CME to Cut Livestock Hours to Reduce Volatility
February 10 2016 - 12:51PM
Dow Jones News
By Kelsey Gee
Exchange operator CME Group Inc. said it plans to slash trading
hours for livestock futures in response to concerns about
volatility in the benchmark agricultural contracts.
CME on Wednesday said the changes, which are scheduled to begin
on Feb. 29, reduce trading in the early morning and late afternoon
in the U.S. when volumes tend to be lower. CME developed the plan,
which is subject to a review by the U.S. Commodity Futures Trading
Commission, after consulting livestock traders, producers and other
market participants, the company said.
Trading for electronic futures and options for livestock
currently starts at 9 a.m. ET every weekday except Monday, when it
begins at 10:05 a.m., and extends to 5 p.m. every day except
Friday, when it halts at 2:55 p.m. Under CME's plan, trading would
be shortened to just over 4 1/2 hours each day, from 9:30 a.m. to
2:05 p.m. Monday through Friday.
CME maintains the main U.S. market for trading contracts
reflecting anticipated prices for cattle and hogs. It said in its
announcement that 87% of trading typically occurs during the
proposed hours. Some traders have complained that relatively scant
trading earlier and later in the day can at times produce wide
swings in prices.
"Nothing is more important to us than the integrity of our
markets, which help farmers and ranchers to discover prices and
transfer risk," said Tim Andriesen, managing director of
agricultural products for the exchange.
CME said it also will form a working group with the National
Cattlemen's Beef Association, an industry group that represents
ranchers, feed-yard operators, and meat processors, to discuss
other possible changes to the cattle markets.
The association in January sent the exchange a letter requesting
closer scrutiny of trading behavior in livestock futures. It raised
concerns about the impact on the markets from high-frequency
trading, which uses algorithms to drive electronic-trading
strategies.
The letter said association members "question their use of the
cattle contracts because the volatility has made them a tool which
is more of a liability than a benefit."
Write to Kelsey Gee at kelsey.gee@wsj.com
(END) Dow Jones Newswires
February 10, 2016 12:36 ET (17:36 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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