The Chicago Mercantile Exchange said Tuesday it agreed to purchase the Chicago Board of Trade for $8 billion US, as cross-town financial rivals with roots in the 1800s join forces in the face of intensifying global competition.

The deal will combine both the electronic and open-outcry trading platforms of the Board of Trade, founded in 1848 for farmers to buy and sell grain, with the 108-year-old Merc, which has gone far beyond its trademark livestock contracts to become the world's largest futures exchange.

If the deal is approved, the two companies will move to a single trading location at the Chicago Board of Trade. The combined company will be named CME Group Inc., and will be headquartered in Chicago.

The resulting global derivatives exchange will have average
daily trading volume approachingnine million contracts per day, easily surpassing the Eurex and other competitors.

"The idea to merge these two great companies has been
contemplated for decades," said Chicago Mercantile Exchange
Holdings Inc. Chairman TerrenceDuffy, who will become chairman of the combined organization.

The deal quickly won praise from Wall Street, and the stocks of both companies rose.

Shares in CBOT Holdings Inc., which had its initial public
offering a year ago Thursday, soared $17.49 US, or 13 per cent, to $152 US in morning trading on the New York Stock Exchange. CME shares increased $12.15 US, or 2.4 per cent, to $515.40 US.

"The merger makes complete strategic sense" and also offers
more than $125 million US in savings by combining the two, said Michael Vinciquerra of Raymond James & Associates in a note to investors.

Prudential Equity Group analyst Robert Rutschow said the
acquisition seems somewhat pricey but "the combined company is a derivatives powerhouse."

Executives said serious talks between the two leading U.S.
futures exchanges have been underway for nearly a year.

Commodities and stock exchanges have been under increased
pressure to consolidate as electronic trading proliferates. The
pressure stepped up last month when the IntercontinentalExchange Inc. announced a $1-billion US deal to acquire the New York Board of Trade.

The consolidation push follows similar activity among stock
markets. NYSE Group Inc. is in the midst of trying to merge the New York Stock Exchange with Euronext NV, while rival Nasdaq Stock Market Inc. continues to show interest in buying the London Stock Exchange PLC.

Based on Monday's closing stock prices of both companies, the merged company is valued at $25 billion US. The purchase is expected to add to earnings in 12 to 18 months after closing, and deliver pretax cost savings of more than $125 million beginning in the second full year after completion.

The transaction is expected to close by the middle of 2007,
pending approvals by regulators and shareholders of both companies and CBOT members.