Chicago Merc to acquire CBOT for $8 billion

CHICAGO — If this were sports, it would be the Cubs teaming up with the archrival White Sox. Their financial equivalents, the Chicago Mercantile Exchange and the Chicago Board of Trade, did just that Tuesday.

The two storied commodities and financial exchanges, who have shaped Chicago and commodities trading for more than a century, announced an $8 billion deal to create the world’s largest one-stop futures market for everything from interest rates to pork bellies.

The deal will combine both the electronic and floor trading platforms of the Board of Trade, founded in 1848 for farmers to buy and sell grain, with the Merc, which has gone far beyond its trademark livestock contracts since it opened in 1898.

“What’d they use to call Chicago — the hog butcher of the world? We are now the risk managers of the world,” said Jack Sandner, retired chairman of the Merc.

If approved as expected, the exchanges located six blocks apart in the downtown Loop will move to a single trading location at the Chicago Board of Trade. Retaining both historic names, the combined company will be named CME Group Inc., a Chicago Board of Trade company.

The resulting exchange will be a derivatives powerhouse far mightier than the Merc alone, which was already the biggest market for the contracts. Futures, the biggest type of derivatives contract, requires delivery of an asset at a certain date and price.

The new exchange will have average daily trading volume approaching 9 million contracts per day, easily surpassing the Eurex and other competitors, with a market cap of more than $25 billion.

“For years, the Chicago exchanges have fueled this city’s economy,” chairman Terrence Duffy, who will become chairman of the combined organization, said at a news conference. “During this time of increased global competition and consolidation, this merger will put us in a stronger position to compete, grow and pursue new market opportunities.”

Mayor Richard M. Daley gave his seal of approval to the deal, too. “This merger will be good for the Chicago economy because it will secure our city’s position as the world leader in global financial exchanges,” Daley said. “I’m pleased that Chicago will remain at the forefront of this growth industry.”

The transaction is expected to close by the middle of 2007, pending approvals by regulators and shareholders of both companies and CBOT members.