In the frantic few days and weeks following the Intercontinental Exchange’s unsolicited bid for the Chicago Board of Trade there was a strange disconnect between CBOT members and the pronouncements of the Chicago Mercantile Exchange’s leadership.

CBOT members to a man pretty much said the CME would need to come through with a higher bid to match or surpass the value of the ICE offer and at the time CME Executive Chairman Terry Duffy coolly and calmly on several occasions rejected the notion of a higher bid, stating confidently that their current definitive agreement remained superior to the ICE bid.

Stranger yet was the apparent confidence of CBOT members in the face of such pronouncements. Several members mentioned to Futures in passing that they expected the CME to come through with a higher bid and heard it was already in the works. It was hard to determine whether or not the old Chicago trader grapevine was alive and well or whether this was simply wishful thinking on the part of members.

Apparently they knew something because today the CME and CBOT announced revised terms of the definitive agreement. CBOT Holdings Board of Directors and its special transaction committee have unanimously recommended that CBOT shareholders vote in favor of the new agreement.

Under the terms of the revised agreement, CBOT Holdings shareholders will receive 0.3500 shares of CME Holdings Class A common stock for each share of CBOT Holdings Class A common stock, an increase of 16% from the original agreement. Once the transaction is complete, current CBOT shareholders will own approximately
34.6% of the outstanding shares of the combined company, up from approximately 31.2% in the original agreement. According to the release, CBOT Holdings will also receive additional representation on the combined company's Board of Directors, with 10 of the 30 seats.

As part of the revised offer, CME will make a cash tender offer for up to $3.5 billion, approximately 12% of the combined company, at a fixed price of $560 per share, to commence shortly after the closing of the merger.

In the release CBOT Chairman Charlie Carey said, "After a thorough review of ICE and careful consideration of its proposal and the revised proposal from CME, the Boards of CBOT Holdings and the CBOT concluded that the revised merger agreement with CME offered greater overall benefits for our shareholders and members.”

No where does it say when CBOT received the updated offer or how long they reviewed it, but from the beginning CBOT members were more comfortable with a link up with the CME, they just felt the original deal undervalued the CBOT and weren’t going to take less just because the Merc deal made more sense synergistically.

Carey added, "Our Boards and advisors carefully reviewed both the short-term and long-term value of both transactions. A combination with the CME will create the most extensive and diverse global derivatives exchange, transforming global derivatives markets and creating efficiencies for customers and members while delivering significant benefits to shareholders.”

CME’s Duffy said, "We believe there is strong support for the combination from shareholders and members of both companies, and these revised terms and the cash tender offer makes our already compelling transaction even more attractive.”

The CME and CBOT Holdings will file supplemental and amended proxy materials. Each exchange will hold a separate special meeting of shareholders and or member on July 9 to vote on the revamped agreement. Proxy cards previously executed and submitted by CME and CBOT Holdings shareholders and CBOT members who continue to hold their shares or memberships, respectively, on the new record date will remain valid.

After the news that the Chicago Mercantile Exchange had upped its bid for the Chicago Board of Trade by 16%, CME shareprices, which had been languishing under $500, jumped more than 7% to $532 by mid-morning. The CBOT stock was up slightly (BOT). Meantime, InterContinental Exchange shareprices were slightly higher after the CME's bid, just a bit over 3% by mid-morning. (ICE)

One of the more innovative new product offerings in the futures space of late has been binary options. These products allow traders to take a position on possible events by a certain time period. They are valued from 0-100 and expire either at 0 or 100 depending on the outcome. They have been used to take positions on sporting events, political events and economic reports.

They are the basis of the Iowa Electronic market first began in 1988 and used on sports gaming sights but more recently are the basis for contract or proposed contracts on numerous regulated exchanges including Hedgestreet, the US Futures Exchange, the Philadelphia Board of Trade, the Chicago Board of Trade, the Chicago Mercantile Exchange and CBOE Futures Exchange.

Hedgestreet has just introduced a group on contracts based on mergers and acquisitions. Traders can take a position on whether a particular merger will close by a certain date. One of the contracts listed is on the possible merger of NYSE Euronext and the International Securities Exchange (ISE). Russell Andersson, co-founder and vice president of Hedgestreet, when asked if they had any inside information given the announced deal between Deutsche Borse and ISE, said, “We don’t know anything at all but we do think it is a possibility given the current discussion between Deutsche Börse and its shareholders. Hedgestreet is also listing a contract on whether a Deutsche Börse/ISE merger will be consumated."

