Winnipeg Commodity Exchange set to close after 131 years
Canola contracts moving to New York to allow better liquidity, larger trades
The Winnipeg Commodity Exchange — Canada's oldest and only commodity futures market — is closing.
In a notice to customers May 1 the owner of exchange, Intercontinental Exchange Inc. (ICE), announced plans to transition the trading and clearing of their canola contracts to New York this summer.
The move to ICE's U.S. affiliate is expected to happen July 29.
"The canola contract has grown quite a bit over the last 10 years and the feeling is that in order to provide the best environment for continued growth, we'd move it to a bigger market," explained Brad Vannan, president and CEO of ICE Futures Canada.
"Bigger markets provide better liquidity, which means you can make larger trades more easily and it also provides the potential for lower administration costs and a more diversified risk-management pool."
Because the canola contract is the exchange's last remaining futures commodity, the move will effectively shutter the Winnipeg Commodity Exchange, which has been operating in the city since 1887.
Vannan says the physical location of an exchange is less important in the digital age, and customers aren't likely to notice any changes when the Winnipeg space is closed.
"Trades are made on a computer screen and so actually trades can emanate from anywhere in the world," he said, adding a high percentage of the market's trades come from outside Canada.
"It's not as important to have a central meeting place because people don't meet down on the trading floor any longer."
Atlanta-based Intercontinental Exchange Inc.purchased the Winnipeg Commodity Exchange for $40 million in 2007.
'Technology is changing'
Vannan says once the transfer is made this summer, two of the exchange's 14 staff will remain in the city to continue the company's presence in Winnipeg.
The loss isn't overly concerning to the head of Economic Development Winnipeg.
"That's never good to see, but we know that technology is changing the way that we do business and there are jobs that are coming and there are certain industries that have to be consolidated elsewhere," Dayna Spiring told CBC News Friday.
"It's not going to have a huge impact on our economy and we're going to work in other ways to try and bring some of those jobs back.
"When you look at the grain industry in Winnipeg, we're headquarters to big multinational companies, and that foundation is going to stay here."
The exchange — formerly known as the Winnipeg Grain Exchange — has been doing futures contract trading since 1904. The exchange was the first North American commodity exchange to shift to all-electronic trading when it shut down its "open outcry" system in December 2004.
While he acknowledges there is "some nostalgia" around the market's closure, Vannan calls the move part of the exchange's evolution.
"Its legacy is that the Canadian industry, which has grown up around canola, will continue to have a very viable contract to continue to manage its risk."
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With files from Bartley Kives