August 11, 2022
Fargo, US 70 F

CME Group sued by brokers & traders

Brokers and traders sued CME Group Inc on Friday in a last-minute effort to halt the company’s new procedures to settle end-of-day prices for agricultural futures in its Chicago Board of Trade. The 24 brokers and traders filing the lawsuit say the move by CME could put them out of business.

In May, CME and subsidiary CBOT said they would change the current price-settlement system to a blended model, using an algorithm that accounts both for floor-trading activity and electronic-trading information, given the increase in volume of electronic futures trading.

Initially announced in December, the move to a blended plan was met with opposition from floor traders. After being delayed several times, a June 25 implementation date was set.

In the complaint, plaintiffs say the move will cause “a rapid, dramatic decrease in trades being sent to the plaintiffs in the ‘pits,’ with the result that they, and the overwhelming majority of other floor traders, will lose business immediately and will have to close their operations forever.”

The change could also eliminate hundreds of jobs for traders and their support staff, including clerks, runners and others, the complaint said. Some traders have banded together in groups like “Save the Floor,” an organization that opposes any changes they think may threaten the survival of pit trading.

A spokesman for CME said in a statement Monday, “We believe the new settlement methodology accurately captures contract value across both the open outcry and electronic trading venues during the settlement period and is fully consistent with our functions as a designated contract market and a derivatives clearing organization.”

Last month, CME implemented nearly non-stop electronic trading hours for grain markets, angering traders who worry that the changes will steal trading volume away from the pits.

The open-outcry trading session will be extended, starting today, by 45 minutes to help synchronize the end of electronic and pit trading, responding to criticism from some market users.

The case is McKerr et al. v. The Board of Trade of the City of Chicago Inc. et al, in the Circuit Court of Cook County, Illinois County Department, Chancery Division, no. 12-23-185.


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