It is not even the first contract of its kind as the US Futures Exchange has already launched contracts on who will acquire the CBOT.

Andersson says that that this is a simplified way for retail traders to participate in the merger arbitrage strategy. He points out that they also can participate in what is called “Chinese Merger Arbitrage.” A typical merger arbitrage trade involves buying the stock of a company being acquired and selling the stock of the acquirer. In “Chinese Merger Arbitrage” you do the reverse after that spread has narrowed and you suspect a possible deal will unwind.

As we have learned recently no deal is final until the last “T” is crossed and “I” is dotted, so it may make sense to monitor these contracts.

Today, Futures magazine spoke with Jeff Sprecher, chairman and CEO of the Intercontinental Exchange Inc. (ICE) about his revised bid to acquire the Chicago Board of Trade (CBOT) and about his plan to file proxy materials with the Securities and Exchange Commission (SEC), which would allow him to communicate directly with CBOT members and tell them how and why to vote against the bid placed by the Chicago Mercantile Exchange.

1) Is the CBOT board required in anyway to respond to this enhanced bid?
“I don’t think they are required to respond, but I suspect that good corporate governance would suggest they would need to take a look at it and come to a conclusion on what to do.”

“Any board, using a fiduciary, would want to take a look at any proposal to show that they have done due diligence for the company.”

2) Is there any question you can get the proxy material through SEC procedures before July 9?
“We are confident to get through before July 9. What we are proposing to do is not particularly controversial with the SEC. And given our status in the merger, [we] designed our thinking and our process to position ourselves appropriately.”

3) What exactly does the proxy mean? Will members be able to vote on the ICE proposal July 9?
“No. We are putting ourselves in a position where we can talk directly to Board of Trade members and our belief that they should vote ‘no’ on the CME.”

“Under the SEC rules, we will be able to 1) solicit a shareholder list directly from the Board of Trade and 2) talk to those shareholders directly about why they should vote ‘no.’”

4) Will CBOT be required to allow ICE to present this proxy at or before the July 9 meeting? “Yes, under the proxy materials, we are simply going to be talking to shareholders [about] why they should vote against the CME/CBOT proposal, so there is nothing for the Board of Trade to present.”

5) Are talks with CBOE (Chicago Board Options Exchange) ongoing? Most CBOT members indicated that the current offer on licenses is inadequate.
“We have an ongoing dialogue with the CBOE. But beyond that, I don’t agree with your premise. There was a substantial revision in what we put out last night and it is too early to come to conclusion about how the members feel about it until they get a chance to understand, its revised CBOE proposal.”

This morning on my way into the office, I had an opportunity to speak with a woman passing out T-shirts and press releases across the street from the Chicago Board of Trade.

This isn’t the least bit unusual. What surprised me is that she wasn’t passing out Chicago Mercantile Exchange T-shirts, or ‘Better Together’ badges or stickers.

She was working for the Intercontinental Exchange, and she wasn’t hyping their agreement to buy the Winnipeg Commodities Exchange either. She was there doing grass roots, guerilla marketing for the ICE, urging passers by to vote ‘no’ on the CME proposal to acquire the CBOT, which is scheduled for July 9.

While the ICE hasn’t taken the Merc’s lunch money yet, by taking the Russell 2000 contract and now the WCE, Jeff Sprecher has taken two bites from Terry Duffy’s sandwich; and with just more than two weeks to go before the vote, I am eagerly watching to see what he will do about it.

As I opened up my Chicago Sun Times today I noticed the full page ad by the Intercontinental Exchange (ICE) exclaiming to Chicago Board of Trade (CBOT) members, “DON’T BE SOLD SHORT.”

The ad in the sports section opposite the Chicago Cubs and White Sox box score, listed reasons why the ICE proposal to the CBOT was superior to the definitive agreement the CBOT’s board of directors reached with the Chicago Mercantile Exchange (CME). At the top of list was the $22.72 per share premium in the ICE offer as of Friday’s close. That premium grew to $26.14 after Monday’s close though it doesn’t include the $9.14 per share dividend to be paid to CBOT members as part of the CME’s most recent enhanced offer (though it is technically being paid by the CBOT). It goes on to tout the agreement reached with the Chicago Board Options Exchange (CBOE) over the Exercise Right Privilege (ERP), ICE’s fast growing stock and ICE’s ability to scale its technology to meet the needs of CBOT customers.

