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24-Hour Markets on the WayPosted Friday, May 4, 2012, at 2:12 PM
Twenty years ago, U.S. commodity markets were open for only a few short, albeit hectic, hours a day. Traders, shouting and flashing elaborate hand signals, crowded around "pits" located in exchanges in major cities like New York and Chicago. Orders were executed in this way, as they had been since the Chicago Board of Trade began operating in the 19th century.
A dramatic shift towards electronic trading began in the 1990's, when improvements in communications technology made it possible for traders to transact from remote locations. Suddenly, a producer in Iowa (or India) had the same access to markets as the pit trader. In order to accommodate international market participants, the Chicago Board of Trade slowly began expanding its hours. Presently, the vast majority of grain futures contracts are traded on electronic platforms 17 hours per day.
As part of a transition toward round-the-clock trading, the Chicago Board of Trade announced this week that its grain contracts would begin trading expanded hours, trading nearly uninterrupted from Sunday night through Friday afternoon. The new 22-hour per day schedule is slated to begin later this month, and will apply to corn, soybeans, wheat, rice, oats, ethanol, soybean oil and soybean meal.
In addition to offering expanded markets to night owl and international traders, the lengthened trading schedule will also leave the markets open during crucial USDA reports that had been previously released while the markets were closed. Information flow is predicted to continue speeding up, and it appears that the Board of Trade is attempting to stay ahead of the curve.
Nat Gas Flares Up
Natural gas prices spiked higher this week, rising to a one-month high. Disheartened by months of plummeting prices, many producers have decided to shut down production. Traders, sensing that reduced production might equate to higher prices in the future, bought contracts of natural gas. On Tuesday, June natural gas hit $2.38 per million British thermal units -- the highest price seen since March.
Though many analysts warn that natural gas production and supplies stand near record high levels, the recent 15 percent rally has bulls fired up. As of midday Friday, natural gas for delivery in June was worth $2.30.
Gasoline Slogs Lower
Gasoline prices continued slipping lower this week, falling another 20 cents per gallon to a three-month low on Friday.
Reduced tension in the Middle East caused traders to refocus on the U.S. domestic supply picture, which is pulling prices lower. U.S. crude oil inventories stand at a 21-year high and gasoline stockpiles are above the average levels for this time of year. Still-high prices have also decreased consumer demand, which is nearly 5 percent lower than last year and threatens to be pulled lower if economic growth stalls.
As of midday Friday, June gasoline futures, which represent the wholesale price without taxes or other fees, were worth $2.95 per gallon.
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.