By Kelsey Gee
CHICAGO--Exchange operator CME Group Inc. unveiled plans Friday
to sharply reduce electronic-trading hours for its
livestock-futures contracts, responding to concerns about light
trading and volatility in some overnight hours.
The CME said the changes, which on Oct. 27 would end trading
that occurs in evening hours and overnight in the U.S., came after
it consulted livestock traders, producers and other market
participants. The plans are subject to a review by the U.S.
Commodity Futures Trading Commission.
"We believe this change will result in deeper and more liquid
markets to serve [customers'] risk-management needs," said Tim
Andriesen, managing director for agricultural commodities and
alternative investments for CME.
CME, the world's largest futures-exchange operator in terms of
trading activity, maintains the main U.S. market for trading
contracts reflecting anticipated prices for cattle and hogs. The
exchange in recent years has retooled hours and contract
specifications for other agricultural products to reflect the wider
range of market participants in an increasingly global market for
commodities trading, which used to revolve around various
industries' business days.
However, more sporadic trading during U.S. overnight hours can
at times produce wide swings in prices, some market participants
said. The CME last year cut the number of hours its grain futures
are traded after expanding them to 21 from 17 the prior year. That
move followed criticism that the trading schedule had become
bloated--increasing costs for grains traders and creating periods
of low-volume, highly volatile trade.
The CME's planned changes are "wonderful news," said Dennis
Smith, a commodities broker at Archer Financial Services in
Chicago. "There was very little volume overnight, so it'll create a
much better trading atmosphere."
Jason Britt, president of Kansas City, Mo., brokerage Central
States Commodities, said it was "nutty" to keep livestock markets
open for 20 or more hours because relatively little trading in the
market occurs outside the U.S. Having lengthy hours for grain
trading makes more sense, he said, because the U.S. grain and
oilseed markets are affected much more than the U.S. beef and pork
markets by fluctuations in export demand and competition from rival
exporters.
Open-outcry trading in CME's Chicago-based pits begins each day
at 10:05 a.m. ET, ending at 2 p.m. ET, though currently contracts
can be traded electronically nearly around the clock, from the time
markets open on Monday mornings at 10:05 a.m. ET to 4:55 p.m. ET
Friday, with one-hour breaks each day in the late afternoon.
Beginning Oct. 27, electronic trading hours would be from 10:05
a.m. ET to 5 p.m. ET on Monday, and 9 a.m. to 5 p.m. ET Tuesday
through Thursday. Friday, trading would stop closer to the end of
the pit session at 2:55 p.m. ET.
CME in July began contacting customers of its futures markets to
discuss potential changes to the current trading session, after
some had expressed concerns about high volatility in the market
and, at-times, sporadic trading.
Write to Kelsey Gee at kelsey.gee@wsj.com
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