Not to be outdone the CME placed its own ad urging CBOT members to vote “YES” for the merger at the July 9 meeting. The CME cites the long-term potential, growth opportunities and a greater ability to integrate the CBOT and CME among other reason to go with the CME.

Later in the afternoon the CME put out a press release citing several analysts who have pointed out that ICE’s stock has had a tendency to improve when it seemed less likely they would win the battle for the CBOT. The implication being that ICE stock would drop precipitously if and when an ICE/CBOT deal is struck.

It is an interesting tactic because CME confirmed Monday was most likely the last day they could improve their offer to the CBOT without delaying the July 9 vote. As of the close of business there was no enhanced CME offer so it appears the two exchanges are prepared to go into the vote with their current offers.

This obviously can change as the vote has been delayed before.

After large stock holders of the Chicago Board of Trade (CBOT) weighed in with their opinions the last month, it seems the vote for or against a "merger" with the Chicago Mercantile Exchange (CME) is coming down to the wire, just like a good old fashion Chicago election. A couple weeks ago, while one of the largest shareholders of CBOT stock, Caledonia Investment Pty. Ltd. of Australia, publicly stated it voted against the merger, another investor, Vernalis Group, whose funds have over $7.5 million of CBOT shares, urged the CBOT board not to make any decision on a merger now. "You should feel no sense of urgency to complete a deal right now. The pressure to merge with BOT should be with CME and ICE management alone. We should be patient and allow time for our full, true value to surface," said Vernalis Group Managing Partner Chris Doll in a letter to CBOT Chairman Charlie Carey on June 11. Then came an announcement that the Instituional Shareholder Services (which isn't a shareholder) recommended for the merger with the CME. It's no wonder why CBOT members still are unsure how to vote and the decision, to come July 9, is up in the air.

Then on July 3, only days after the Intercontinental Exchange (ICE) sponsored a swanky cocktail party at Grant Park in Chicago held for CBOT members to urge them to vote no to the CME proposal, ICE gave members until 5 p.m. on July 12 to vote for its current proposal. This would be only days after the July 9 CME vote, if indeed it's voted down. The CME, which held its own member cocktail party, countered with blunt language: "ICE continues to try to play the role of a spoiler in the CME CBOT merger agreement and has offered nothing new to its proposal. Having been rejected by CBOT's board not once but twice, ICE has yet to address the fundamental strategic and operationa flaws in its proposed transaction...."

Most likely the back and forth is falling on deaf ears. Chances are most CBOT members have left town for the July 4th holiday, hoping to watch fireworks from a lawn chair with a brew in one hand and a hot dog in the other. July 9th will come soon enough, and right now, CME is seen as the winner by a squeaker. Despite his higher bid, ICE CEO Jeff Sprecher may learn the hard way that he may be from the Midwest, but he's not from Chicago.

The Chicago Mercantile Exchange increased its offer for the Chicago Board of Trade, raising the exchange ratio to .375 from .350 shares of CME Holdings for every share of CBOT Holdings. The increase raises the value of the CME bid to $208.38 per share from $194.49 (not including the $9.14 per share dividend to be awarded prior to closing) and is slightly higher than the Intercontinental Exchange (ICE) offer when you add in the dividend based on Thursday’s closing prices. The move was enough to get the largest shareholder of the CBOT, Caledonia Investment Pty. Ltd. of Australia, to back the deal. Caledonia, which owns approximately 7% of CBOT, had indicated earlier in the week that they would vote ‘no’ on the merger.

“We have always supported this merger from a strategic rationale and long-term growth perspective,” stated Caledonia Managing Director Will Vicars, in a CME release. “Now, with the CME's latest enhancement, we fully endorse this merger and will vote in favor of this transaction,” he added.

CME Executive Chairman Terry Duffy, who was up all night negotiating the enhancement, which the CME described as its “best and final agreement,” is confident it will ensure approval of the CME/CBOT deal. Duffy said that while they were confident previous enhancements turned the tide, it was important to get the largest shareholder on board. “This vote was trending very highly in our favor and we were confident that we were going to get it, [but] the largest single shareholder of the Board of Trade was on the opposite side of the equation voting ‘no.’ It is always important to have the largest single shareholder supporting your transaction.”

Duffy said he was concerned so many shareholders had not yet voted. “The problem was that they had not voted, so we felt that the right thing for us to do was to go ahead and increase the exchange ratio knowing full well that we would have the support then of Caledonia and the fence sitters that were holding back their vote.”

