours to 22 beginning May 13

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Since the development of futures contracts for buying and selling farm commodities began in 1848—there have been several significant changes at the Chicago Board of Trade.  And one that was announced yesterday is among a handful with the greatest impact.

The new development expands the trading day to 22 hours.  It begins at 6 p.m. and ends at 4 p.m. the next afternoon.  That begins May 13—and is in response to a major challenge by the new InterContinental Exchange at Atlanta to take over the traditional grain and agricultural commodities traded in Chicago.

The open outcry trading in the iconic pits will remain 9:30 a.m. to 1:15 p.m.  However, the 22 hour per day trading will be on the electronic version of the Chicago Board of Trade—known as the CME Globex trading platform.  There is a lot of impact to this. 

First of all—farmers who call elevators to forward contract grain, place hedges, or buy options, will likely wait until the market closes at 4.  That means elevator merchandisers and managers will be working late every day.  Currently, it is easy to take care of that business between the 1:15 market close and when the elevator office closes at 5.  But not any more.

Secondly—the trading day will be underway when the USDA releases price-sensitive reports, typically at 7:30 a.m. and 3:00 p.m. when the market is not in operation.  Unless the USDA changes its schedule to release its commodity estimates between 4 p.m. and 6 p.m.—there will be some haves and have nots when a report is released during the trading.  Large trading groups will have the resources to get instant access, but a typical farmer will have to wait 15 or 20 minutes until his dial-up Internet modem taps into the information flow of the report.

Thirdly—Farmers who manage their price risk at the CME will have to be much more aware of the daily trading activity.  China may announce a major grain purchase during their business day, but that may be 1 a.m. here, and the markets could make major moves that the large brokerages follow, but can’t be followed easily by the typical producer.

It will take some time to get used to waiting until 4 p.m. to see how the market closed, or did it just temporarily stop so records could be updated, and margin calls made. Probably, more of the latter than the former.

Beginning with the trading on Sunday evening May 13, the CME Globex trading floor will be in operation 22 hours per day, with the official start at 6 p.m. and the market close at 4p.m. the following day.  The open outcry will remain its regular morning and early afternoon hours.  The change will have impact on farmers who closely follow the price action, and elevators who provide hedging services.

Source: FarmGateBlog

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Wisconsin  |  May, 02, 2012 at 01:52 PM

Grain and soybean futures already are already trading electronically overnight under the current system, so the impact of any announcements by China at say 1 a.m. CT shouldn't be any different than it is now.

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