NGFA Urges CFTC to Solicit Public Comments on Expansion of Electronic Futures Trading

• The impact on back-office personnel, as well as computer and accounting systems used to reconcile trading activity, given different closing times for open-outcry (1:15 p.m. Central for CME Group’s CBOT contracts) and electronic trading (4 p.m. Central for CBOT contracts and 5 p.m. Central for ICE).  The NGFA and NAEGA noted that the current 1:15 p.m. Central time closing for both open-outcry and electronic trading for CBOT grain and oilseed contracts provides sufficient time to allow firms to close out and reconcile their trading activities and perform required accounting and other back-office functions before electronic trading reopens at 6 p.m.  “If electronic trading remains open through the late afternoon or early evening, firms – especially those operating in the Eastern time zone – will be faced with putting on extra personnel and/or paying overtime to work into the evening hours.”  The NGFA and NAEGA also cited the difficulty confronting firms when trying to assess – in an extremely short time period – the types of software and systems changes that will be needed to accommodate expanded electronic trading hours and different closing times for open-outcry and electronic trading.

The two organizations also cited such practical concerns as: 

• How cash grain purchasers will price bids to producers when open-outcry trading is closed and settlement prices have been established, while electronic trading remains open.

• The mechanics of how margin requirements will be determined by exchange clearinghouses given two different closing times – one for open-outcry and the other for electronic trading.

• Potential discrepancies between hedgers’ cash market positions and their brokerage statements at the end of the trading day.

“We believe there is no compelling reason why 22-hour electronic trading needs to begin immediately,” the NGFA and NAEGA concluded, noting that each of the issues raised would benefit from an opportunity for public comment and further dialogue with ICE and CME Group.  “It is much preferable that expanded hours and new contracts be analyzed in a deliberate fashion for effects on cash and futures markets, market volatility and producer-customer relationships than to rush to implementation unnecessarily.”