MGEX board recommends exclusive electronic trading

by Eric Schroeder
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MINNEAPOLIS — The Minneapolis Grain Exchange (MGEX) on Friday said it plans to close its trading pits on Dec. 19. The move, which was approved by the MGEX board of directors but remains subject to MGEX ownership approval, means the exchange would operate exclusively through electronic trading on the CME Globex electronic trading platform.

The MGEX said it will continue to host the cash market from a remodeled location in the Grain Exchange building, and has built in space for a new member lounge as well as desk space for electronic trade execution.

The decision to shift its trading operations reflects a trend away from open outcry and toward electronic trading by all U.S. exchanges, the MGEX said, and comes after a lengthy study done by MGEX management at the request of the exchange’s board of directors.

"The board of directors is acting in accordance with its fiduciary responsibility to MGEX members," said Scott A. Cordes, chairman of the board. "While we will regret to see the end of open outcry trading in Minneapolis, the new fee programs provide an opportunity for global growth in our hard red spring wheat contract."

In an effort to facilitate the change and build market participation, the MGEX said it will incorporate several initiatives, including implementing a fee waiver program for floor traders who trade for their own account, as well as a liquidity provider program and market maker program.

During the transition period to electronic trading, the MGEX said it will waive all fees associated with open outcry transactions for floor traders initiating trades on their own behalf from Nov. 1 to Dec. 19. In addition, exchange fees for electronic trading permit holders will be waived Nov. 1 through Jan. 31, 2009.

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