Expanded electronic trading hours for wheat futures and other agricultural contracts generated some confusion last week with grain producers, merchants and end users seeking to determine the best approaches to conducting business given what were widely viewed as competing daily “closing prices” in agricultural futures.
Under the new electronic trading regime that began last week, electronic trading hours run from 5:00 p.m. Central time to 2:00 p.m. After a three-hour pause, trading for the next business day begins at 5:00 p.m. Meanwhile, open-outcry trading in the wheat pits of Kansas City and Chicago continued its longstanding schedule, beginning at 9:30 a.m. Central time and ending at 1:15 p.m.
The exchanges continued to post settlement prices reflecting the 1:15 p.m. close of open-outcry trading, but those settlements could not reflect price movements in electronic trading during the next 45 minutes each day. This raised the question whether business based on use of futures closing prices should use the 1:15 p.m. settlement prices or the 2:00 p.m. final prices in the electronic market. As the week wore on, it seemed more businesses relied on the 2:00 p.m. electronic trading last trade prices.
The consensus of pit traders and many other market participants seemed to be the open-outcry hours should be extended to 2:00 p.m., so both electronic and pit trading once again end at the same time. Many traders assumed the CME would advise the Commodity Futures Trading Commission it wanted to extend the open-outcry session to 2:00 p.m.
Instead, the CME Group on May 24 sought approval to extend the open-outcry hours in the other direction, to an earlier start to the session, on days when critical U.S. Department of Agriculture supply-and-demand, crop production, acreage and grain stocks reports are issued, beginning June 12.
That would address another problem with the expanded electronic trading hours, which was previously, U.S.D.A. reports were issued when no trading, electronic or pit, was going on, and if electronic trading was open during the release of the reports while the open-outcry pits were closed, some traders, particularly options traders, would be put at a disadvantage.
The CME Group said on May 25 that beginning June 12, open-outcry trading on days critical U.S.D.A. reports are released will begin at 7:20 a.m. Central time, pending C.F.T.C. approval. The U.S.D.A. reports are released at 7:30 a.m. Central time. On other trading days, the traditional 9:30 a.m. to 1:15 p.m. open-outcry schedule would be observed. The dates in 2012 on which open-outcry trading would begin at 7:20 a.m. would be June 12, June 29, July 11, August 10, September 12, October 11, November 9 and December 11.
It was unclear as of this writing why the CME Group refrained from seeking an extension in open-outcry trading to 2:00 p.m. Some suggested it was pressed to meet the deadline for requesting approval of an early open for open-outcry trading on June 12 (the C.F.T.C. has up to 10 days to indicate its approval or disapproval to such a change) and gave that request priority. Others suggested there may be disagreement at the CME Group over whether an extension in open-outcry hours to 2:00 p.m. should be sought.