Grainnet

By Susan Reidy, BioFuels Journal Editor

Starting Wednesday, May 31, the Chicago Board of Trade will list its ethanol futures contract electronically during daytime trading hours, a move the exchange says will make the contract more readily available to the industry.

“We thought offering the contract on the CBOT electronic platform along with the open auction would increase the transparency and build liquidity in the contract,” says Brenda Tucker, commodities group manager.

“Being able to see the bids and offers 10 levels deep that electronic trading allows may help market participants feel more comfortable putting orders in when they can see what the market is doing.”

E-cbot platform users will be able to see the entire order book, including all the bids and offers for each contract month, she says.

The information will also be available for free on CBOT’s web site (see link below).

The ethanol contract will be available on the exchange’s electronic platform and via open auction from 9:30 a.m. to 1:15 p.m. CST. The contract will resume trading electronically from 6:36 p.m. to 6:00 a.m. CST.

CBOT launched the ethanol contract in March 2005. Trade volumes continue to grow, Tucker says.

Open interest is hovering between 800 and 900 contracts, she says, with an average daily volume of about 20 contracts.

Tucker expects the electronic trading will increase interest in the contract.

“Everyone wants this contract to succeed. There is strong consensus it’s going to work; it just takes time,” she says.

“There’s definitely more than way to define success when it comes to a futures contract. Volume isn’t the only criteria. We’re very pleased with how the industry is embracing the contract as a benchmark.”

The biggest benefit of the contract, Tucker says, is that it provides a pricing benchmark that is transparent and influenced by true supply and demand.

“This is an industry that didn’t have that before. Previously, you were relying on each counter party to give you an idea of what ethanol was worth,” she says.

The ethanol contract is the second agricultural futures contract to CBOT will trade electronically during daytime trading hours.

CBOT listed its South American Soybean futures contract on May 15.

The remaining agricultural futures contracts including corn, soybean, soybean oil, soybean meal, rough rice, wheat, and oat futures, will be added starting Aug. 1.

See Related Websites/Articles:

• CBOT

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