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Agricultural News

CME Reduces Electronic Livestock Trading Hours to Build Liquidity in Market

Mon, 27 Oct 2014 15:13:59 CDT

CME Reduces Electronic Livestock Trading Hours to Build Liquidity in Market

Livestock traders are adjusting to new trading hours at the Chicago Mercantile Exchange. Recently the CME Group announced electronic trading hours would be reduced from 23 hours a day down to daytime hours only. The hours for open outcry trading remain unchanged.   The new hours took effect on Monday, October 27th. CME Group Managing Director Commodity Research and Product Development Dave Lehman said the change was driven by factors see in the market.

"We found we really weren't see seeing that much or very little trading in overnight hours, therefore liquidity was lower and prices could tend to be exaggerated or a little more volatile because of that lower level of liquidity, "Lehman said.

The primary reason for overnight market trading was driven by the demands of international customers to allow non-US participants to access US markets during their business hours. Unlike the grain or oilseed markets, the CME Group estimates approximately 80 percent of the trade comes from domestic market participants. Lehman said 98 percent of the electronic trade volume was taking place between 6 am and 6 pm.

Lehman addressed the factors influencing the changes in electronic trading with Leslie Smith of the Radio Oklahoma Network. Listen to the full interview by clicking on the LISTEN BAR below.

In addressing lower liquidity levels the CME Group sought input from commercial producers, processors and livestock traders . Lehman said they also released a public survey through the CME Group website asking for feedback on what the electronic trading hours should be for livestock contracts. This input helped outline the new trading hours - Monday trading will be held from 9:05 am - 4 pm, Tuesday through Thursday 8:00 am - 4 pm and Friday's hours will be 8 am - 1:55 pm and electronic trading would halt over the weekend.

"By having shorter hours will allow the liquidity to be concentrated in those hours that the market is open and therefore the markets may be a little more liquid," Lehman said.

For the average cattle or hog producer these changes in trading hours will have very effect on how producers or traders conduct business, but reducing the electronic trading hours would result in more effective price discovery tool and a better trading environment.   

Prior to implementing this changes, the CME Group filed these changes with the US Commodity Futures Trading Commission.



Leslie Smith interviews Dave Lehman of CME Group
right-click to download mp3


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