On Dec. 19, the Minneapolis Grain Exchange (MGEX) will close its floor trading operation. The trading floor will likely be used for office space and a museum, says Mark G. Bagan, president and chief executive officer.
“Our largest floor locals are actually trading more electronically than by open outcry when it comes to hard red spring wheat,” Bagan says. “Of the top ten, each of them trade more than double the amount electronically as they do by open outcry. They are already making the adjustment.” By bringing together the open outcry and electronic liquidity, Bagan says tighter bid/offer spreads will result, benefiting all participants.
Bagan says that the cash market will move to another floor where an arcade will also be hosted. “We are trying to incentivize all the intellectual capital on the floor today to move up into the new space,” he says, aknowledging the importance of the knowledge, history and social element of floor trading. “A lot of those pit traders probably know each other better than they know family members. They spend 10 hours per day standing next to the same guy,” Bagan says.
The CME Group hosts electronic trading of MGEX and Kansas City Board of Trade agricultural contracts, but when asked if MGEX is demutalizing, or if the exchange’s relationship with the CME is changing, he only laughs. “Right now there are a lot of good reasons to be a private company.”
Tags: Globex, hard red spring wheat, Kansas City Board of Trade, MGEX
