CHICAGO, Ill. (Reuters) — Longtime grain and livestock traders blasted the CME Group Dec. 12 when the exchange said it would allow electronic trading activity to be used to set official closing prices.
It is a move that many fear will drive another nail in the coffin of open-outcry dealing.
The CME said that starting in March or April it will modify settlement procedures for agricultural futures to include input from its electronic Globex trading platform as well as the pits.
Electronic trade already accounts for the vast majority of all transactions on the world’s biggest grain exchange, but the official end-of-day prices are still set by trades executed only in open-outcry floor format during the last minute of frenetic activity.
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“Are we going to sit here and be kicked in the teeth or are we going to fight back?” shouted Alan Young, a cattle broker who helped organize a raucous meeting of 100 brokers and traders around the livestock pits in the cavernous Chicago Board of Trade.
“There will be a snowball effect if this thing goes electronic, and there won’t be any more jobs left.”
Dealers say the settlement process has helped preserve the floor, even as other open-outcry pits around the world are closed in favour of quicker and cheaper electronic trading. The number of pit traders has dropped dramatically since the CBOT launched side-by-side electronic and open-outcry trading in 2006.
Traders around the livestock pits vented their anger.
“It was inevitable, but the speed and quiet nature the CME moved on this is a concern. I don’t believe clientele’s input was adequate and there are numerous commercials that are against it,” said Matt Pierce, a veteran floor trader and analyst for GrainAnalyst.com.
The changes will apply to corn, soybeans, soyoil, soymeal, oats, wheat and rice futures as well as CME live and feeder cattle and hog futures.