The CME and CBOT plan to go ahead with the vote on Monday July 9 and do not expect any additional delays. “We believe that the SEC will declare us affective this afternoon and we will maintain our record date for Monday. We feel very confident in doing this. We have been advised that they will declare us affective and we will go forward on Monday,” Duffy says.

As of mid-afternoon Friday, the Intercontinental Exchange (ICE) had not responded to requests for a comment but their offer for the CBOT has moved back above the CME’s most recent enhancement based on Friday trading activity.

“I feel very good that we have answered all the concerns of the CBOT shareholders going back to the ERP, going back to the member protections, adding another director to the combined company from nine to 10, giving a dividend of $9.14, giving the ERP, giving the put on the ERP, given the up side and now with an exchange ratio of .3750, yes I feel very confident of the support of the CBOT shareholders,” Duffy concluded.

The lack of tension at the Union League was palpable this afternoon, as Chicago Board of Trade (CBOT) members and shareholders gathered to vote on the proposed merger with the Chicago Mercantile Exchange and a round of informal interviews found not single vote against the proposed CME/CBOT merger.

“Preliminary indications are that this thing is going to pass overwhelmingly,” said Charlie Carey, CBOT Chairman.

While a vote tally isn’t yet available, CME spokespeople publicly declared victory to the press. The CME increased its bid on Friday morning, offering a stock swap ratio of .375 CME shares for each CBOT share, up from .35.

“I think it’s a fair deal, that’s what people were waiting for. It didn’t become a fair deal until Friday morning. All anybody really wanted was for it to be fair,” said independent trader Terry Donegan.

In a statement to the press, Jeffrey C. Sprecher, chairman and chief executive officer of the Intercontinental Exchange Inc. said, “Despite our disappointment in the outcome, our proposal has brought many benefits for both CBOT and ICE stockholders. For CBOT stockholders, ICE's involvement has created nearly $3 billion in additional value through our willingness to recognize the true worth of your company.”

Intercontinental Exchange (ICE) shares rallied to $172.45 today, making the value of its offer for the Chicago Board of Trade $12.9 billion. Based on the most recent share price of the Chicago Mercantile Exchange...

Oh forget it!

Since ICE made its competing bid for the CBOT, chart watching has become a mild obsession and now that the CBOT and CME shareholders have approved their definitive merger agreement, I find myself in need of a fix. I am sure there will soon be new merger and acquisition proposals to follow as the New York Mercantile Exchange may be looking for a partner, ICE becomes a target and U.S. based options exchanges may begin to find partners.

On Thursday afternoon the Chicago Mercantile Exchange’s acquisition of the Chicago Board of Trade became official. It ends the 159-year history of the CBOT as an independent company. It also ends the impressive 21-month history of the CBOT stock (BOT). The CBOT stock actually outperformed the CME stock in their initial few months. The CBOT had an offering price of $54—which was raised from $44 the week before the IPO—and opened at $80.75 and never looked back.

The Chicago Board of Trade and representatives of the class who have filed suit against the Chicago Board Options Exchange in Delaware Chancery Court over CBOE’s attempt to terminate CBOT member exercise rights filed a temporary restraining order on July 20, seeking to prevent CBOE from terminating the exerciser rights while the issue is under consideration by the Court.

On July 2, CBOE adopted a rule change granting temporary membership status to CBOT members exercising on the CBOE until the Securities and Exchange Commission takes action on the CBOE rule filing attempting to extinguish those rights. Exercisers as of July 1, 2007 would be able to continue trading on CBOE and would be charged a fee. All other CBOT members with the necessary components to become exercisers would no longer be eligible. There are approximately 600 CBOT members who hold the exercise right privilege (ERP) and the necessary class A shares to become CBOE exercisers, who would be affectively locked out by the CBOE rule change. Also CBOT members leasing those rights out would no longer receive leasing fees as the CBOE will hold those fees in an escrow account in lieu of a monthly access fee to exercisers.

The Delaware Court set a July 31 hearing date on the temporary restraining order motion.

“CME Group is committed to vigorously defending the rights of CBOT B-1 members in the Delaware litigation against CBOE,” states a CME Group release. “CME Group and CBOT continue to believe that the merger of CBOT Holdings and CME Holdings Inc. did not impair the exercise rights of CBOT B-1 members under the terms of the 1992 Agreement and the CBOE Charter.”

