CME Group announced Monday that it has completed its acquisition of the Kansas City Board of Trade (KCBT), adding hard red winter (HRW) wheat to its offering of agricultural products.
The deal was originally announced in October, and received regulatory approval from the U.S. Federal Trade Commission the following month. Under the terms of the acquisition, CME Group will pay $126 million in cash for KCBT, and will also make a special distribution of excess cash to members upon closing.
"We're pleased to complete this transaction, combining KCBT Hard Red Winter Wheat products with our deep and liquid CBOT Soft Red Winter Wheat futures and options markets," said CME Group Executive Chairman and President Terry Duffy. "The integration of these two global wheat benchmarks will provide new trading opportunities to commercial grain market participants, wheat traders and customers who continue to rely on these tools to manage their price risk."
CME and CBOT members and KCBT permit holders will immediately be able to trade each other’s wheat futures and options products on the CME Globex platform. Starting Dec. 10, the interexchange KCBT-CBOT Wheat futures spread will also be available for trading on Globex.
Once KCBT’s clearing services have been integrated, customers will also be able to take advantage of cross-margining and other capital efficiencies, according to CME. That integration will take place over several years, as CME has pledged to continue operations of the KCBT trading floor for at least six months and to maintain a KCBT market participant committee to advise on HRW wheat contracts for at least three years. CME will introduce a timeline for the integration of clearing systems in the first quarter of 2013.
Last year, the average daily futures volume for KCBT wheat was 25,170 contracts, while the average daily volume of CME wheat contracts was 96,362.