Corn Futures E-Trade Tops Pit Trade

Electronic trading of Chicago Board of Trade (CBOT) corn futures has surpassed open auction volume over the past several trading sessions, and traders and analysts expect it will continue to grow as local traders and retail customers increasingly adopt screen-based trading.
Trading in the spot month corn contract has been higher on the e-CBOT system for the past several weeks, but since Nov. 14, overall corn volume has been higher on the screen than in the pit. On Nov. 15, electronic trading volume was more than 25,000 contracts greater than open auction, according to data on the exchange's Web site.

“A lot of the trade is being done by the locals as they stand in the pit,” a commercial trader tells Dow Jones Newswires. The screen “eliminates out trades, and the liquidity on the screen is better than the pit at times, and people are beginning to lean on the screen instead of the order flow in the pit,” he says.

It appears the spreads are being done on the screen as the market rolls out of December and into March, the trader adds.

Liquidity on the screen in nearby months is solid, but the deferred months are still lightly traded as the liquidity provided by locals is not seen in the back months, the trader says.

According to data from CBOT, the volume of electronic trading executed by full members for their own accounts was 44% of the contracts traded electronically on Nov. 14 and 45% on Nov. 15, when screen volume topped 179,000 contracts compared with the 153,726 contracts traded in open auction activity.

This is a marked increase from mid-October, when volume on the screen for members trading their own accounts was near 30%, according to exchange data.

Retail customers have readily adopted the electronic trading system, says Paul Kavanaugh, senior account executive at Peregrine Financial Group in Chicago.

Since CBOT introduced side-by-side agricultural trading on Aug. 1, retail customers almost immediately began using the electronic trading system, making it an overnight success, Kavanaugh tells Dow Jones.

Since side-by-side trading was introduced, volume in the CBOT's corn futures contract has soared, with eight of the top 10 daily volume records established since day-session electronic trading was launched.

“This is exactly what people expected electronic trading to do. More people have access to the marketplace, and information is more accessible to the traders,” Kavanaugh says. “It's a tremendous tool for traders.”

Editors note: Richard Brock, The Corn and Soybean Digest's Marketing Editor, is president of Brock Associates, a farm market advisory firm, and publisher of The Brock Report.

To see more market perspectives, visit Brock's Web site at www.brockreport.com.