The CME announced that they will purchase the Kansas City Board of Trade futures exchange. Kansas City was one of the last holdout as an independent futures exchange from the great exchange grab by the CME and ICE. CME will have control of most US futures trading by volume and open interest. It has a monopoly on exchange services and the fees that go with it. (In fact, institutional investors pay more in exchange fees than in brokerage fees.) The power of networking is very strong with exchange trading. One dominate exchange will usually maintain a monopoly for trading given this is where liquidity will be centered.
The agreement will allow the exchange floor to exist for another six months but then will go electronic. There are some advantages with cross margining between wheat contracts, but once again there will be limited choices on where trades can be made. There is no competition on exchange services in most futures products. The monopoly is with the CME and this will have an impact on innovation in this industry.
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