Do you still call the elevator to sell your wheat? Have you noticed any changes in grain marketing procedures over the past year? Even if you have not noticed any changes at your localelevator, behind the scenes revolutionary changes have brought buyers and sellers together in a virtual trading pit. Electronic trading is no longer a wave of the future…it is how today’s trading is done. Once thought of as a supplement to open outcry trading, electronictrading now dominates the volume on every major exchange in the world. In fact, the advent of electronic trading sparked the creation of several all-electronic exchanges. This transparency and instant global price availability has fueled the growth of electronic trading. Buyers and sellers are now brought together by a platform’s matching engine and trades are executed in nanoseconds, able to be viewed by market participants wherever they may be. .

On December 22, 2008, MGEX futures contracts began trading exclusively electronically.  Since then, various trading records have been broken as added transparency facilitated the trading of Hard Red Spring Wheat (HRSW) on a global scale. Daily, weekly, monthly and fiscal year MGEX electronic records have fallen since then. In June 2009, nearly 120,000 MGEX contracts traded electronically, surpassing the previous monthly electronic trading record by 20 percent. June also marked a record-breaking fiscal year for electronic trading. On June third, with 62 trading days still remaining, the fiscal year electronic trading record was surpassed. Advantages of electronic trading such as transparency, improved execution time and reliability continued to drive market participants to the electronic platform. “Electronic trading at MGEX has opened new doors of opportunities for traders all over the world to interact with the Hard Red Spring Wheat market, giving them quicker access and more control,” said John J. Lothian, president and CEO of John J. Lothian & Company, founder and owner of MarketsWiki and the head of electronic trading at Price Futures Group, Inc. “More participants than ever can interact in the price discovery process in these markets,” Lothian said.

The shift to electronic trading was a steady process for the flagship HRSW traded at MGEX. It began in December 2004 with overnight electronic trading of HRSW futures. By July 2006, just 2 percent of all Exchange volume was done by electronic trading, all of it during the overnight session. But that was about to change.

August 2006 saw the Exchange offer side-by-side trading of futures contracts, or trading both open outcry and electronically during daytime trading hours in addition to electronic trading during the overnight session. By month’s end electronic trading of HRSW futures contracts accounted for 20 percent of the Exchange’s volume. One year later, that number grew to 27 percent. Then in April 2008, MGEX launched side-by-side options contracts and total electronic trading volume grew to nearly 50 percent of total Exchange volume. Just four months later, in August 2008, 63 percent of all contracts tradedon the Minneapolis Grain Exchange were done electronically.By December 2008, that number swelled to 87 percent. Even in June 2009, when MGEX continues to offer open outcry trading of Hard Red Spring Wheat options, nearly 98 percent of Exchange volume happened electronically.

MGEX futures and options contracts trade electronically on the CME Globex platform. This sophisticated trading platform allows traders from across the world to access MGEX products for their various risk management needs. Electronic trading offers transparency, increased transaction speed and extensive benefits by creating a single point of access for the agricultural markets and provides new spread opportunities for market participants across the globe.

The increase in electronic trading volume at MGEX speaks for itself. In the ever-expanding global marketplace, the ongoing growth potential for electronic trading is limitless. Despite the changes taking place behind the scenes, farmers can still sell grain just like their fathers and grandfathers: with a visit to the elevator, or a phone call to the manager. What happens behind the scenes may be different, but farmers can still rely on the tried and true methods of personal visits, phone calls and paper contracts to get the grain sold