CME Group Inc will extend trading hours for its hallmark grain contracts, two sources close to the matter said on Monday, as the Chicago exchange moves to defend its turf against rival ICE's bid for nearly round-the-clock transactions.
The board of the CME, which has a stranglehold on grains trading through the Chicago Board of Trade, the world's largest grain exchange that it acquired in 2007, has agreed to extend trading hours, but has not decided on how many hours to add to its trading day or when to implement them, the sources said.
Chicago traders had earlier cited widespread talk that the CME was planning to extend the trading day to 22 hours, matching the trading period unveiled several weeks ago by the Atlanta-based IntercontinentalExchange as it announced plans to launch look-alike grains contracts.
Currently CME grains trade a 13-hour stretch overnight and nearly four hours during the day.
The shift to a nearly continuous cycle would be the latest step-change for the tradition-bound Chicago institution, which has struggled to balance demands from new hedge funds and institutional investors against the floor traders, farmers and other smaller dealers who have been wary of change.
"I don't think this is about either exchange caring about how long peoples' trading days are. This is about competition and holding market share and maximizing return to shareholders," said Rich Feltes, vice president for research with futures merchant R.J. O'Brien.
A source said the extended trading hours could possibly go into effect after May 23, which marks the end of a five-year period during which five people, including three CBOT directors, had veto rights over rule changes at the exchange.
Traders cited a widespread rumor that the CME was planning for grains to be traded from 6 p.m. CDT (2300 GMT) to 4 p.m. CDT (2100 GMT) -- allowing for the exchange to be open during times when price-sensitive data is released from the U.S. Department of Agriculture.
The Chicago Board of Trade has been the unchallenged global benchmark for grains prices from Paris to Sydney to Singapore, extending its trading hours in the past to allow traders in Asia and Europe to participate and expand its business.
But ICE is now encroaching, offering contracts that will trade from 8 p.m. to 6 p.m. Eastern Time (2400-2200 GMT).
"The board has approved to extend trading hours," one source said. The sources said a plan by ICE to launch look-alike corn, wheat and soybean contracts was a key reason behind the move.