AN AMERICAN company may soon own the Winnipeg Commodity Exchange.
The nationalist that lurks within most Canadians cringes at the news, but the deal with Intercontinental Exchange Inc. (ICE) is unlikely to hurt farmers who grow the crops traded on the exchange.
The Winnipeg exchange is a prairie icon, thought not always a beloved one.
Created in 1887, it traded its first futures contract early in 1904 and by the end of that year had already upset some farmers.
After a personal investigation, Ed Partridge, an influential Saskatchewan farmer, condemned it as “the house with the closed shutters.” To counter its power he formed the farmer-owned Grain Growers Grain Co., the first of its kind and forerunner of United Grain Growers and the Pools.
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Farmers today generally view the WCE as a neutral trading forum. Few use it directly, but its canola, feed barley and feed wheat contracts are critical to price setting.
But by 2000, technology and international business trends were forcing change. These trends pushed the WCE to become a shareholder-owned company in 2001 and to replace its trading floor with all-electronic trading in 2004.
Since then, its trade volume has soared, due partly to electronic trading, but also the global boom in commodities trade.
That boom has raised the profitability and share value of exchanges, sparking an international round of takeovers, the largest of which is the multibillion-dollar battle between ICE and the Chicago Mercantile Exchange for ownership of the Chicago Board of Trade.
If WCE shareholders accept the ICE bid, it will have almost no immediate impact on Canadian farmers. WCE will simply switch to ICE’s electronic trading platform from the CBOT platform it now uses.
Longer term, the question is whether under new ownership the WCE is better able to introduce new contracts.
Its track record has not been good, with oats, flax, pea and canola meal contracts all failing on lack of trade.
ICE says it wants to develop new products for Canadian markets.
But will new agricultural contracts catch the eye of ICE, which will also look at opportunities in energy, carbon credit trading and minerals? If new agriculture contracts clear that hurdle, then they might have more chance of success because of ICE’s financial ability to carry them until they catch on.
Also, as part of a larger trading enterprise that already includes the ICE-owned New York Mercantile Exchange and perhaps the CBOT, global traders will be exposed to WCE contracts generating opportunities for more trade volume.
Ultimately, the question of who owns the exchange is less important than how it conducts itself.
It can have no closed shutters. It must be seen to be an open, honest broker and guardian of the free market.
Bruce Dyck, Terry Fries, Barb Glen, D’Arce McMillan and Ken Zacharias collaborate in the writing of Western Producer editorials.
