The Chicago Board of Trade, the oldest U.S. futures and options exchange, is going Wall Street after 157 years.
CHICAGO — The oldest U.S. futures and options exchange is going Wall Street after 157 years.
The Chicago Board of Trade, founded to do business in corn and soybeans but now predominantly a marketplace for financial futures and options, hopes to raise as much as $147 million from an initial public offering Wednesday.
The exchange needs the money to improve its trading technology and speed its ongoing embrace of electronic trading in a fast-changing industry.
Final details on pricing were expected Tuesday evening in New York, where the underwriting is being led by Credit Suisse First Boston, a unit of Credit Suisse Group, and J.P. Morgan Chase & Co. The Board of Trade is to debut on the New York Stock Exchange Wednesday morning under the symbol BOT.
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The Board of Trade, the world’s third-largest derivatives exchange behind the Chicago Mercantile Exchange and the all-electronic Eurex, said in its registration last month that it anticipated an IPO price of $45 to $49 per share.
Its holding company, CBOT Holdings Inc., is offering 2.9 million shares of common stock and its selling shareholders are offering another 263,000 shares. That will still leave Board of Trade members holding about 93 percent of the more than 52 million shares outstanding.
It intends to use the proceeds in part to strengthen its technology infrastructure as futures and options trading shift increasingly toward electronic transactions and away from “open outcry” or open auction trading — the colorful system of hand-waving and shouting that has been the exchange’s hallmark.
“It’s clear that the world is moving more and more away from open outcry to the screen,” Patrick Arbor, who chaired the Chicago exchange from 1993-98, said in an interview. “You must adapt, and the Board of Trade is doing precisely that. … The bigger risk is to do nothing.”
The board hopes to emulate the recent success of the crosstown Chicago Mercantile Exchange Holdings Inc., which in December 2002 became the first U.S. financial market to sell stock in itself. Those shares have increased almost tenfold in less than two years from an initial $35 to the current price near $330, making many Merc traders into millionaires or multimillionaires, and trading volume has soared.
The boom in electronic commodities trading has helped the Board of Trade leap into the new era. Volume growth averaged 27 percent from 2000-04 and 2005 volume was up 17 percent through September compared with a year earlier.
But it still faces substantial challenges as it completes the transition from not-for-profit, member-owned institution to publicly traded company. It acknowledged in an 11-page section on risks in its registration statement that many of its competitors and potential competitors have greater financial resources and better marketing and technology.
The competition knocked the CBOT out of its spot as world’s largest futures exchange as recently as 2001 to its current No. 3.
It has tried to keep up with the rapid industry changes, beefing up electronic efforts and shifting its emphasis more toward financial products such as its benchmark U.S. Treasury futures. Electronic trading accounted for 58 percent of all volume at the CBOT last year, up from 52 percent in 2003, while 82 percent of all contracts traded during the first six months of this year were financial futures or options and just 14 percent were for agricultural products.
The CBOT said it had net income of $39 million in the first half of 2005, up 20 percent over a year earlier, on sharply increased revenues of $237 million.
Amid speculation that it might merge with the Merc, the exchange’s leaders said in June that they considered an undisclosed merger offer but decided to go ahead with the IPO instead.