Reflections on the Merc-CBOT Merger

With the historic, $8 billion combination of the Chicago Mercantile Exchange and the Chicago Board of Trade that was announced on Oct. 17, BusinessWeek asked some prominent players in the futures trading industry for their thoughts on the deal and the industry's direction.

Richard L. Sandor, chairman and CEO, Chicago Climate Exchange; former board member of Chicago Mercantile Exchange and Chicago Board of Trade

"A number of us involved in the industry think this is a good thing. It's a smart move. It's part of the consolidation of the exchange sector we're seeing worldwide. This is an inexorable trend that is creating global players in the space. I think it's smart from the point of view that there should be enormous efficiencies to be gained.

"I also do think from a macro point of view that this is not different from the consolidation that's gone on in the last 20 years in the banking sector. Ultimately, the model there is that you create large-scale banks and megabanks and then you also have a smaller group that are niche players. I do think we're going to see this pattern continue.

"I think this is one of these 'win-win' situations. I think it's a great thing for the user constituents, be they agricultural or banking or corporate. They're going to have a more efficient exchange."

Victor Niederhoffer, financial columnist, former principal of Niederhoffer Investments

"It's a great merger. But I'm sorry because competition is key to success, and this will reduce same. However, I wish them the best of luck. Two very worthy organizations fulfilling a great good, with one of them now cashing in for the increased and well-deserved wealth of its members."

Leo Melamed, chairman emeritus of the Chicago Mercantile Exchange, described on Oct. 16 as the "Babe Ruth" of the futures industry, on why deal attempts between the Merc and the CBOT failed at least three times before in the last 30 years

"It required time. Time for our ideas to be established, time for us to mature and become public, time for our cultures to harmonize."

Jack Sandner, also a former chairman of the Merc, added "the time had to be right," and said the deal reaffirms Chicago's leading role in futures

"We are the risk managers for the world in Chicago. The two exchanges together will change the world."

George Constantinides, Leo Melamed Professor of Finance, University of Chicago

"This is not sort of a merger out of necessity.… The bigger a market is, the more business it's going to attract, so the hope behind this is that…you will get more business and more liquidity and it's going to grow.

"If you see the kind of play that the NYSE is getting now, why did it not demutualize earlier? It's a valid question and one you could ask of many exchanges."