The CBOT motion states that the Court should grant a restraining order because the actions of the CBOE drastically alters the status quo and immediately impacts class members while the CBOE would not be harmed by awaiting a ruling by the court on the plaintiff’s claims.

While the CME won its battle with the Intercontinental Exchange (ICE) over the CBOT, one of the moves made by ICE during the process that had CBOT members stand up and take notice and perhaps granted ICE more legitimacy was its ability to work out a deal with CBOE over the ERPs. It forced the CME to up its offer and take off spending limits to defend those rights.

An optimist may have thought that the ICE/CBOE proposed deal would serve as a template for a future settlement on the ERP issue but with CBOT members flush with cash and the CME taking off limits to defend the ERP, we are back to two sides offering an all or nothing solution.

There is a strange anomaly going on with the dance between the Chicago Board Options Exchange, Chicago Board of Trade members and the newly formed CME Group.

Theoretically the closing of the merger between the Chicago Mercantile Exchange and CBOT should have negatively affected the value of CBOE seats but CBOE announced a record seat sale of $2.65 million yesterday. After all the Intercontinental Exchange (ICE) had worked a deal with the CBOE that if approved by CBOT members would have put a definitive price on the value of exercise right privileges (ERP) on CBOE held by CBOT members. In outbidding the ICE, the CME took off the cap on funds it would dedicate to defend those rights. Additionally CME Group pledged yesterday to “vigorously defend the right of CBOT B-1 members in the Delaware litigation against CBOE.”

The CME Group release goes on to say, “We will continue to work to preserve the rights of CBOT members to become or remain exerciser members of the CBOE pursuant to the exercise right and to share equally in any CBOE demutualization (ital. mine).”

The term “equally” is an important one. There are 1,331 ERPs out there and approximately 827 CBOT members holding all of the necessary components to use the right. But we are not talking about using the right, we are talking about equity in a demutualized CBOE. A CME Group spokesperson says only those members with all the necessary components would be eligible to retain the right pursuant to the Delaware court action and qualify for equity in a CBOE demutualization but that a record date would be set in the future and members would be able to reassemble components to qualify for a stake. There are 930 CBOE members, if an additional 827 ERP holders (and possibly many more) qualify for a full share stake in a CBOE demutualization, current CBOE members would see their share stake cut by nearly half, or more.

To give a little perspective, the first CBOE seat sale in 2007 was for $1.8 million and a seat went for a low of $850,000 as recently as January 2006.

So why did a CBOE seat sell for a record $2.65 million? With seat prices continually rising throughout the ICE/CBOE negotiations, there probably is a CBOT member equity stake in CBOE worked into the price of CBOE memberships. But if that is the case that price is probably the equivalent to the CBOE offer, which was roughly 10% of a CBOE full member not including the ICE share. A source with an interest in the value of both CBOE and CBOT told Futures prior to the CME/CBOT merger vote that the street was valuing the ERP at 20-25% of a CBOE membership. The assumes that ERP holders would eventually be awarded equity in CBOE equivalent to 20-25% of what a full CBOE member gets. If somewhere between 827 to 1,331 ERP holders are awarded a 100% share of what the 930 CBOE members will receive, that would make the most reason sale a pretty bad investment. However, the market is usually right and if the CBOE wins the court battle and the rights are extinguished completely, that $2.65 million price tag will be the bargain of the century.

The rumor is not only is the New York Mercantile Exchange (Nymex) looking to sell its building, but it could move to the New York Stock Exchange, which is already rearranging its floor for the new tenant. The NYSE in the run for Nymex is a bit of an oddity, with the most likely player for Nymex's affection being the Chicago Mercantile Exchange or CME Group. Last November, prior to the InterContinental Exchange's failed run at the Chicago Board of Trade, a CME official noted with confidence that Nymex would be the next target after the CBOT purchase was finished. Seems some at Nymex are hoping for it, especially floor traders who are said to be having a morale issue. Whatever happens it probably will be soon as Nymex is on a trajectory to sell its building and put itself on the block. With Nymex products trading on Globex already, CME Group seems the right fit, while Nyse/Euronext might be better off going after ICE.

We all knew it was a matter of time before all of the exchanges in the whole entire world began consolidating — which, of course, will one day lead to only two super exchanges — one in Europe and one in Chicago — that’s right, I said Chicago.

