Consolidation in commodity derivatives markets took another step Wednesday with news that CME Group is buying the Kansas City Board of Trade (KCBT).
The KCBT, which operates a futures market for hard red winter wheat (the predominant variety grown in the United States, and the leading variety sold through export), is being bought by the CME for US$126 million in cash. And, it intends to make a special distribution of excess cash to its members when the deal closes.
The CME has agreed to keep the KCBT trading floor in Kansas City open for at least six months, and to maintain a committee of KCBT market participants to advise on wheat contracts for at least three years. The exchange says that the addition of HRW wheat contracts will boost its agricultural product offering.
“Global agricultural market participants continue to depend on liquid, transparent risk management tools for price discovery in both established and emerging economies,” said CME Group executive chairman and president, Terry Duffy. “Building on two rich legacies, the combination of KCBT Hard Red Winter Wheat products with our deep and liquid CBOT Soft Red Winter Wheat futures and options markets will provide new trading opportunities for market participants around the world — both on the trading floor and on the screen.”
The board of directors of KCBT unanimously approved the transaction, which is expected to close later this year pending approval by KCBT shareholders and regulators, and other closing conditions.