CME Group challenges Miami alternate with new spring wheat contract

By Tom Polansek and Julie Ingwersen

(Reuters) – CME Group (NASDAQ:CME) stated on Wednesday it plans to launch spring wheat futures and choices within the coming months that can compete straight with a historic Minneapolis market now owned by Miami Worldwide Holdings.

Merchants count on CME, which dominates agricultural futures with benchmark grain and soy contracts, might steal buying and selling quantity for onerous pink spring wheat after its launch slated for early within the second quarter.

The proprietor of the Chicago Board of Commerce already runs U.S. markets for 2 different sorts of wheat, comfortable pink winter wheat and onerous pink winter wheat.

“Market contributors will now be capable to handle worth threat throughout each main sort of wheat on one alternate and all cleared in a single clearing home,” stated John Ricci, CME’s world head of agricultural merchandise.

Laborious pink spring wheat was traditionally traded on the Minneapolis Grain Alternate, or MGEX, which launched its signature contract in 1883 to commerce the high-quality crop used to make bread and frozen dough merchandise. It has the thinnest buying and selling quantity of the three U.S. wheat contracts.

Miami Worldwide Holdings final 12 months renamed the Minneapolis market as MIAX Futures Alternate after shopping for MGEX in 2020.

MIAX plans to transition the buying and selling and dissemination of market knowledge for MGEX merchandise from CME’s Globex platform to a platform it’s constructing on June 30, spokesman Andy Nybo stated.

MIAX is creating its personal platform so it might launch new merchandise with out asking CME so as to add them to Globex, he added.

“We will management our personal future,” Nybo stated. Requested about CME’s launch, he stated competitors is wholesome in markets.

“We’re in it to compete.”

MIAX stated in September it entered a licensing settlement with Bloomberg Index Companies and can record quite a lot of fairness index merchandise.

However exiting Globex will value it some wheat enterprise.

Brian Hoops, president of dealer Midwest Market Options, stated he’ll shift to CME’s product.

“Taking it off of Globex, I believe, goes to remove quite a lot of the quantity from somebody like me who’s doing brokerage work with purchasers which can be rising spring wheat,” Hoops stated.

“It is form of the tip of the previous Minneapolis Grain Alternate product.”

Business merchants, corresponding to flour mills and grain elevators, initially would possibly favor the Miami alternate because the established market, or use each buying and selling platforms, stated Frayne Olson, an agricultural economist with North Dakota State College. In the end, he stated, speculative merchants will decide which platform dominates.

“If you do not have the buying and selling volumes, the liquidity to get into and out of positions, the contract goes to fail,” Olson stated. “And that’s pushed by the speculator.”