CME Group Agrees to Buy Kansas City Board of Trade for $126 Million

Oct 17, 2012

CME Group Inc. (CME) announced Wednesday, that an agreement has been reached to buy the Kansas City Board of Trade for $126 million and seeks to expand its agriculture product offerings. CME will now be able to add hard-red winter wheat into the mix, which is a good move for CME since it’s a dominant variety of wheat that’s grown in the U.S. CME is the world’s largest futures exchange and this new move signals that they want to continue to assert their dominance in the world grains futures market.

The strategic move comes as CME is presently the front runner on the world stage for futures-exchange operator by volume and competing with their rival IntercontinentalExchange Inc. Prior to the acquisition, CME offered futures trading for soft-red winter wheat but will now be able to offer contracts for both hard and soft wheat products. This will give CME a competitive edge, allowing them to develop new products in both futures and in options.

"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,” said CME Group Executive Chairman and President Terry Duffy.

The deal has been approved by the board and it’s expected to close later this year. CME reported in July that its second-quarter profit slipped 17% - largely attributed to slower trade on its futures. Company shares closed at $57.49 on Tuesday, with stock up at 18%.

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