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CME Group buys KCBT

Jeff Caldwell 10/17/2012 @ 9:25am Multimedia Editor for Agriculture.com and Successful Farming magazine.

The influence of electronic grain trading took a big step forward Wednesday with the announcement that the Chicago Mercantile Exchange (CME) Group has acquired the Kansas City Board of Trade (KCBT). Now, the key KCBT hard red winter wheat contract will join CME's other futures contracts trading almost around the clock.

"Global agricultural market participants continue to depend on liquid, transparent risk management tools for price discovery in both established and emerging economies,” says CME Group Executive Chairman and President Terry Duffy in a company report. “Building on two rich legacies, the combination of KCBT Hard Red Winter (HRW) 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 transaction's not the end of the KCBT trading floor, though. The deal announced Wednesday stipulates the Kansas City floor will remain open for at least six months, and KCBT market brokers and staff will remain part of the advisory committee for the merged entity. But electronic trading is definitely a key piece of the group's future, says KCBT President and CEO Jeff Borchardt.

"Throughout KCBT’s 156-year history, trading has evolved dramatically, with an increasing emphasis on technology in recent years,” he says. "CME Group’s position as a global leader in electronic trading access and capability makes them an ideal partner for the future of KCBT’s HRW wheat contract, the global benchmark for bread wheat."

Down the road, the move's expected to make HRW contracts more of a player in market investment strategies, says AgTraderTalk.com Market Analyst Kevin Penner. Ultimately, this should create new marketing options for wheat farmers.

"I think the merger will be beneficial to the trade. I hope to see the HRW contract become even more liquid and widely used for hedging," he says. "This move should give wheat growers even more tools for market risk management."

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