Minneapolis Grain Exchange, Inc.

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Minneapolis Grain Exchange, Inc.
Mgexlogo.jpg
Founded 1881
Headquarters Minneapolis, MN
Key People Kent Horsager, President/CEO
Raymond F. Lottie, Chairman
Products Cash, futures and options grains products
Twitter @MGEX1
Website www.mgex.com/

Minneapolis Grain Exchange, Inc. (MGEX)[1] was founded in 1881, and has been the principal market for Hard Red Spring Wheat (HRSW) - first as a cash market and subsequently for futures and options.

MGEX was ranked as the world's 47th-largest derivatives exchange by volume in 2010, moving up two positions from the previous year, according to the annual volume survey published by the Futures Industry Association (FIA).[2] The FIA report, published in March of 2011, notes that the MGEX's total volume for 2010 jumped by 39.8% from the previous year, reaching over 1.72 million contracts.

Launched August 13, 2012, the Apple Juice Concentrate (AJC) futures contract is a risk management tool offering suppliers and buyers a new, never before available tool to manage price risk. It allows participants the opportunity to utilize the contract to hedge price risk and offers all parties transparency in the price discovery process.

In May of 2010, exchange member-owners voted to convert the exchange to a for-profit company. [3] The Exchange said it wasn't looking at a stock market listing, however.

In January of 2012, it was announced that CME Group and the National Futures Association (NFA), in conjunction with the InterContinental Exchange (ICE), the Kansas City Board of Trade (KCBOT) and the Minneapolis Grain Exchange (MGEX) had formed a joint committee to review how self-regulatory organizations could strengthen current safeguards for customer segregated funds held at the firm level in light of the MF Global bankruptcy.[4]

In April 2015, MGEX and the Carbon Trade Exchange announced the establishment of a new business relationship that will result in the launch of CTX in the California Cap-and-Trade Program, with MGEX providing support and services for a spot market exchange trading Allowances and Offsets in the state-based program.[5]

MGEX ranked 46th in global derivative exchange volume in 2015 with over 2.3 million contracts traded, a 6.3 percent increase from the previous year, according to the FIA Annual Volume Report.[6]

Products

MGEX offers futures and options contracts based on Hard Red Spring Wheat (HRSW)[7] and Apple Juice Concentrate (AJC)[8] . Futures are traded exclusively electronically on the CME Globex platform. Options are traded side by side. HRSW is a high protein wheat used in bagels, high quality breads and cereals.[9] It is planted mostly in the U.S. Northern Plains and the Canadian Prairies.

On May 20, 2012 single-click functionality became available for market participants between the MGEX HRSW futures and the CBOT Soft Red Winter Wheat futures contracts. Additionally, on March 11, 2013, this functionality became available between MGEX HRSW futures and KCBT Hard Red Winter Wheat futures contracts. This single-click functionality allows market participants around the world a more secure and convenient way to spread trade between the wheat classes.

In addition to futures and options for HRSW and AJC, the following agricultural index products are also listed at the exchange:

The five index products are financially settled to a spot index of country elevator pricing calculated daily by DTN, an Omaha-based electronic commerce and information services company.

The five financially settled Agricultural Index contracts provide trading options for traditional hedgers and speculators.

MGEX Agricultural Index products differ from traditional futures and options contracts in a number of ways.

  • Financial Settlement — When index futures and options expire they settle to a financial value, eliminating deliveries. There are no delivery specifications, storage costs, grade differentials or load-out costs.
  • Simultaneous Expiration — At the end of each month, futures and options settle based on a simple average of the index value for the last three trading days of that month. This means options bought or sold for September expire at the end of September, not August like traditional options.
  • Index based, country-origin pricing — DTN collects hundred of elevator bids daily, and in turn, calculates indexes upon which MGEX agricultural index futures and options are settled.
  • All Calendar Months Traded
  • Hedging

Open Outcry And Electronic Trading

Dec. 19, 2008 marked the final day of open outcry futures trading at MGEX. On Jan. 13, 2008, MGEX migrated to the CME Globex electronic trading platform. HRSW Futures trade exclusively electronically. Options trade side by side.

•MGEX HRSW Trading Hours:

  • Sunday to Friday, electronic trading from 7:00 p.m. to 7:45 a.m. CT;
  • Monday to Friday, break in electronic trading from 7:45 a.m. to 8:30 a.m. CT;
  • Monday to Friday, electronic trading and open outcry options from 8:30 a.m. to 1:30 p.m. CT

•MGEX Index Products Trading Hours:

  • Sunday to Friday, 7:00 p.m. to 1:45 p.m. CT

•Contract settlement period for HRSW and all Index Products:

  • 1:14:00 p.m. to 1:14:59 p.m. CT

•Pre Open for HRSW and all Index Products:

  • Sunday, 4:00 p.m. to 7:00 p.m. CT
  • Monday to Thursday, 4:45 p.m. to 7:00 p.m. CT
  • Monday to Friday, 8:00 a.m. to 8:30 a.m. CT (HRSW only)
  • Post Close Pre-Open: Monday to Friday, 2:30 p.m. to 4:00 p.m. CT

•MGEX Apple Juice Concentrate Trading Hours:

  • Monday to Friday, 7:00 a.m. to 1:10 p.m. CT
  • Contract Settlement Time: 1:09:00 p.m. to 1:09:59 p.m. CT

On Jan. 13, 2008 (for trade date Jan. 14, 2008), MGEX moved electronic trading for its futures and options products from the e-CBOT platform to the CME Globex electronic trading platform.

