By Marvin G. Perez - April 12, 2012
Futures Expands CME Rivalry With Plan to Offer Grains
IntercontinentalExchange Inc. (ICE) (ICE)
plans to offer futures and options in U.S. grains and
oilseeds, expanding competition with CME Group (CME)
(CME) Inc., the leader
in agriculture products.
corn, wheat, soybeans, soybean oil and soybean meal
will debut May 14 on ICE Futures U.S., subject to regulatory
review, Atlanta-based IntercontinentalExchange said
today in a statement. The contracts will settle on a
cash basis linked to prices on CME Group’s Chicago Board
cocoa, cotton and orange-juice futures currently trade
on IntercontinentalExchange’s electronic platform. ICE
Futures U.S., formerly the New York Board of Trade,
ended futures floor trading in early 2008. The Chicago-
based CME Group, owner of the world’s largest futures
market, offers both pit and electronic trading. The
two companies also offer competing energy contracts.
over the past several months have approached ICE about
providing an alternate execution and clearing venue
for grain products currently listed exclusively on the
CBOT,” Lee Underwood, an ICE spokesman, said in an e-mail.
“We believe ICE will provide value to this market by
offering an alternate pool of liquidity, similar to
what we did for the energy markets almost a decade ago.”
total volume on corn futures in Chicago has averaged
335,000 contracts a day, according to data compiled
by Bloomberg. The average in sugar futures, the biggest
agriculture contract on ICE, is 110,000 contracts.
“We don’t need another corn market,” said Shawn Hackett,
the president of Hackett Financial Advisors in Boynton
Beach, Florida said in a telephone interview. “The corn-futures
market is the most liquid in the world, it sets the
global price, and it’s very efficient. Maybe ICE thinks
they can get market share from the CBOT, but why would
anyone want to trade there?”
agricultural prices “are global benchmarks that continue
to offer the deepest and most liquid markets to customers
around the globe,” Chris Grams, a spokesman, said in
an e-mail. “We believe competition is good for business,
and we will continue to work with our customers to meet
their needs for agriculture-risk management.”
The bankruptcy of MF Global Holdings Ltd. roiled futures
markets late last year, and CME Group will require brokers
to report daily customer fund levels effective May 1.
estimated $1.6 billion in client money related to the
MF Global (MF) (MF) bankruptcy
is still missing.
ICE may be
trying to “take advantage of the CME’s current issues
surrounding the MF Global debacle,” Sterling Smith,
a market analyst at Country Hedging Inc. in St. Paul,
Minnesota, said in an e-mail. “One market in the U.S.
is enough, so the success may be limited.”
also offers contracts in rice and oats on the CBOT.
The parent company has cattle, hog and dairy futures
on its Chicago Mercantile Exchange unit and offers coffee,
cocoa, cotton and sugar on its New York Mercantile Exchange.
so-called softs contracts in New York to compete with
ICE, and “it failed badly,” Smith said.
said in February that net income rose 28 percent in
the fourth quarter to $127 million from a year earlier.
The shares (ICE) rose 0.5
percent to $134.13 at 4:15 p.m. in New York Stock Exchange
composite trading. They have climbed 11 percent in the
past 12 months.
CME Group reported fourth-quarter profit that trailed
estimates by analysts as volumes eased in late 2011.
Group rose 1.2 percent to $287.49. The stock (CME)
has dropped 4.7 percent in the past 12 months. The company
also offers contracts linked to interest rates and equity
grain and oilseed options are scheduled to start on