The CME has made multiple changes to trading hours of various products. What is their motivation and what is the impact on traders and the markets?
The CME has recently made two significant changes to the trading hours of some of their most popular contracts. The first was implemented in late May of 2012 and greatly expanded the number of hours traders could speculate in grain futures and options; the second went into effect in mid-November 2012 and altered the cut-off point between trading sessions in stock index futures and options.
What changes were made to CME Group grain trading hours, and why?
Following the changes implemented in the summer of 2012, CME Group grain futures and options trade 21 hours per day; prior to the change, the markets were available 17 hours per day. Although 17 hours sounds ample, it was far less than most other commodity markets and failed to provide market access during the announcement of critical USDA Reports which are typically released early in the morning on various week days.
Under the new schedule, grain trading begins on Sunday afternoon at 5 pm Central. The market then trades around the clock before pausing at 2:00 pm Central; trade then resumes at 5:00 pm Monday through Thursday; but trading halts for the weekend at 5:00 Central on Friday. In a nutshell, the market is closed only from 2:00 to 5:00 pm during the week but is open during all other times of the day.
I can’t speak on behalf of the CME Group but from what I’ve gathered, there were two primary goals in expanding trading hours for grain products. First, the new hours created an opportunity for traders to immediately react to the USDA reports. Prior to the changes, traders were forced to digest the news for two hours before they were able to react in the marketplace. As you can imagine, inability to enter or exit a market following such an event opened the door to human emotions running wild; this often triggered panicked trade on the market open.