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CME seen trying to buy Paris contracts to complete grains suite
2013年8月23日 / 下午1点09分 / 4 年前

CME seen trying to buy Paris contracts to complete grains suite

* ICE dominance of softs paves way for potential CME deal

* Dealers say CME takeover could boost Matif volumes

* CME acquisition could simplify margining processes

By Sarah McFarlane and Silvia Antonioli

LONDON, Aug 23 (Reuters) - Exchange CME Group is expected to try and buy Europe’s leading wheat futures contract from rival Intercontinental Exchange (ICE), a move that would solidify its dominance of world grain trading.

Analysts say regulatory obstacles to the acquisition would be less likely to arise after the European Commission gave unconditional approval to ICE’s takeover of NYSE Euronext, a deal that gives ICE a near monopoly in trading of cocoa, coffee and sugar derivatives.

In the deal, ICE is also acquiring the thriving Paris-based Matif milling wheat contract, part of the Euronext Paris, Lisbon, Amsterdam and Brussels business, which it plans to sell off to help finance the acquisition.

“We have previously noted that we would spin off all continental European cash and derivatives products, which includes the Paris milling wheat contract and would take place in 2014,” a spokeswoman at ICE said, declining to give further details on the exchange’s plans.

This offers an opportunity for the largest exchange in agricultural commodities, CME, to make an approach.

“The CME would rub their hands together with glee if they could get their hands on the Matif contract,” a London-based broker said.

A spokeswoman for the CME declined to comment.

Earlier this week, sources said ICE had hired three banks to advise on the potential listing of Euronext but that an IPO could be pre-empted by a good offer and there had been discussions with possible buyers.

Traders and analysts in the wheat market are not opposed to CME ownership of the Paris wheat contract. By contrast, coffee, cocoa and sugar dealers initially opposed ICE’s acquisition of the Liffe softs contracts due to monopoly worries.

CME ownership could help boost liquidity for the wheat contract, market users said.

“With all the grains under one roof, people will be able to use them slightly better,” James Dunsterville, head analyst with Geneva-based Agrinews, said.

“There won’t be any competition issues as far as the industry is concerned. It is just a question of whether the bureaucrats will have an issue. The CME can argue that they (the Competition Commission) have allowed it with coffee, cocoa and sugar.”

GLOBAL DOMINATION

CME already owns three wheat contracts, including global benchmark Chicago Board Of Trade (CBOT) wheat, which attracted trading representing more than 4.5 billion tonnes in 2012, around 12 times more than the Paris contract at 373.5 million.

Volumes of the Paris-based milling wheat futures contract have been climbing sharply, however, up 31 percent in 2012.

Adding the Paris contract to its portfolio would be the U.S. exchange’s first major breakthrough in Europe’s wheat market. The Black Sea wheat contract it launched last year has attracted minimal volumes.

There are several potential obstacles to a CME acquisition.

It would probably have to compete with other bidders.

Analysts and traders said Asian exchanges may be interested in acquiring the Paris-based agricultural contracts, which also include rapeseed, corn and malting barley. The London Stock Exchange has expressed interest in developing more commodity futures contracts as well.

In addition, ICE has not said whether it is open to selling the agricultural contracts separately from the rest of the Euronext divestment. It is not clear whether CME would be interested in the whole business.

If CME does acquire the wheat contract, dealers said the single ownership would simplify margin processes for users of the European and U.S. contracts.

“I don’t think that there’s much concern about it being with the same player, as it becomes easier to use,” said Mike O‘Dea, risk management consultant at brokerage INTL FCStone.

O‘Dea said the CME takeover of the Kansas City Board of Trade last year helped consolidate margin calls for positions held on the Chicago and Kansas wheat contracts.

“It’s easier to margin against a product that’s on the same platform. It’s easier to margin everything from the one place with one account,” O‘Dea added.

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