By Tom Polansek and Carey Gillam
CHICAGO/KANSAS CITY Feb 4 Open-outcry grain
trading at the 156-year-old Kansas City Board of Trade will go
quiet in June as new owner CME Group moves the
once-raucous pits to Chicago.
CME, owner of the Chicago Board of Trade, bought the Kansas
City wheat exchange last year, cementing its dominance in global
grain trading after a challenge from rival
The closure of the floor in Kansas City caught few by
surprise on Monday as a surge in electronic trading over the
past seven years has left the pits sparsely populated. The
Minneapolis Grain Exchange closed its wheat trading floor in
2008 due to low volumes.
Still, it will the end of an era in Kansas City, where stock
index futures were born and contracts representing billions of
bushels of bread wheat change hands each year.
The last day of open-outcry trading on the KCBT floor will
be June 28.
"You hate to see great old institution pass on to oblivion,
and that is what has happened to Kansas City," said Dennis
Gartman, a well-known investor and former KCBT board member.
Kansas City's main pit, for hard red winter wheat futures,
could comfortably fit several dozen traders.
In recent years, though, it has been largely empty as many
traders prefer to do their business on computer screens set up
on desktops scattered around the trading floor.
It's a far cry from a few years ago, when the floor was
buzzing and bustling with frenetic traders who fought their way
in and out of the packed circular pits.
Some of the remaining floor traders are planning to relocate
to Chicago to continue trading, while others will move on to
other jobs or trade totally electronically.
"The thing has come to an end," said Morgan Shay, a trader
at the exchange since 1971. "The handwriting was on the wall
when the electronic started. We are sad to see it go, but I'd
rather concentrate on how well we did."
"WE CAN TRADE ANYWHERE"
CME will operate an electronic trading center on the former
KCBT floor until the end of September, from which Kansas
City-based traders will be able to execute trades on CME's
electronic trading platform.
Some KCBT traders, sensing the end was near for the floor,
recently started working from rental space in suburban Kansas
City, instead of at the exchange.
Just 41 wheat futures contracts traded hands in the KCBT
pits on Friday, while 26,573 contracts traded electronically.
"We have a screen so we can trade anywhere," said one
trader, who did not want his name used.
CME owns most of the KCBT building, whose facade boasts a
giant wheat stalk that appears to be waving in the wind, but it
has not yet decided whether to sell it, a spokeswoman said.
She did not immediately know how much money it cost to keep
the floor open.
CME said it can make trading more efficient by locating the
KCBT wheat futures and options pits next to the CBOT wheat pits.
KCBT trades a high-protein variety of wheat used to make
bread, while CBOT trades a lower-quality variety used to make
doughnuts and snack foods.
"By moving Kansas City wheat to the Chicago floor later this
year, we will make it as efficient as possible for our customers
to trade both products and the spread between the two," said
Bryan Durkin, CME chief operating officer, in a statement.
CME said it does not plan to close its Chicago trading
floor. KCBT executives declined to comment.
The proximity of the pits could improve spread opportunities
and the overall execution of trades, said Sterling Smith,
futures specialist at Citigroup in Chicago, who noted he was not
surprised by the move.
The move "just marks the continued evolution of the futures
trading business," he said.