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CME Group to acquire KCBT in $126 million deal

House Financial Services Hearing On May 6 $700 BilliMarket Drop

House Financial Services Hearing On May 6 $700 Billion Market Drop

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Updated: November 19, 2012 3:17PM

CME Group Inc. said Wednesday it will buy the Kansas City Board of Trade for $126 million so it can bring a wheat contract to the agricultural markets in Chicago.

The cash deal keeps the Kansas City operation out of the clutches of a CME competitor, IntercontinentalExchange Inc., known as ICE. Sources said ICE wanted to buy the Kansas City exchange to aid its effort to cut in on CME’s market leadership in crop futures.

Kansas City lists a contract in hard red winter wheat, a dominant variety used in bread and rolls. It will join with CME’s contract for soft red winter wheat, more commonly used for animal feed.

Founded in 1856, the Kansas City exchange has seen its business go overwhelmingly electronic. CME as part of the sale pledged to keep the Kansas City trading floor open a minimum of six months, and many traders expect it will be shut next year.

CME Executive Chairman Terrence Duffy said on a conference call that ther was no definite timetable for closing the floor. A K.C. Board of Trade committee will advise the CME for at least three years, the exchanges said.

The sale will produce a windfall for owners of 192 K.C. Board of Trade seats. The price works out to $656,250 per seat, vs. a recent sales price of $480,000. Members also will get a distribution of K.C.’s excess cash upon the closing.

CME owns the Chicago Board of Trade and the Chicago and New York mercantile exchanges. It last bought an exchange in 2008 when it acquired the energy-focused New York Merc.

Shares of CME gained 40 cents, or 0.7 percent, to close at $57.89.

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