(Reuters) – IntercontinentalExchange will cut in half the exchange fees for its struggling, four-month old U.S. grain and oilseed futures and options contracts in an attempt to boost business.
Fees for its cash-settled corn, wheat, soybean, soybean meal and soybean oil contracts will drop to 75 cents from $1.50 starting Oct. 1, ICE said on Wednesday.
The exchange would not comment on the change.
ICE began trading the contracts in May in the biggest challenge yet to archrival CME Group’s cornerstone U.S. grain futures business.
In promoting the contracts last spring, ICE said there were “substantial differences” between its new contracts and CME’s contracts, given that ICE’s products are traded only electronically and use its proprietary technology. ICE said it was launching the contracts in response to customer demand, particularly from large global commercial traders.
However, traders have stayed at CME, which dominates activity in agricultural markets with its Chicago Board of Trade.
ICE has failed to gain traction in the grain markets because “they invented a solution to a problem that doesn’t exist,” said Alan Brugler, president of Brugler Marketing & Management.
“People were able to get their hedging done on the CME okay and don’t have a lot of incentive to go to a different exchange,” he said.
Total volume in ICE corn futures on Tuesday was 590 contracts, while volume in the most actively traded CBOT December corn contract was 148,390 contracts.
ICE “potentially could get some of the high-volume traders to get over there” by undercutting CME’s exchange fees, Brugler said.
“If they don’t have the volume, that scares me away because I’m not getting the liquidity,” he said.
Ben Jackson, chief operating officer of ICE Futures U.S., said in April that ICE’s fees would be competitive with CME but that it was not looking to start a “fee war.”
CME did not immediately reply to a request for comment about ICE’s move.
The launch of ICE’s contracts last spring pushed CME to implement nearly non-stop trading hours for its grain contracts as ICE kept its new markets open almost around the clock.
