CME to sell Chicago Board of Trade buildings
CME Group Inc
CME will keep the building that houses the trading of financial contracts, which include futures on U.S. Treasuries and currencies, it said in a statement on Monday.
The other two buildings, one of which is home to agricultural trading, will be marketed for sale by Jones Lang LaSalle and Holly Duran Real Estate Partners LLC, it said. The CME plans to take out a 15-year lease on the agriculture trading floor, signaling what it says is its commitment to open-outcry trading.
The CME has never been enamored with owning buildings, so it fits with their management moves in the past, said Jerry Gidel, an analyst for North America Risk Management Inc. I think the 15-year lease would be significant and says there should be no disruptions to the floor for quite a while.
Many of CME's once-loud, bustling pits are largely silent, some with just a handful of traders who stand and chat while millions of contracts change hands via computer screens.
As we go more and more electronic, we don't need bricks and mortar, said Bill Copolla, who has been a Chicago livestock trader for more than 35 years.
Open outcry trading at CME's three exchanges -- which include the CBOT, the Chicago Mercantile Exchange and the New York Mercantile Exchange -- accounted for just over 10 percent of buying and selling last month, down from nearly 12 percent a year earlier and more than 14 percent the year before that.
Even so, Copolla called the effort to sell the CBOT building a surprise.
It has always been the anchor of LaSalle Street, referring to the broad avenue that cuts through Chicago's financial center and ends at the CBOT's Art Deco facade.
Most of the CME's options contracts are still bought and sold face to face and the long-term lease suggests the CME believes that pattern will persist for some time.
The agriculture pits will be here as long as the options are, Copolla said.
The sale comes just days after CME Executive Chairman Terrence Duffy said he was exploring options for moving some of the company's business out of state to avoid a sharp tax increase imposed earlier this year on Illinois companies.
Renting a trading floor is not without precedent. Before relocating its open-outcry trading to the CBOT building in 2008, trading of CME products was conducted on a rented trading floor suspended above Wacker Drive. The CME also rents all its office space, including its fourth-floor executive suite, on Wacker Drive.
Selling the buildings will give the CME extra cash to invest in its business, it said.
CME Group remains committed to our floor based membership and open outcry trading services, which continue to be a profitable part of our business and serve our customers well, CME Chief Financial Officer Jamie Parisi said in a statement.
The CME acquired the CBOT buildings when it bought the operator of the Chicago Board of Trade in 2007.
It will continue to occupy about 440,000 square feet of the 1.7 million square feet in the complex, it said.
CME Group shares closed 1.4 percent higher at $272.02 on Monday.
(Additional reporting by Sam Nelson and Bob Burgdorfer; editing by Matthew Lewis and Andre Grenon)
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