In early March of 2012, it was announced that CME Group and MGEX, a designated contract market (DCM) and derivatives clearing organization (DCO), would launch of MGEX-CBOT Wheat Spread Options to begin trading on March 26 of that year. These contracts are listed with, and subject to, the rules and regulations of CBOT. MGEX-CBOT Wheat Spread Options are unique hedging tools based on the price differentials between hard red spring wheat futures listed on the Minneapolis Grain Exchange, Inc. (MGEX) and soft red winter wheat futures on the Chicago Board of Trade (CBOT), which are the result of fundamental supply and demand factors and varying protein levels between these two distinct classes of wheat.

As of June 12, 2012, Hard Red Spring Wheat open outcry options trading will open at 7:20 a.m. CT on the trading days the USDA releases monthly World Agriculture Supply & Demand Estimates, any Acreage, Crop Production, Prospective Planting reports and quarterly Grain Stocks reports.

History

The Historic Minneapolis Grain Exchange
Founded as the Minneapolis Chamber of Commerce in 1881, the MGEX has been a marketplace for producers, processors and millers for more than 125 years.

The three Grain Exchange buildings in downtown Minneapolis are listed on the National Register of Historic Places.[11]

The Minneapolis Chamber of Commerce opened as a regional cash marketplace to promote fair trade and to prevent trade abuses in wheat, oats and corn. Before the development of this centralized marketplace, farmers in the region had no way of knowing if they were receiving the best price for their grain. Most farmers harvested and sold their crops at the same time, and the subsequent overabundance of grain reaching the market set the supply-and-demand curve askew. Although the Chicago Board of Trade existed in Chicago, grain was a local issue in the 1900s; thus, a local Minneapolis market reflected unique local grain producer/user supply/demand and quality issues.

In 1883, just two years later, the Chamber of Commerce introduced its first futures contract: Hard Red Spring Wheat. This contract was launched to address price risk management needs of buyers and sellers of spring wheat and still trades today.

For over 60 years the exchange operated as the Minneapolis Chamber of Commerce. By 1946, “Chamber of Commerce” had become synonymous with organizations devoted mainly to civic and social issues. In 1947, the exchange was renamed the Minneapolis Grain Exchange. Today the exchange uses MGEX as first reference and is most recognized by its logo.


Key People

Contract Volume

Year Total Annual Volume Percent Change
2014 2,177,740 46.8%
2013 1,483,657 21.3%
2012 1,223,457 (-)29.4%
2011 1,732,331 2.7%
2010 1,687,228 40.8%
2009 1,198,013 (-)12.0%
2008 1,361,042 (-)24.1%
2007 1,792,310 11.1%
2006 1,613,239 16.5%
2005 1,384,750 0.5%
2004 1,378,447 29.3%

Layne Carlson John Lothian News Interview

Layne Carlson Tells the Story Behind MGEX’s Apple Juice Contract
The Minneapolis Grain Exchange, now known as MGEX, launched Apple Juice Concentrate (AJC) futures and options on August 13, 2012. We asked Layne Carlson, corporate secretary and treasurer of the exchange, for the story behind the new Apple Juice contract. Interview by JLN publisher John Lothian. Published August 23, 2012. Watch at JohnLothianNews.com[12]

Membership

The Minneapolis Grain Exchange, Inc. is a membership organization. MGEX provides facilities for and oversight of trading that occurs on the exchange, but does not participate in trading and does not establish prices. Memberships on MGEX are bought and sold between individuals and firms. There are a fixed number of memberships, or seats, therefore the price fluctuates according to supply and demand.

A full membership secures trading, voting rights and the opportunity to become a clearing member. A delegate membership is also available, offering an individual the opportunity to trade for his or her own account.

The MGEX clearing members include:

Membership Resources

  • Membership Transfers[13]
  • Membership Prices[14]
  • Historical Membership Prices[15]
  • Trading & Clearing Fees[16]

References

  1. Home Page. Minneapolis Grain Exchange, Inc..
  2. 2010 Annual Volume Survey. Futures Industry.org.
  3. MGEX Gets For-Profit Conversion Approval. The Wall Street Journal.
  4. Press Release. NFA.
  5. CTX and MGEX Announce Key Partnership. Exchange press release.
  6. FIA Annual Volume Survey 2015. Futures Industry Association MarketVoice Magazine.
  7. HRSW Brochure. Minneapolis Grain Exchange.
  8. AJC Fact Sheet. Minneapolis Grain Exchange.
  9. MGEX Website. Minneapolis Grain Exchange.
  10. Agricultural Index Brochure. Minneapolis Grain Exchange.
  11. Cleaning Stone and Masonry: Minneapolis Grain Exchange. Google Books.
  12. Layne Carlson Tells the Story Behind MGEX’s Apple Juice Contract. John Lothian News.
  13. Membership Transfers. Minneapolis Grain Exchange.
  14. Membership Prices. Minneapolis Grain Exchange.
  15. Historical Membership Prices. Minneapolis Grain Exchange.
  16. Trading & Clearing Fees. Minneapolis Grain Exchange.