CME seeks quick approval for 21-hour grain cycle

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CME Group has asked U.S. regulators for expedited approval of its revised plan to increase grain trading hours, sending them a detailed rebuttal to lingering industry concerns about the change.

The massive exchange operator, scrambling to keep pace with nearly around-the-clock trading that began on Monday at rival IntercontinetalExchange, requested the Commodity Futures Trading Commission allow it to increase its grain trading cycle to 21 hours a day "as soon as possible," underlining the words in a letter to the agency that was posted on the CFTC website on Thursday.

CME, owner of the Chicago Board of Trade, modified its plan to extend trading for grain futures and options to a 21-hour session from an originally envisioned 22 hours in response to criticism from grain firms, confirming a Reuters report. The markets currently trade for 17 hours.

It hopes the revision is enough to win quick support from the CFTC. A majority of the five CFTC commissioners would need to approve CME's plan for fast-track approval, an agency spokesman said.

On the chance the expedited approval would not be granted, the CME also filed a request seeking CFTC approval of the expanded trading within a 10-business-day review period. Unless the agency decides to extend the review, the longer hours will take effect by June 4, according to CME.

The National Grain and Feed Association, the nation's largest grain group, put its weight behind CME's expedited request, telling the CFTC it saw "no reason to delay" implementation of 21-hour trading.

At the same time, the NGFA and other grain groups said they were still worried that expanded trading hours will increase volatility by keeping markets open when the U.S. Department of Agriculture issues monthly crop reports that often cause sharp swings in prices. CME hastily unveiled plans to expand the CBOT's two-part, 17-hour trading day early this month, seeking to defend its turf after ICE said it would launch 22-hour electronic trading in five major grains including corn and wheat.

The plan caused an uproar among the CME's core agricultural constituents, prompting calls for changes or a public-comment period.

The National Farmers Union attempted to put the brakes on CME's latest plan by calling for a 30-day comment period.

"The public, especially farmers and others with an interest in fair and functional markets, would be well-served if the CFTC were to allow for further dialog," Roger Johnson, president of the union, said in a statement.

CME said it would continue to discuss concerns about trading during USDA reports with industry members. It said in the letter to CFTC that it was "fair and reasonable" to keep CME markets open for the reports because grains will be actively traded on other markets, an apparent reference to ICE.

CME also told the CFTC that "additional price discovery during longer trading hours will allow the market to absorb market event(s) more effectively," downplaying concerns about increased volatility.

CME, which dominates agricultural markets, is eager to implement the longer trading hours as it has already had to delay the start of extended trading twice. CME did not submit its initial plan for 22-hour trading to CFTC in time to meet the originally scheduled start date of May 14. On Wednesday, it withdrew its plan to start 22-hour trading on May 21 in response to concerns from grain groups.

The Kansas City Board of Trade also pared back a request to increase trading hours to 21 hours a day from 22 hours, following CME's lead. The MGEX, formerly known as the Minneapolis Grain Exchange, is also expected to follow suit, as both wheat exchanges trade on CME's electronic platform. KCBT said "the effective date of the new extended trading hours will be coordinated with and announced by CME Group."

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