The Chicago Mercantile Exchange (the Merc) is acquiring the Chicago Board of Trade (BOT). If you’re not a commodities trader, you probably don’t really care. But for millions of people who buy commodities, having a functioning liquid market for commodities is critical. And the upcoming merger of the top two exchanges has raised many eyebrows in America’s midwest.
Most importantly, the Merc was built on electronic trading. The Board of Trade was built on pit trading. The cultural divide is enormous to those who built a fortune in one or the other, and to those who place millions of dollars on the line every day in trades. What will the future organization look like? One would hope it would be a brilliiant combination of human traders and electronic capability like what is being built by the New York Stock Exchange (NYSE) and their acquired partner Archipelago. From that merger we’re seeing an ever-developing, new, seemless 24-hour equity trading market.
But, the merger of these two stalwarts is not as likely to be so easy. As the Chicago Tribune quoted me, in this instance of two bitter rivals there is a likelihood that the entity which controls the resources and processes will emerge as the lone surviving company. The customers will be transitioned, and only one company will exist.
This is too bad. What the Tribune didn’t have space to discuss is what should happen. The two groups should create a White Space team dedicated to designing a merger which brings out the best of both companies. This team must be given resources to actually develop a unique solution, and it should have independence by reporting to the top people of both companies. This team should design a solution that utilizes the best of both company’s processes, driving the best in customer satisfaction while opening commodities to even more investors. A White Team approach to the merger would give the Merc’a investors, as well as all customers, the best solution.
Such a merger need not be a vicious battle about who is in charge. Although almost all do end up that way. Instead, everyone would benefit if the merger were viewed as a Disruption. One driven by market Challenges. And then seen as an opportunity to create a new solution, previously not available, that can expand the market for commodities investing by not only traders but ever more corporations and individual investors. By using a Phoenix Principle solution to the merger, including White Space, a better result could be obtained than from any one-sided approach.
We’ll have to see if the companies take an enlightened approach, or instead use "clout" to drive toward a fast, but single-sided solution.