UPDATE 1-CME Group prevails in lawsuit over grain settlement rules
(Updates with comment from traders' lawyer, no comment from CME, details)
By Tom Polansek
CHICAGO, March 31 (Reuters) - CME Group Inc can keep in place rules that factor in electronic trades for settling end-of-day grain futures prices, an Illinois judge ruled on Monday following a legal challenge from veterans of the Chicago trading floor.
Cook County Circuit Court Judge Jean Prendergast Rooney in Chicago ruled that CME Group, which owns the Chicago Board of Trade, had the authority to implement the settlement method in June 2012 without taking a vote among certain stakeholders.
A spokeswoman for CME Group declined to comment.
A group of traders from the CBOT's 140-year-old agricultural trading floor in June 2012 sued the exchange to overturn the method, saying that it was putting them out of business. Prior to the change, the CBOT had a century-old tradition of settling futures prices for crops like corn and soybeans based on transactions executed in open-outcry pits.
"As indicated in the ruling, there is no question that the settlement change devastated our clients' business," said George Sang, a lawyer for the traders. "We look forward to continuing to make that case."
The lawsuit was seen as something of a last stand for open-outcry traders, whose business has declined since the rise of electronic trading. The floor traders traditionally did much of their business at the close of trading and said CME Group's new settlement procedures made the pits largely irrelevant.
The traders had argued in court that CME Group failed to hold a required vote to approve the new settlement method among certain holders of CBOT memberships. CME said it did not need to take a vote, and the judge agreed.
"Based on all of the evidence, the plaintiffs have not satisfied their burden to show, by a preponderance of the evidence, a clear right to a member vote," Rooney wrote in her decision.
Some traders believe CME wants to shut down the floor in favor of electronic trading because the pits are expensive to maintain. CME executives have said they are committed to keeping the floor open.
The case is Anthony McKerr et al v. The Board of Trade of the City of Chicago et al, Circuit Court of Cook County, Illinois, No 12-CH-23185. (Editing by Steve Orlofsky and Eric Walsh)