Interdealer broker OTC Global Holdings (OTCGH) has announced the acquisition of two Chicago-based firms, Futures International and T&J Shuff Enterprises, specialising in agricultural futures and options contracts in corn, wheat, soybeans, soybean meal and soybean oil.
Both companies have strong relationships with banks, hedge funds and processors that transact on the Chicago Board of Trade (CBOT) and the move positions OTCGH as a significant liquidity provider within agricultural products, according to OTCGH.
The announcement of centralised clearing for agricultural products on the Chicago Mercantile Exchange (CME) in March 2009 was one of the main drivers behind OTCGH's decision to move into these markets. "We expect to see in ags what we saw in natural gas when Nymex started clearing natural gas swaps and then options, which was an increase in efficiency and transparency which then created more volume and liquidity in the market," says Joe Kelly, president and chief operating officer of OTCGH. "As grains and beans both become centrally cleared, we will see whole OTC space becoming more liquid for traders and this was a significant factor behind our decision to enter this market."
OTCGH's business model has been to gain market share and then aggregate liquidity on its platform EOXLive. It has already achieved this in natural gas and aims to eventually offer and support all of its products on EOXLive, including agricultural products Kelly says.
OTCGH is planning to expand to the UK and continental Europe by the end of 2009. Kelly says that London office space being finalised and the process for FSA approval is underway.
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