- DTN Headline News
CME Shortens Livestock Trading Hours
Wednesday, February 10, 2016 3:48PM CST

By Katie Micik
DTN Markets Editor

OMAHA (DTN) -- CME Group will shorten trading hours for livestock contracts effective Monday, Feb. 29.

The move follows escalating criticism that extreme volatility has rendered cattle futures effectively broken for cash market hedgers. Cattlemen have pointed to many factors in that volatility, most prominently the rise of automated trading and the shrinking number of cattle traded on a cash-negotiated basis.

Pending approval by the Commodity Futures Trading Commission, live cattle, feeder cattle and live hog futures and options will trade electronically from 8:30 a.m. to 1:05 p.m. Central Time Monday through Friday. Open outcry hours will be from 8:30 a.m. to 1:02 p.m. CT. The daily settlement period and procedures will remain unchanged.

"I think it's pretty cosmetic," DTN Livestock Analyst John Harrington said of shortening the trading day. "I think they're fishing around for ways to get volatility under control. I suppose it's worth a try, but color me skeptical for the moment."

CME shortened electronic trading hours in October 2014, reducing them from 23 hours per day to the current schedule, which varies by day. On Mondays, Globex trades from 9:05 a.m. to 4:00 p.m. CT. From Tuesday to Thursday, it trades from 8:00 a.m. to 4:00 pm., and on Fridays, the market is open from 8:00 a.m. to 1:55 p.m.

The shorter day will align trade with the period of greatest liquidity, CME said. During 2015, roughly 87% of daily livestock futures and options trades occurred during the proposed hours.

"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, CME group managing director of agricultural products. "We believe these actions will further enhance our cattle markets for all participants."

CME also announced several other changes, including a review of the Worthing, South Dakota, delivery point for live cattle and the formation of a cattle market joint working group with the National Cattlemen's Beef Association to discuss other possible changes.

On Jan. 13, NCBA sent a letter to CME Group outlining its concerns with automated trading, spoofing and lack of transparency.

"The effectiveness of cattle futures contracts as a viable risk management tool is being called into question due to the concerns over high-frequency trading," the letter stated. "In fact, we continue to hear our 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. This is counter to the very existence of these contracts."

As of Feb. 1, CME added livestock contracts to its messaging efficiency program, which regulates the speed and quantity of trade signals a market participant can send. It was one of the five requests NCBA set out in its letter.

NCBA is not the only cattle group to complain about the cattle market. R-CALF USDA sent a request to the Senate's Judiciary Committee asking for an investigation into the sharp drop in cattle prices in late 2015.

DTN's Harrington thinks there's a bigger issue underlying the cattle market's woes.

"I think the problem is a little more fundamental. It's the disconnect between the futures and the viability of cash markets. We trade so few cash cattle on negotiated basis anymore. I think that's a major problem, but I'm not quite sure how you solve that."

For futures markets to have a degree of stability, they have to be in close coordination with the underlying cash market, he said. There are macroeconomic issues -- the stock market and the oil price collapse -- for example, that can affect volatility in cattle.

"I think commercials are really having a difficult time using futures now because of the volatility, because of the unpredictability of its behavior and effect on basis," he said. "Basis is essential to hedgers and risk managers. If they can't depend on the relationship, then it's just a wild guessing game."

Katie Micik can be reached at katie.micik@dtn.com

Follow Katie Micik on Twitter @KatieMDTN


blog iconDTN Blogs & Forums
DTN Market Matters Blog
Katie Micik
Markets Editor
Thursday, February 11, 2016 3:35PM CST
Thursday, February 11, 2016 3:32PM CST
Monday, February 8, 2016 7:20PM CST
Technically Speaking
Darin Newsom
DTN Senior Analyst
Thursday, February 11, 2016 12:58AM CST
Sunday, February 7, 2016 6:37PM CST
Sunday, February 7, 2016 6:02PM CST
Fundamentally Speaking
Joel Karlin
DTN Contributing Analyst
Friday, February 5, 2016 12:44PM CST
Monday, February 1, 2016 4:52PM CST
Tuesday, January 19, 2016 4:59PM CST
DTN Ag Policy Blog
Chris Clayton
DTN Ag Policy Editor
Wednesday, February 10, 2016 3:14AM CST
Wednesday, February 10, 2016 3:14AM CST
Monday, February 8, 2016 10:26PM CST
Minding Ag's Business
Marcia Taylor
DTN Executive Editor
Thursday, February 11, 2016 3:03PM CST
Tuesday, February 9, 2016 10:26PM CST
Monday, February 8, 2016 11:13PM CST
DTN Ag Weather Forum
Bryce Anderson
DTN Ag Meteorologist and DTN Analyst
Friday, February 12, 2016 5:21PM CST
Thursday, February 11, 2016 4:20PM CST
Friday, February 5, 2016 4:25PM CST
DTN Production Blog
Pam Smith
Crops Technology Editor
Thursday, February 11, 2016 7:30PM CST
Monday, February 8, 2016 9:22PM CST
Wednesday, February 3, 2016 9:57PM CST
Harrington's Sort & Cull
John Harrington
DTN Livestock Analyst
Friday, February 12, 2016 6:17PM CST
Tuesday, February 2, 2016 10:09PM CST
Friday, January 22, 2016 6:34PM CST
South America Calling
Alastair Stewart
South America Correspondent
Friday, February 12, 2016 9:21PM CST
Friday, January 29, 2016 8:29PM CST
Friday, January 29, 2016 12:32PM CST
An Urban’s Rural View
Urban Lehner
Editor Emeritus
Thursday, February 11, 2016 12:13PM CST
Tuesday, February 2, 2016 12:00AM CST
Wednesday, January 27, 2016 12:03PM CST
Machinery Chatter
Jim Patrico
Progressive Farmer Senior Editor
Monday, February 8, 2016 8:01PM CST
Tuesday, January 26, 2016 10:16PM CST
Thursday, January 21, 2016 4:29PM CST
Canadian Markets
Cliff Jamieson
Canadian Grains Analyst
Friday, February 12, 2016 11:10PM CST
Thursday, February 11, 2016 10:43PM CST
Wednesday, February 10, 2016 10:50PM CST
Editor’s Notebook
Greg D. Horstmeier
DTN Editor-in-Chief
Thursday, January 21, 2016 8:31PM CST
Thursday, December 31, 2015 7:36PM CST
Friday, November 13, 2015 7:05PM CST
Copyright DTN. All rights reserved. Disclaimer.
Powered By DTN