When the Chicago Mercantile Exchange’s (CME) merger with the Chicago Board of Trade (CBOT) became final, the warning signal for the “other” exchanges considering consolidation went up to ORANGE.

Now simply considering some type of strategic move is no longer acceptable—it’s time for action.

MMM. Hmm. The New York Mercantile Exchange (Nymex) has confessed — revealing in a statement that it is in talks with certain "parties" in regards to possible transactions, meaning a merger or sale.

The Nymex did not, however, name those parties, which are rumored to be the New York Stock Exchange (NYSE) and the Chicago Mercantile Exchange (CME) Group, neither of which are saying anything other than "no comment," which surely means YES!

Speculation now lies in which exchange will end up the victor — seems to be NYSE Euronext at the moment.

CME Group announced today it has successfully migrated e-cbot interest rate futures and options on futures to its CME Globex electronic trading platform. The bigger news of the day, however, was preliminary acquisition discussions between CME Group and Nymex. CME Group confirmed that the two organizations have agreed to a 30-day exclusive negotiating period. Under the terms being discussed, shareholders of Nymex would receive $36 in cash and 0.1323 of a share of CME Group's common stock (the exchange ratio), in exchange for each Nymex share.CME Group and Nasdaq held a panel discussion today on global trading trends, but did not mention the Nymex talks at the panel. Panelists, including CME CEO Craig Donohue, Nasdaq CEO Bob Greifeld, Matt Andresen, co-head of Citadel, and Kevin Davis, CEO of MF Global, instead discussed various economic issues, including the falling dollar, the importance of speed in electronic trading in their respective organizations and the growth of business in the BRIC region (Brazil, Russia, India, and China). Davis touted MF Global’s growth in China and India in particular, while Donohue mentioned CME’s recent agreement to acquire a 10% stake in the Brazilian exchange. After the panel discussion, journalists mobbed Donohue for information on the possible Nymex deal, but he had no comment beyond CME’s previously released statement.

While the stock and bond markets are roiling due to the Bear Stearns rescue, the CME Group and Nymex announced today they signed a "defnitive agreement to combine the two organizations" for a cool $9.4 billion. A press conference held in New York included commentary from Sen. Charles Schumer (D-NY) who noted that the sale late last week of the CME Group metals complex to the Nyse-Euronext should pave wave to having no anti-trust issues on the CMEGroup-Nymex. This announcement comes after the annual Futures Industry Association in Boca Raton, Fla., in which the CME's absence as a sponsor had tongues wagging, and its newest competition, the Electronic Liquidity Exchange (ELX), announced its new name and had a coming out party at the conference. More to come.

Early Monday morning we got word that the Executive Committee of the Chicago Board Options Exchange (CBOE) had suspended all purchase and sale transactions in CBOE memberships. The announcement could mean only one thing, that the long dispute over CBOE exercise right privileges (ERPs), currently being fought in a Delaware Chancery Court, could be near a settlement.

An attorney familiar with the industry told us this morning that when there is a halt on seat transactions it usually precedes an announcement that could affect the value of seats. “They don’t want anyone to have an advantage or disadvantage. History says there will be an announcement [that will involve the value of memberships],” said the attorney.

When CME Group stock gapped up more than $16 on Tuesday there was little doubt it had to do with the exchange securing approval from the Department of Justice for its proposed purchase of the New York Mercantile Exchange (Nymex). The announcement came out just as the markets closed on Monday.

It was somewhat of a surprise because although the DOJ has caused CME some grief with its comment letter to Treasury regarding clearing structure, few suspected that they would raise an objection to a merger with Nymex. While there may have been an element of buyers remorse with the DOJ regarding its decision to “approve” (DOJ does not actually approve M&As, they either object or leave it alone) the CME/Chicago Board of Trade merger, CME Group’s proposed purchase of Nymex should have raised fewer issues than the CBOT deal that already had been allowed.

It has been almost one year since the subprime problems first surfaced last July as two Bear Stearns hedge funds acknowledged that they had lost virtually all of their funds. It was the beginning of a slow drip of disturbing information regarding the extent financial institutions, primarily investment banks, were affected by subprime holdings.

While it was the collapse of a couple of hedge funds that introduced us to the problem, it was the investment banks that had the greatest exposure. So much so that the Federal Reserve had to open its lending window to these institutions for the first time in 80 some odd years and arrange the bailout of Bear Stearns. And while hedge funds continue to be watched with suspicion, it is the banks who have had to book billions of dollars of losses due to this exposure.