Beef producers in the United States are frustrated by the sudden drop in futures-market prices, so are asking for inquiries.
R-CALF USA is asking for a Senate committee investigation.
The National Cattlemen's Beef Association (NCBA) is asking for changes at the Chicago Mercantile Exchance, especially into flash trading.
Markets were volatile all year long, but the final straw came near the end of the year when cattle futures dropped 16 percent, a rate not seen in 34 years.
The NCBA has written to Terrence A. Duffy, executive chairman and president for CME Group, Inc., saying “for several months we have been hearing from our members across the country regarding market volatility and their concerns about high frequency trading’s contribution to that volatility.
“The effectiveness of cattle futures contracts as a viable risk management tool is being called into question due to the concerns over high frequency trading. In fact, we continue to hear our members question their use of the cattle contracts because the volatility has made them a tool which is more of a liability than a benefit.”
NCBA officials would like to see livestock contracts have the same limits on messaging as grain, currency and index contracts. Adding a one second delay would help reduce messaging.
“High frequency trading occurs at a rate faster than any human can analyze. Latency would therefore level the playing field so that everyone sees the market at the same speed,” the letter says of adding a delay.
The letter also voices regards with “spoofing” and asks CME Group to “release audit trail data for analysis.”
An investor and trader named Jeffery Carter shared the letter and his thoughts in a recent blog. Carter is a former member of the CME Board of Directors.
In his blog Carter writes, “If you talk to old cattle traders, they will tell you that their market is broken.
"Hog traders have echoed their sentiments.
"This isn’t sour grapes over losing the floor. It’s about customers like the members of the NCBA that cannot get into and out of large positions when they need to roll contracts without getting run over.”
