Chicago exchanges in $8bn merger

Costs can be cut by merging trading room floor operations

The US's two largest futures exchanges are combining in an $8bn (£4.3bn) deal.

Chicago Mercantile Exchange (CME) has agreed to buy Chicago Board of Trade (CBOT), signalling the latest round of consolidation in US financial markets.

The companies said that the move would "transform global derivatives markets", and allow them to cut costs and serve a broader range of customers.

The new firm will be called CME Group and expects to complete an average of 9 million contracts each day.

Based in Chicago, CME chairman Terrence Duffy will head the group, while CBOT's Charles Carey will be vice-chairman.

'Monstrous'

While the move has not come out of the blue, analysts said that the creation of the super-exchange could well change the way markets have been run.

"These are probably the two wealthiest, most powerful futures exchanges in this country, and combining them makes almost a Microsoft-type entity," said Randy Frederick, director of derivatives at Charles Scwab in Austin, Texas.

The merger could make them "monstrous and hard to compete with", he said.

According to Boyd Cruel, an analyst at Alaron Trading: "This merger creates a single entity with a wide breadth of products."

"They are just basically going to be battling the other exchanges in the world. It's all Chicago," he added.