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CME Group Takes Heat Over Large, Private Grain Trades

Small grain dealers frustrated with private block trades

Stock market

Global grain merchant Bunge Ltd. and U.S. farmer-owned cooperatives hit exchange-operator CME Group Inc. with complaints at a regulatory advisory committee meeting on Thursday over private transactions which critics say reduce transparency in agricultural markets reports Reuters.

CME, which owns the Chicago Board of Trade and the Chicago Mercantile Exchange, began allowing the privately negotiated deals - called block trades - in markets such as corn and wheat in January. Proponents say the transactions help them execute large orders without disrupting prices in thinly traded markets.

But small grain dealers, whose transactions do not meet size requirements for block trades, are frustrated that their orders do not get filled in the central market while block trades are being executed privately, said Joe Barker, a director for broker CHS Hedging.

Concerns about the deals surfaced as the U.S. Commodity Futures Trading Commission (CFTC), which regulates the CME Group’s exchanges, held a meeting of its agricultural advisory committee in the farm state of Kansas.

“The feeling in the country is that there is one set of rules for people that do five lots and another set of rules for people that do 500 lots,” said Barker, who represents an association of farm cooperatives on the CFTC committee. “You’ve created two different markets.”

Read the full report here.

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