| CHICAGO, April 28
CHICAGO, April 28 Hedge fund manager Murray
Stahl has bought 13 percent of the seats on the last independent
U.S. grain exchange, doubling prices and fueling speculation he
may want a platform to trade his fund's products or even to cash
in on a potential takeover, industry sources said on Monday.
The Minneapolis Grain Exchange (MGEX) survived rounds of
consolidation among global exchanges that created giants like
CME Group, based in Chicago, and ICE, a network
of exchanges including the New York and Euronext stock markets.
Founded in 1881, MGEX is still owned by members who pay for
a seat which allows them to trade and vote on exchange rules.
Its only widely-used contract is booming - spring wheat
futures have set volume and open interest records this year as
Canadian growers turn to Minneapolis to hedge risk following the
break-up of the Canadian Wheat Board's grain monopoly in August
That could make the exchange an attractive bid target,
traders say. Just 18 months ago, CME paid $126 million for the
Kansas City Board of Trade and its hard red winter wheat
contract in a move to bolster its lucrative grains franchise.
Stahl, who is chief executive of New York based hedge fund
Horizon Kinetics, declined to speak to Reuters for this story.
In a recent conference call with his fund investors, Stahl
in comments on the internet called the MGEX investment
"strategic," given the consolidation within the industry as well
as its potential as a platform for Horizon products.
"As a real estate investment by itself, the exchange's
building might have some merit and then, more importantly, it
includes the exchange itself," Stahl said, adding in later
questions that his board seat would not preclude it being a
platform for index or structured products of Horizon.
MGEX's chief executive, Mark Bagan, suggested that the
recent boom in the spring wheat contract and much stronger
participation from Canadian growers and grain handlers was a
clear attraction for Stahl.
"Everyone realizes the higher your volume, the more
profitable you are," Bagan told Reuters.
As a member-owned derivatives exchange, the 133-year-old
MGEX is regulated by the Commodity Futures Trading Commission,
not the Securities and Exchange Commission. It also boasts
approved "clearing" facilities, like its larger rivals, that
allow trades to be tracked by regulators.
Stahl has now amassed through his funds 53 out of a total
402 seats on MGEX, or 13 percent, according to exchange data,
and holds a seat on the board which he took last October.
Now, MGEX is proposing the limit on seat ownership be raised
to 35 percent from 20 percent, according to a circular to
members seen by Reuters, although voting rights will still be
capped at 20 percent for any one owner under rules from the
With the cost of an MGEX seat doubling to $195,000 in a year
as Stahl has been buying, that would put a 20 percent stake at
roughly $15.7 million. To buy 20 percent of the massive CME
would cost roughly $4.8 billion at today's prices.
Asked if Stahl planned to launch investment indexes on MGEX,
the exchange's chief executive, Bagan, told Reuters: "That would
be news to me."
(Editing by Diane Craft)