Winnipeg Exchange Shareholders Vote to Close Floor

By Roberta Rampton
WINNIPEG, Manitoba (Reuters) – The 117-year-old Winnipeg Commodity Exchange said on Wednesday its shareholders had approved plans to trade grain futures contracts electronically, spelling an end for its storied “open outcry” pits.
Eighty-one percent of the WCE’s shareholders voted in favor of the plan to move the exchange’s canola, barley and feed wheat contracts to an electronic system owned by the Chicago Board of Trade by the end of the year, the exchange’s president Mike Gagne said.

“I think it’s a great decision and our job now is to work with our existing participants and new participants to make sure everybody’s ready to go in early December,” Gagne said.
The change is pending provincial regulatory approval and the negotiation of a final agreement to use the CBOT’s system, Gagne said.
The move will make the WCE the first North American agricultural futures exchange to trade exclusively on computer screens — a shift many believe will be echoed by other commodity exchanges in coming years.
WCE leaders, who have struggled with slumping volumes and declining liquidity in recent years, believe they can attract broader international interest in the contracts by making them more available to users outside the pits.
The Winnipeg exchange trades the equivalent of C$50 million to C$100 million ($36 million to $72 million) of grain a day. It has larger volumes than the Minneapolis Grain Exchange, but about half the volumes of the Kansas City Board of Trade.
Traditionally, grain futures have been traded face-to-face by men who yell out their bids and offers, using hand gestures to signal their intentions.
Proponents of open outcry trading believe the information that pit traders gather about what other players are doing helps make the market liquid.
They believe the WCE’s move could erase about 25 percent of current volumes by taking out “local” independent speculators, with no guarantees that large institutional traders will pick up the slack.
“Today is the first day of the demise of the Winnipeg Commodity Exchange,” said Bob Fugle, a prominent independent who has traded on the Winnipeg floor for 25 years.
Several traders spoke out against the plan at the voters’ meeting and said they are worried that the exchange’s strategy will backfire, resulting in less liquidity, added costs and job losses.
“Once they go that route, there’s no going back,” said trader Denis Cattani.
Traders said price transparency for Canadian crops is at stake.
“Most traders believe the big losers in this are the farmers of Western Canada,” said Bill Craddock, a veteran floor trader.
The majority of shareholders who voted in person at the meeting in a show of hands were opposed the plan.
Grain companies that own the bulk of the exchange’s shares supported the move, although most voted ahead of time by proxy.
“Even though they cut our throats … they don’t have time to come (in person) and vote,” an angry trader said after the meeting.
Bill Parrish, the chairman of the WCE’s board of directors and president of privately held grain company Parrish and Heimbecker Ltd., declined a request for comment.

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